Sale of 1031 replacement property

[HeatherHouchens]

I have a client that sold their 1031 replacement property and there is about $100k in deferred gains from that sale that occurred nearly 20 years ago. In Lacerte, would I just reduce the basis by the deferred gains when I enter the sale on the disposition screen? 

Also, California is involved. The land that was initially sold was in California while the replacement property that has now sold is in Virginia. Any input regarding that would be much appreciated considering I rarely prepare California returns. Thank you!

[sjrcpa]

The basis of the replacement property just sold should have reflected the deferred gain all along.

CA wants its tax on the previously deferred gain.

[abctax55]

The 'basis' on the depreciation schedule should have been adjusted for the deferred gain in the year of purchase.

Hopefully, the required CA Form 3840 has been filed for all these years.

Now that the property has been sold, a CA 540 (or perhaps a 540 NR?) is needed to report the gain & pay the taxes due.

[HeatherHouchens]

So this is the first year that I am preparing for this client and the CA Form 3840 was not included in the prior year return. I believe that it was never filed. What do you suggest?

[abctax55]

Ask Bob, he knows everything.

[BobKamman]

Trying to find something in the original post that suggests the replacement property was depreciable.  Appears that the California property was just land.  

Not that I trust AI, but it tells me that "California’s "claw-back" provision (AB 92), requiring taxpayers to track and report deferred gain when exchanging California property for out-of-state property, was enacted on June 27, 2013, and became effective for tax years beginning on or after January 1, 2014."  Must be some newbies around here suggesting that there's a Form 3840 problem that goes back 20 years.  

[BobKamman]

@abctax55 And does Spidell tell you when this Form 3840 rule went into effect?  Or maybe there is a Speidel watch that tracks such timing.  

[abctax55]

Fine Bob, fine.  

[abctax55]

I'm done.

You can help the OP.