California Exchange Rules

Acquiring Property Outside California
California AB 92

The California Legislature passed Assembly Bill 92 in June 2013.
AB 92 will require a reporting of resident and nonresident taxpayers who engage in 1031 Exchanges of California property into a replacement that is outside of California. This will take effect on all exchanges that occur on or after January 1, 2014. Taxpayers are required to file an information return for the year of the exchange and every year thereafter with tax due on the originally deferred California gain where the taxpayer sells the replacement property or fails to file the information return.

There are many problems that arise from this bill because it will require non-residents trading from California property into non-California property to compute and track California sourced gain. The extent of this required filing is broad and is likely to be controversial and possible challenge when enforcement of filing begins in 2015.

FTB Pub 1100
Rev & TC ยงยง 18032 and 29453