Form 3840 problem - Spidell

Form 3840 problem

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Message Board Form 3840 problem

  • This topic has 2 replies, 2 voices, and was last updated 1 year ago by Anonymous .
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    • #274656

      New 2019 client who lives in Hawaii. When I was transferring over the 2018 information, I noticed that a 1031 exchange had an incorrect basis – easy fix with an amended return, and was only thinking of federal at the time. However, the property was a CA property exchanged with a property in another state.  I notice that no CA return was ever filed showing the rental income and expenses on Sch E. And because no CA return was filed, the Form 3840 was not filed.

      Now what do I do? Since they did not file the form 3840 last year, are they automatically subject to that tax? There is no CA return to even amend. Is there anything to do to fix this scenario?

      And how to I deal with 2019? I can easily amend the federal return, but what should I do about that form?


      Thank you.

    • #274669
      Lynn Freer

      Yes CA could accelerate the gain. I would file a 540NR for 2018 now as it should have been done with the federal. As there would be no tax due, no penalty and then if there is no CA-source income, for 2019, you can just file Form 3840 alone – must be paper filed- or efile as part of a 540NR with no CA source income

    • #274737

      CA could accelerate the gain -but would it be automatic if we filed the late Form 3840?  Better late than never? Obviously going forward would create an issue as well if not filed, so I feel as if we are just waiting for that tax letter to come either way we deal with it.

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