CHAPTER 13. Gain or Loss on Disposition of Property [18031. - 18045.]

Cal. Revenue and Taxation Code - RTC 13.
in effect

Cal. Revenue and Taxation Code - RTC § 18031.5. Section 18031.5.

(a) The amendments made by Section 13303(a) and (b) of the Tax Cuts and Jobs Act, 2017 (Public Law 115-97) to Section 1031 of the Internal Revenue Code, relating to exchange of real property held for productive use or investment, shall apply, except as otherwise provided in this section. (b) (1) (A) In the case of a taxpayer who is a head of household, a surviving spouse, or spouses filing a joint return, this section shall only apply to those taxpayers with adjusted gross income, as defined in Section 17072, of five hundred thousand dollars ($500,000) or more for the taxable year in which the exchange begins. (B) In the case of a taxpayer filing an individual return, this section shall only apply to those taxpayers with adjusted gross income, as defined in Section 17072, of two hundred fifty thousand dollars ($250,000) or more for the taxable year in which the exchange begins. (2) This subdivision shall not apply for taxable years beginning on or after January 1, 2025. (c) (1) This section shall apply to exchanges completed after January 10, 2019. (2) This section shall not apply to an exchange where the property to be disposed of by the taxpayer in the exchange is disposed of by that taxpayer on or before January 10, 2019, or where the property to be received by the taxpayer in the exchange is received by that taxpayer on or before January 10, 2019.

Cal. Revenue and Taxation Code - RTC § 18032. Section 18032.

(a) If gain or loss from the exchange of property in this state of a taxpayer is not recognized under this part because of Section 1031 of the Internal Revenue Code, relating to exchange of property held for productive use or investment, for a taxable year and the property acquired in that exchange is located outside of this state, the taxpayer shall file an information return with the Franchise Tax Board for the taxable year of the exchange and for each subsequent taxable year in which the gain or loss from that exchange has not been recognized, in the form and manner prescribed by the Franchise Tax Board. (b) If a taxpayer fails to file an information return required pursuant to subdivision (a), and fails to file a return required under Part 10.2 (commencing with Section 18401), the Franchise Tax Board may make an estimate of the net income, from any available information, including the amount of gain described in subdivision (a), and may propose to assess the amount of tax, interest, and penalties due in the same manner as Section 19087. (c) Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this section. (d) This section shall apply to exchanges of property that occur in taxable years beginning on or after January 1, 2014.

Cal. Revenue and Taxation Code - RTC § 18036. Section 18036.

(a) In addition to the adjustments to basis provided by Section 1016(a) of the Internal Revenue Code, a proper adjustment shall also be made for amounts allowed as deductions as deferred expenses under subdivision (b) of former Section 17689 or former Section 17689.5 (relating to certain exploration expenditures) and resulting in a reduction of the taxpayer’s taxes under this part, but not less than the amounts allowable under those sections for the taxable year and prior years. A proper adjustment shall also be made for amounts deducted under Section 17252.5, 17265, or 17266. (b) Notwithstanding the provisions of Sections 164(a) and 1016(a) of the Internal Revenue Code, no adjustment to basis shall be made for any of the following: (1) Abandonment fees paid in respect of property on which the open-space easement is terminated under Section 51061 or 51093 of the Government Code. (2) Tax recoupment fees paid under Section 51142 of the Government Code. (3) Sales or use tax which is paid or incurred by the taxpayer in connection with the acquisition of property for which a tax credit is claimed pursuant to Section 17052.13. (c) The provisions of Section 1016(c) of the Internal Revenue Code, relating to increase in basis of property on which additional estate tax is imposed, shall be applicable. (d) The amendments made to Section 1016 of the Internal Revenue Code by Section 1913(a) of Public Law 102-486, relating to deduction for clean-fuel vehicles and certain refueling property, shall apply to property placed in service after June 30, 1993, without respect to taxable year. (e) The provisions of Section 1016(a)(38) of the Internal Revenue Code, relating to basis adjustments for capital gains invested in opportunity zones, shall not apply.

Cal. Revenue and Taxation Code - RTC § 18036.5. Section 18036.5.

In addition to the adjustments to basis provided by Section 1016(a) of the Internal Revenue Code, a proper adjustment shall also be made in the case of property the acquisition of which resulted under Section 18038.5 in the nonrecognition of any part of the gain realized on the sale of other property, to the extent provided in paragraph (4) of subdivision (b) of Section 18038.5.

Cal. Revenue and Taxation Code - RTC § 18037. Section 18037.

An election made by a taxpayer pursuant to Section 1033(g)(3) of the Internal Revenue Code, relating to the election to treat outdoor advertising displays as real property, may not be denied because the taxpayer has, on his or her federal return, elected to expense the asset.

Cal. Revenue and Taxation Code - RTC § 18039. Section 18039.

Section 1052 of the Internal Revenue Code, relating to basis established by prior revenue acts, is modified as follows: (a) Section 1052(c) of the Internal Revenue Code does not apply. (b) If the property was acquired, after February 28, 1913, in a transaction to which the Personal Income Tax Law of 1954 applied, and the basis thereof, for purposes of the Personal Income Tax Law of 1954, was prescribed by Section 17747, 17751, 17755, 17756, 17757, 17758, or 17788 of that law, then for purposes of this part the basis shall be the same as the basis therein prescribed in the Personal Income Tax Law of 1954.

Cal. Revenue and Taxation Code - RTC § 18041.5. Section 18041.5.

(a) No gain shall be recognized with respect to a sale of an assisted housing development to a tenant association, nonprofit organization, profit-motivated organization or individual, or public agency which obligates itself and any successors in interest to maintain the assisted housing development affordable to persons or families of lower income or very low income for either a period of 30 years from the date of sale or the remaining term of existing federal government assistance as listed in subdivision (a) of Section 65863.10 of the Government Code, whichever is greater, provided that all of the proceeds from the sale are reinvested in residential real property, other than a personal residence, in this state within two years after the sale. This obligation shall be recorded at the time of sale in the office of the county recorder of the county in which the development is located. (b) No gain shall be recognized with respect to a sale of a majority or more of units in an assisted housing development converted to condominium interests, to a tenant association, nonprofit organization, profit-motivated organization or individual, or public agency which obligates itself and any successors in interest to maintain the condominiums affordable to persons or families of lower income or very low income for either a period of 30 years from the date of sale or the remaining term of existing federal government assistance as listed in subdivision (a) of Section 65863.10 of the Government Code, provided that all of the proceeds from the sale are reinvested in residential real property, other than a personal residence, in this state within two years after the sale. This obligation shall be recorded at the time of sale in the office of the county recorder of the county in which the development is located. (c) No gain shall be recognized with respect to a sale of real property to a majority or more of existing lower income and very low income residents of that property, provided that all of the proceeds from the sale are reinvested in residential real property, other than a personal residence, in this state within two years after the sale. (d) No gain shall be recognized with respect to a sale of a majority or more of units converted to condominium interests to the existing lower income or very low income residents of that property, provided that all of the proceeds from the sale are reinvested in residential real property, other than a personal residence, in this state within two years after the sale. (e) For purposes of this section: (1) “Assisted housing development” means a multifamily rental housing development that receives federal government assistance, appearing of record and containing a legal description of the property, as defined in subdivision (a) of Section 65863.10 of the Government Code. (2) “Tenant association” means a group of tenants who have formed a nonprofit corporation, cooperative corporation, or other entity or organization; or a local nonprofit, regional, or national organization whose purpose includes the acquisition of an assisted housing development, real property, or condominium and which represents the interests of at least a majority of the tenants in the assisted housing development, real property, or condominium. (3) “Nonprofit organization” means a not-for-profit corporation organized pursuant to Division 2 (commencing with Section 5000) of Title 1 of the Corporations Code, which has as its principal purpose the ownership, development, or management of housing or community development projects for persons and families of lower income and very low income, and which has a broadly representative board, a majority of whose members are community-based and has a proven track record of community service. (4) “Public agency” means a housing authority, redevelopment agency, or any other agency of a city, county, or city and county, whether general law or chartered, which is authorized to own, develop, or manage housing or community development projects for persons and families of lower income and very low income. (5) “Regional or national organization” means a not-for-profit, charitable corporation organized on a multicounty, state, or multistate basis which has as its principal purpose the ownership, development, or management of housing or community development projects for persons and families of lower income and very low income. (6) “Regional or national agency” means a multicounty, state, or multistate agency which is authorized to own, develop, or manage housing or community development projects for persons and families of lower income and very low income. (7) “Profit-motivated organization or individual” means an individual or two or more persons organized pursuant to Division 1 (commencing with Section 100) of Title 1 of, Division 3 (commencing with Section 1200) of Title 1 of, or Division 1 (commencing with Section 15001) of Title 2 of, the Corporations Code, which carries on as a business for profit. (8) “Lower income” means those residents having an income as defined by Section 50079.5 of the Health and Safety Code. (9) “Very low income” means those residents having an income as defined by Section 50105 of the Health and Safety Code. (10) “Resident” means a tenant or other person who lawfully occupies a unit located in a qualified low-income housing project as defined under Section 17058, and whose income qualifies as lower income or very low income. (11) “Condominium” means the interest in real property defined in Section 783 of the Civil Code. (f) If the purchase of residential real property results in the nonrecognition of gain on the sale of an assisted housing development, real property, or condominium under subdivision (a), (b), (c), or (d), in determining the adjusted basis of the purchased residential real property as of any time following the sale of the assisted housing development, real property, or condominium, the adjustments to the basis shall include a reduction by an amount equal to the amount of the gain not so recognized on the sale of the assisted housing development, real property, or condominium. If more than one parcel of residential real property has been purchased, the nonrecognized gain from the sale of the assisted housing development, real property, or condominium shall be attributed to the parcels of residential real property on a pro rata basis based upon the purchase prices of those parcels. (g) In accordance with subdivision (a), (b), (c), or (d), if the sale of an assisted housing development, real property, or condominium results in a gain during the taxable year, then all of the following shall apply: (1) The statutory period for the assessment of any deficiency attributable to any part of the gain shall not expire before the expiration of four years from the date the Franchise Tax Board is notified (on the form as the Franchise Tax Board may provide) of one of the following: (A) The cost of purchasing the residential real property which satisfies the requirement of subdivision (a), (b), (c), or (d), and results in the nonrecognition of gain. (B) The intention not to reinvest all of the proceeds from the sale in residential real property within the period specified in subdivision (a), (b), (c), or (d). (C) The failure to reinvest all of the proceeds from the sale in residential real property within the period specified in subdivision (a), (b), (c), or (d). (2) The deficiency may be assessed before the expiration of the period specified in paragraph (1), notwithstanding the provisions of any other law or rule of law which would otherwise prevent the assessment. (3) All information regarding the sale of an assisted housing development, real property, or condominium, at a gain in accordance with subdivision (a), (b), (c), or (d), shall be disclosed in the return for the taxable year in which the sale took place in order to determine if the sale qualifies and the amount of nonrecognition of gain qualifies under subdivision (a), (b), (c), or (d). (h) The Department of Housing and Community Development shall do all of the following: (1) Certify that the lower income or very low income resident meets the definitions provided in paragraphs (8) and (9) of subdivision (e). (2) Provide an annual listing to the Franchise Tax Board, in a form and manner agreed upon by the Franchise Tax Board and the Department of Housing and Community Development, of the names and identification numbers of the persons who are members of the group of purchasers who are lower income or very low income residents that were issued a certification, and the names and identification numbers of the sellers of the property. (3) Provide the group of purchasers who are lower income or very low income residents a copy of the certification. (i) The group of purchasers who are lower income or very low income residents shall do all of the following: (1) Provide the Department of Housing and Community Development with documents, as deemed necessary by the department, verifying the income of each member of the group. (2) Provide a copy of the certification to the seller of the assisted housing development, real property, or condominium. (3) Retain a copy of the certification. (j) The seller of the assisted housing development, real property, or condominium shall do all of the following: (1) Obtain a copy of the certification from the group of purchasers who are lower income or very low income residents of the assisted housing development, real property, or condominium. (2) Retain a copy of the group’s lower income or very low income certification for tax purposes.

Cal. Revenue and Taxation Code - RTC § 18042. Section 18042.

(a) Section 1042 of the Internal Revenue Code, relating to sales of stock to employee stock ownership plans or certain cooperatives, shall apply to taxable years beginning on or after January 1, 1995. (b) For taxable years beginning on or after January 1, 1998, and before January 1, 2028, Section 1042 of the Internal Revenue Code, relating to sales of stock to employee stock ownership plans or certain cooperatives, is modified to provide that the term “domestic corporation” shall instead mean “domestic C corporation.” (c) For taxable years beginning on or after January 1, 2028, Section 1042(h) of the Internal Revenue Code, relating to application of section to sale of stock in S corporation, shall apply. (d) Section 1042(g) of the Internal Revenue Code, relating to application of section to sales of stock in agricultural refiners and processors to eligible farm cooperatives, shall not apply.

Cal. Revenue and Taxation Code - RTC § 18044. Section 18044.

The provisions of Section 1044 of the Internal Revenue Code, relating to rollover of publicly traded securities gain into specialized small business investment companies, shall not apply to any taxable year (or portion thereof) that those provisions (or similar provisions) are not applicable for federal income tax purposes.
Source: CA Legislative Counsel Bulk DataURL: https://downloads.leginfo.legislature.ca.gov/pubinfo_2025.zipFetched: 6/27/2026

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