Grouping 1031 Properties Together

[Scott Scharl]

Posting a question for a friend who's not on BP. I was interested in hearing the answer, so I figured I ask what you all think:

In 2004 he sold a rental in CA to buy 3 rentals for cash in Idaho via 1031. If he now want to buy 3 rentals in AZ w/ leverage via 1031 could he do each transaction separately? Would he have 45 days to identify and 180 days to close for each Idaho property? Or, because it started with one rental in CA, does he have to keep the three Idaho properties lumped together to sell all at once? Thus having to identify 3 properties in AZ at the same time.

Thanks for your advice

[Joe Nugent]

The California State Assembly recently enacted legislation that added new sections to the California Revenue and Taxation Code (New R&TC Sections 18032, 24953 added by AB 92). These sections provide that investors involved in a 1031 Exchange transaction who sell California property and purchase NON-California Replacement Property will be required to file an annual information return with the California Franchise Tax Board (FTB), reporting this NON-California property.

The California taxes that were previously deferred will be due when and if taxpayers sell their new properties and elect to take their profits rather than continuing to defer taxes through another 1031 Exchange. If taxpayers fail to file the annual return, the FTB may estimate taxes due and assess tax, interest and penalties.

The new California Like Kind Exchange reporting requirements shall apply to 1031 Exchanges of property that occur in taxable years beginning on or after January 1, 2014. You can review a complete copy of AB 92 here:
http://leginfo.ca.gov/pub/13-14/bill/asm/ab_0051-0100/ab_92_bill_20130614_enrolled.pdf