Alert: New Changes to the 1031 Exchange in California in the New Year

As of Jan, 01, 2014, new tax filing laws will take effect for investors looking to perform a 1031 exchange from a California property to a like-property outside of the state. Not filing this new information properly will result in fines plus interest with the IRS.

…all taxpayers who defer gain or loss under IRC §1031 (1031-exchanges) by selling California relinquished properties (CA RQs) and acquiring like-kind, non-California replacement properties (Non-CA RPs) will have to file a new information return (California 1031 information return) to track their deferred California sourced gain or loss. The new return is meant to help keep track of California sourced gain deferrals from 1031-exchanges, and will generally be required to be filed annually until the deferred California source gain is recognized.

Source: CA.gov

Things to keep in mind:

It doesn’t matter whether you are an individual, trust group, or business entity, this law applies to you. Regardless of whether you live outside of California or not, if you own a property in the state, you must conform to these new state laws. All tax filling in California is due on the same day. If you are a nonresident, you would simply report this information then. Residents will add this information as an attachment to their regular taxes.

Our agents are always available to provide you with more information about how these changes affect you and what you can do to make smart investing decisions.

Stay tuned with Commercial Brokers International for news updates on commercial real estate.