This month the FTB is sending demand letters to taxpayers who either failed to file or filed an incomplete Form 3840, California Like-Kind Exchanges, in 2016.
If taxpayers do not respond to the demand letter within 30 days, the FTB may open an audit for the tax year. If the audit results in a Notice of Proposed Assessment for the California like-kind exchange, a 25% penalty of the computed tax for the failure to provide information upon legal demand may be imposed (R&TC §19133). Don’t procrastinate.