A 1031 exchange is a real estate selling tax break. This 1031 Exchange Checklist is intended to provide a brief overview of the steps involved in an IRC Section 1031 taxdeferred exchange.California recognizes 1031 Exchanges which allows an investor to defer capital gains taxes as long as you are purchasing another "likekind" property. Explain transactions to the IRS. During the tax filing period, you need to file your Form 8824 with the IRS. Use form FTB 3840 to report like-kind exchanges of California business or investment property for out of state like-kind property. An executed grant deed in the form attached hereto as Exhibit C ("Deed").