Form 3840 - Spidell

Form 3840

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Message Board Form 3840

This topic contains 1 reply, has 2 voices, and was last updated by Sandy Weiner 2 months, 1 week ago.

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  • #159241

    A client exchanged a California rental property for 3 condos (A, B, and C) in Wisconsin years ago. We’ve been filing the 3840 annually. In 2018 they sold condo A (small gain, but PALs to cover it), and did another 1031 trading condo B for condo D. Not sure how to report on the 3840 that we now have condos C and D. Thank you for any responses.

  • #159318
    Sandy Weiner

    From our Analysis & Explanation book Par. 21-403:

    Multiple replacement properties

    If a property is exchanged for multiple out-of-state replacement properties, different reporting rules apply depending on the disposition of the replacement property. If a replacement property is sold at a loss, the taxpayer should exclude the property from the list of properties on Form 3840 and attach a statement noting that the property was sold at a loss.

    If one of the replacement properties is exchanged again, that original replacement property should be removed from the Form 3840 filed in relation to the original exchange. A statement should be attached explaining that one of the original replacement properties was exchanged for a new replacement property, and that a new Form 3840 is being submitted with details concerning the second exchange. The new Form 3840 should have the “Initial FTB 3840” box checked on Question B and should list the property exchanged in the subsequent exchange as the relinquished property. The portion of the original deferred gain relating to that property should be reflected on the second Form 3840.

    The taxpayer will continue to file multiple 3840s in future years.