California FTB Announces New Filing Requirement

California Assembly Bill No. 92 imposes new annual filing requirements for taxpayers engaged in IRC Section 1031 tax-deferred exchanges, effective January 1, 2014.

Taxpayers who sell California Relinquished Property and acquire non-California Replacement Property in a transaction designed to defer current recognition of gain under IRC Section 1031 will be required to file a new information return with the State of California to track their California sourced deferred gain or loss. The "California 1031 Information Return" is still in development.

Taxpayers will be required to file the return annually until the California sourced gain or loss is recognized. Failure to file may result in the California Franchise Tax Board making an estimate of the net income and assessing the tax, interest and penalties due.

The filing requirement applies to all individuals, estates and trusts and all business entities regardless of their state of residency or commercial domicile.

For additional information, please visit the California Franchise Tax Board website:

https://www.ftb.ca.gov/professionals/taxnews/2013/November/Article_1.shtml