Sale of 1031 replacement property

Forum|Forum|3 months ago
March 6, 2026
2 replies
12 views

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!

Lacerte Tax

sjrcpa

Level 15

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.

The more I know the more I don’t know.

abctax55

Level 15

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.

HumanKind... Be Both

H

HeatherHouchensAuthor

Level 3

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

Level 15

Ask Bob, he knows everything.

HumanKind... Be Both

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