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Critical Diagnostic Error - CA Form 3840

SBTS
Level 3

Hello Lacerte Community:

I am here once again for your help.  I am trying to submit a partnership return in Lacerte but have a critical diagnostic error that goes like this "e-file:  Form 3840, Schedule A, Part 1:  If Line 1 Property is checked as property in California - Line 8, Part II, and Part III are required for electronic filing purposes. (ref #2053385)" and is preventing me from e-filing.

I have all the necessary fields populated with data -- Line 8 and Part II and Part III for the like-kind exchange.

Don't know what's the solution to fix this error message.  Any help wold be appreciated.

Many thanks in advance.

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8 Replies 8
dfa
Level 3

I'm having the same problem with Lacerte 2019. I do several 1031 exchanges a year with Form 3840 and filled this one out no differently than prior years. Try to override the diagnostic when e-filing. I'm also getting a diagnostic regarding TCJA and my assets might not be eligible for 1031 which is another glitch that I'm hoping to override.  

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SBTS
Level 3

Hello:

I was able to resolve this diagnostic by entering the values in 4 fields located under the 'California Like-Kind Exchanges (3840)' section:

1.  Total CA source deferred gain
2.  Apportionment percentage (xx.xxxx)
3.  Properties given up (Crtl+E)
4.  Properties received (Crtl+E) 

As I understand, #2 above is now a mandatory field which may not have been the case in prior years.  Since with my client's return, I did have out of state income, I did have a value to enter in #2. 

For 100%, enter 100.00 if you do not have out of state apportionment.

Check the outcome on Part III, lline 11 of 3840.

Good luck and please let us know if this worked.

dfa
Level 3

Thanks! It worked. It was the apportionment. My guy is a CA resident selling CA property for AR property. Lacerte doesn't appear to have a CA Schedule R  for individuals and so I'm hoping the AR rental property doesn't require a Sch R since it's a passive activity of its own and I'll use 100% for apportionment.

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SBTS
Level 3

Great!

Remind your client that CA requires filing form 3840 every year as long your they owns out-of-state replacement property.  This one usually gets overlooked by the client and then they get penalized.

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WAZ
Level 1

Like a charm, thanks!

abctax55
Level 15

I'm also getting a diagnostic regarding TCJA and my assets might not be eligible for 1031 which is another glitch that I'm hoping to override.  

Based on numerous previous posts, this diagnostic can be ignored/overridden.

Former Chump..umm... AllStar...This message was typed from 6 feet away so you can safely read it immediately.

If a post answers your question, click on *Accept as solution* for future searches
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SBTS
Level 3

Did the exchange involve real estate for both legs located in the US?

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dfa
Level 3

I figured this one out. I needed to check the box that it's 1250 property since it's pre-1987 property and research whether there's any 1250 recapture subject to ordinary income. So I think it's very important to not ignore this diagnostic. If this diagnostic appears, you may be tagging your client with ordinary income rather than capital gain.

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