California 1031 Exchange Reporting Forms

If you completed a 1031 exchange involving California real estate, start with two questions: did you transfer property in a federal like-kind exchange, and did you give up California property for replacement property outside California? The first question points you to IRS Form 8824. The second may add California Form FTB 3840, including annual follow-up filings until the California-sourced deferred gain or loss is resolved.

California reporting does not replace federal reporting. Form 8824 reports the exchange on your federal return. California Schedule D-1 may come into play when California gains or losses differ from federal amounts. Form FTB 3840 tracks California property exchanged for out-of-state replacement property, even when the investor has moved or no longer files a regular California return.

Quick answer by transaction type

Transaction	Federal filing	California filing to check
California investment real property exchanged for California replacement property	Form 8824 with the federal return for the transfer year	California reporting may follow the return; Schedule D-1 applies only if California gains or losses differ from federal gains or losses
California real property exchanged for out-of-state real property	Form 8824	Form FTB 3840 for the exchange year and later annual filings while the California-sourced deferred gain or loss remains deferred
Out-of-state property exchanged for California replacement property	Form 8824	Form FTB 3840 is aimed at California property exchanged out of state; California source rules can matter when the California property is later sold or disposed of
Related-party exchange	Form 8824, with related-party reporting	Check the related-party box on FTB 3840 if the California out-of-state reporting rule applies
California amounts differ from federal amounts	Form 8824 federally	Schedule D-1 says to complete and attach it only if California gains or losses differ from federal gains or losses

California form map

Form	Who uses it	Attachment point	What it records
IRS Form 8824, Like-Kind Exchanges	Taxpayers who transferred property in a like-kind exchange during the tax year	Attach to the federal tax return	Property descriptions, transfer and identification dates, related-party information, realized gain, recognized gain, deferred gain, and basis
California Schedule D-1	California filers whose California gains or losses differ from federal gains or losses	Complete and attach to the California tax return when required	Sales or exchanges of business property, including like-kind exchange gain or loss from federal Form 8824 completed using California amounts
California Form FTB 3840	Taxpayers who exchange California real property for like-kind property outside California under IRC Section 1031	Attach to the California return, or file separately as a California information return if no California return is otherwise required	California-sourced deferred gain or loss and its allocation to out-of-state replacement property

This map is a starting point, not a substitute for return preparation. A California exchange can involve more than one form because the forms answer different questions: federal deferral, California differences, and California source tracking.

Federal Form 8824 vs California reporting

The IRS instructions say to use Parts I, II, and III of Form 8824 to report each exchange of business or investment real property for real property of a like kind. The same instructions say that if you transferred property to another party in a like-kind exchange during the current tax year, you must file Form 8824 with your tax return for that year.

Form 8824 also records the exchange deadlines. In a deferred exchange, replacement property must be identified within 45 days after the property given up is transferred. The replacement property must then be received by the earlier of 180 days after the transfer or the due date of the tax return, including extensions, for the year in which the transferred property was given up.

California then asks whether state-specific reporting is needed. Schedule D-1 says to complete and attach the schedule only if California gains or losses differ from federal gains or losses. The same schedule has lines for IRC Section 1231 gain and ordinary gain or loss from like-kind exchanges from federal Form 8824 completed using California amounts.

Form FTB 3840 has a narrower job. It does not report every California 1031 exchange. It reports the exchange of California property for out-of-state like-kind property and allocates the California-sourced deferred gain or loss to the property received in the exchange.

When Form 3840 applies

For taxable years beginning on or after January 1, 2014, California requires an annual information return when California property is exchanged for out-of-state like-kind property under IRC Section 1031. The FTB 3840 instructions state that all taxpayers who exchange real property located in California for like-kind property located outside California must file Form FTB 3840, regardless of residence status or commercial domicile.

FTB Publication 1100 gives the sourcing reason. A gain or loss from the sale or exchange of real or tangible personal property located in California is sourced to California when the gain or loss is realized. If a nonresident exchanges California property for property outside California, the realized gain or loss is sourced to California, and taxation does not occur until the gain or loss is recognized.

Form FTB 3840 must be filed for the year of the exchange and for each later taxable year, generally until the California-sourced deferred gain or loss is recognized on a California tax return. If the taxpayer is required to file a California return, attach Form FTB 3840 to that return. If the taxpayer has no other California filing requirement, the instructions say to complete the entire form, sign Side 1, and file Form FTB 3840 separately as a California information return.

The form also separates initial, amended, annual, and final filings. Use the initial box for the exchange year. Use the annual box after a prior FTB 3840 when the California-sourced deferred gain or loss has not been recognized. Use the final box when the deferred California-sourced gain or loss from the property received in the exchange has been recognized, and attach the statement the instructions require.

If a taxpayer reported more than one federal like-kind exchange in which California property was given up and out-of-state like-kind property was received, the FTB instructions call for a separate Form FTB 3840 for each exchange.

Annual filing checklist

Use this checklist after a California-outbound exchange:

1. Keep the federal Form 8824 for the exchange year with the California file.
2. Confirm whether the relinquished property was real property located in California and whether the replacement property was outside California.
3. File an initial Form FTB 3840 for the exchange year when the California outbound rule applies.
4. Attach Form FTB 3840 to the California return if a California return is otherwise required.
5. If no California return is otherwise required, file Form FTB 3840 separately as the California information return and sign the form.
6. Continue filing annual FTB 3840 returns while the California-sourced deferred gain or loss remains deferred.
7. Use a final FTB 3840 when the California-sourced deferred gain or loss has been recognized, and include the explanatory statement required by the form instructions.
8. If the out-of-state replacement property is later exchanged again in a tax-deferred exchange, keep filing FTB 3840 because the FTB says the deferral continues.

The FTB Tax News compliance note lists three endpoints for continued reporting: the deferred California-sourced gain or loss is recognized on a California return, the property is transferred through inheritance and the deferred California source gain or loss is eliminated, or the replacement property is donated to a nonprofit organization.

Common mistakes and preparer notes

Treating Form 8824 as the only form. Form 8824 handles federal reporting. It does not satisfy California annual information reporting when Form FTB 3840 applies.

Missing the annual FTB 3840 filing after year one. The California form is not a one-time attachment for outbound exchanges. The FTB instructions call for filing in the exchange year and each later taxable year, generally until the California-sourced deferred gain or loss is recognized.

Assuming California reporting ends after a later exchange. The FTB Tax News compliance note says an FTB 3840 is still required if the out-of-state replacement property is later exchanged for another property as part of a tax-deferred exchange, because the deferral continues.

Using one FTB 3840 for multiple outbound exchanges. If more than one federal exchange involved California property given up and out-of-state like-kind property received, the FTB instructions call for a separate Form FTB 3840 for each such exchange.

Forgetting California-only differences. Schedule D-1 points preparers to federal Form 8824 completed using California amounts for like-kind exchange gain or loss lines. If California gains or losses differ from federal gains or losses, Schedule D-1 may be part of the California return.

Leaving Schedule A thin. The FTB 3840 form asks whether each property given up or received is in California, the ownership percentage, property description, address or parcel details, California adjusted basis, California-sourced deferred gain, and the allocation of that deferred gain to properties received. Those entries are the audit trail for later annual filings.

Frequently asked questions

What California form reports a 1031 exchange?

Does Form 8824 replace California Form 3840?

Do I file FTB 3840 if I no longer file a California tax return?

When can annual Form 3840 filings stop?

Where do the Form 3840 numbers come from?

Primary sources

• IRS Instructions for Form 8824 explains who files Form 8824, how deferred exchange deadlines work, and how the form reports gain, recognized gain, deferred gain, and basis.
• IRS Form 8824, Like-Kind Exchanges shows the federal form fields for property descriptions, dates, related-party questions, and gain calculations.
• FTB 3840 Instructions, California Like-Kind Exchanges explains who must file Form FTB 3840, annual filing, separate filing when no California return is required, and the form-to-form mapping from federal Form 8824.
• FTB Form 3840, California Like-Kind Exchanges shows the initial, amended, annual, and final filing boxes, plus Schedule A for properties given up and received.
• FTB Tax News, Compliance effort for FTB 3840 describes when FTB 3840 reporting continues and when it can end.
• FTB Publication 1100 explains California sourcing for nonresidents and California property exchanged for out-of-state property.
• 2025 California Schedule D-1 shows the California attachment rule when California gains or losses differ from federal gains or losses and references Form 8824 completed using California amounts.

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This article is for educational purposes only and is not legal or tax advice. California 1031 exchange reporting depends on the property, taxpayer, tax year, and return position. Review the current IRS and FTB instructions with a qualified tax professional before filing.

Related reading

• California 1031 Exchange Guide (state tax rules & deadlines)
• 1031 Exchange 180-Day Rule: How the Deadline Really Works
• 1031 Exchange 45-Day Rule: Identification Deadline
• 1031 Exchange and Depreciation Recapture Rules
• 1031 Exchange Primary Residence Rules
• 1031 Exchange Calculator: 45 & 180-Day Deadline Dates
• What is a 1031 exchange? Rules, timeline & how it works