GingerM Posted April 8, 2019 Report Share Posted April 8, 2019 Client sold rental property that was purchased in an exchange. The original property was sold in NY in 2011 and all gain was deferred by replacing with property in AZ using a 1031 exchange. Do I allocate the gain on NY to the original gain? The gain will be about $1M - $740,000 from the NY sale and the rest on the AZ property. Quote Link to comment Share on other sites More sharing options...
Abby Normal Posted April 8, 2019 Report Share Posted April 8, 2019 The replacement property's basis should have already been reduced by the deferred gain, if it was done correctly, so there should be nothing you have to do. The current gain will include the deferred gain by virtue of the deferred having already reduced the basis of the property being sold. 2 Quote Link to comment Share on other sites More sharing options...
GingerM Posted April 8, 2019 Author Report Share Posted April 8, 2019 You are correct Abby Normal however, my question is regarding the states. NY tax should only be paid on the original gain not the current gain, correct? That is how it would have worked if the gain had not been deferred in 2011. Quote Link to comment Share on other sites More sharing options...
Lee B Posted April 8, 2019 Report Share Posted April 8, 2019 5 minutes ago, GingerM said: You are correct Abby Normal however, my question is regarding the states. NY tax should only be paid on the original gain not the current gain, correct? That is how it would have worked if the gain had not been deferred in 2011. Excellent question ! Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted April 8, 2019 Report Share Posted April 8, 2019 If you were in CA, they would be tracking that exchange and be looking for the gain to be paid to CA from the original deferral. Tom Modesto, CA Quote Link to comment Share on other sites More sharing options...
GingerM Posted April 8, 2019 Author Report Share Posted April 8, 2019 47 minutes ago, BulldogTom said: If you were in CA, they would be tracking that exchange and be looking for the gain to be paid to CA from the original deferral. Tom Modesto, CA Thank you. I will research to see if NY has clarification. Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted April 8, 2019 Report Share Posted April 8, 2019 About 3 or 4 years ago, CA realized that people were doing exchanges, deferring taxes, moving out of state, and then selling the asset they deferred gain on without telling them and paying their tax (imagine that - sounds like good financial planning!). They now have a form 3840 that you must file every year to tell them about the asset, even if you do not have a filing requirement in CA. Fail to file the form and you get hit with a tax bill for the amount of deferred income. This is probably TMI. Tom Modesto, CA 1 Quote Link to comment Share on other sites More sharing options...
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