Other Differences in Calculating Income (A)
In three other areas, California may calculate income differently from the federal return.
Capital Loss Carryover (CA Schedule D)
- Capital loss carryover amounts can vary between federal and CA - see instructions on page 49.
Inherited Property Basis Difference (page 47)
- For inherited property, the CA basis is always the fair market value (FMV) at date of death.
- The federal basis for property inherited in 2010 (and sold during the tax year) may be different from FMV; this is shown on the 2010 Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent (instructions). If the basis is not FMV, the return is out-of-scope.
IRA Basis Difference
- Note: For the federal return, the IRA basis recovery is on Form 8606 Part I.
- There may be a basis difference for CA as shown in this table.
|
Year |
Federal |
California |
|
1975 |
Maximum deduction $1,500 |
No IRA deduction |
|
1982-1986 |
$2,000 maximum; must be earned income |
$1,500 maximum; not allowed if covered by pension plan |
|
1987-1994 |
Limited to net federal Schedule C income plus wages |
Limited to net income on CA C Page 1 if less than federal |
|
2007-2009 |
AGI limits increased for deductible IRA for active participants |
CA AGI limits lower, allowed deduction could have been lower |
|
2007-2009 |
Catch-up provisions |
Non-conformity |
|
1987 - Now |
Nondeductible contributions |
Separate election |
- The taxpayer must have records showing the amount contributed for each of these years and the amount deducted for federal and CA, if any.
- Without records, there can be no adjustment of the taxable IRA distribution.
- Generally, CA basis in excess of federal basis reduces the amount of taxable IRA distribution until CA basis is the same as the federal.
- Thereafter, no further adjustment would be needed as CA follows federal IRA basis recovery rules.
- FTB Pub 1005 has detailed instructions and worksheets.
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