1031 in 2015

[Strongsilence-CPA]

Client did 1031 in 2015. One Texas property was relinquished for one CA property. Amherst facilitated.

In 2025, the CA property was sold. Large gain, large tax.

After hearing of the large tax, the client told me that a 2nd relinquished property was missed by Amherst.  She wants to add the basis of the 2nd property (in effect, a decrease of the deferred gain from 2015) when the 2025 1040 is filed.

I don’t trust the client. She is a realtor and would have been very hands-on, with a sharp eye for every detail when the 2015 LKE was done. This could be a case of simple ignorance, thinking that I can easily just plug in a revised deferred gain for this sale. She is very gung-ho about investing in crypto and wants to “get in” as early as possible.  I think she is motivated to avoid taxes on this sale.

AND CA form 3840 was never filed from 2015 to 2024!

[BobKamman]

I thought the 3840 was required only if the relinquished property was in California.  

[sjrcpa]

Doesn't pass my smell test either.

"She is a realtor and would have been very hands-on, with a sharp eye for every detail when the 2015 LKE was done." So she should know 1031 only defers tax on the gain.

If you believe her, ask her to produce all of the 1031 exchange docs, including for the "two" replacement properties.

"She is very gung-ho about investing in crypto and wants to “get in” as early as possible" Hasn't that boat sailed years ago? 🤣

[Strongsilence-CPA]

After requesting the 1031 documentation, she remembered that the second house was not included in the 1031.  

Thanks for your advice.

[IRonMaN]

Sounds like she has an "iffy" memory.  Maybe you will be lucky and she won't remember to come back next year.

[TaxGuyBill]

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@Strongsilence-CPA wrote:

 Amherst facilitated.

a 2nd relinquished property was missed by Amherst. 

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Is Amherst a 1031 company?  If it is "missed", it seems to have NOT been part of the 1031 Exchange.