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Changes to 2009 Forms

Updates to the Publication 1001 on 02/13/2014 –– Supplemental Guidelines to California Adjustments

We replaced text on Page 9, Item 6.

Previous Version

DIFFERENCES BETWEEN FEDERAL AND CALIFORNIA LAW

Federal law allows deferral and exclusion under IRC Section 1045 and IRC Section 1202 of 75% of the gain on sale of qualifying small business stock originally issued after August 10, 1993, that was held for more than five years. California does not conform.

Revised Version

DIFFERENCES BETWEEN FEDERAL AND CALIFORNIA LAW

California law does not conform to federal law changes regarding the increase in the percentage of the gain exclusion for the sales of qualified small business stock acquired after February 17, 2009. California law allows an exclusion of 50% of any gain from the sale or exchange of qualified small business stock held for more than 5 years. For California purposes, 80% of the issuing corporation’s payroll must be attributable to employment located within California (at time of issuance). Also, at least 80% of the value of the corporation’s assets must be used by the corporation to actively conduct one or more qualified trades or businesses.

R&TC Section 18038.5 also provides for the deferral of gain from the sale of small business stock that has been held for six months or more, if qualified replacement stock is purchased within 60 days after the sale giving rise to the gain. Report gain deferred from the sale of qualified small business stock in accordance with the instructions contained in Revenue Procedure 98-48.

For more information, go to ftb.ca.gov and search for qsbs.

Reason for the changes

AB 1412 (Stats. 2013, ch. 546), signed by the Governor on October 4, 2013, retroactively allows the Qualified Small Business Stock (QSBS) deferral and 50 percent gain exclusion for tax years 2008 through 2012.

Impact

This revision may decrease the tax liability for taxpayers who did not report a QSBS exclusion or deferral for taxable years beginning on or after January 1, 2008.

Back to Tax Form Changes for 2009


Updates to the Publication 1001 on 02/19/2013 –– Supplemental Guidelines to California Adjustments

We replaced text on Page 9, Item 6.

Previous Version

DIFFERENCES BETWEEN FEDERAL AND CALIFORNIA LAW

Federal law allows an exclusion under IRC Section 1202 of 50% of the gain on the sale of qualifying small business stock originally issued after 08/10/93, that was held for more than five years. California law provides a similar exclusion (under R&TC Section 18152.5); however, for California purposes, 80% of the issuing corporation’s payroll must be attributable to employment located within California, and at least 80% of the value of the issuing corporation’s assets must be used by the corporation to actively conduct one or more qualified trades or businesses in California.

WHAT TO DO FOR CALIFORNIA

Use California Schedule D (540 or 540NR) if you claim the federal IRC Section 1202 exclusion on your federal return.

Revised Version

DIFFERENCES BETWEEN FEDERAL AND CALIFORNIA LAW

Federal law allows deferral and exclusion under IRC Section 1045 and IRC Section 1202 of 75% of the gain on sale of qualifying small business stock originally issued after August 10, 1993, that was held for more than five years. California does not conform.

WHAT TO DO FOR CALIFORNIA

Use California Schedule D (540 or 540NR) if you claim the federal IRC Section 1045 deferral or IRC Section 1202 exclusion on your federal return.

Reason for the changes

The Court of Appeal’s held in Cutler v. Franchise Tax Board (2012) 208 Cal. App. 4th 1247, that the qualified small business stock exclusion and deferral statutes under California Revenue and Taxation Code (R&TC) Sections 18152.5 and 18038.5 are unconstitutional. These sections are now invalid and unenforceable.

Impact

This revision increases the tax liability for taxpayers who reported a qualified small business stock exclusion or deferral for taxable years beginning on or after January 1, 2008.

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Updates to the Publication 1001 on 05/05/2010 –– Supplemental Guidelines to California Adjustments

We replaced text in Publication 1001 on:

  1. Page 1, column 1, after first paragraph
  2. Page 14, column 1, first paragraph
  3. Page 14, column 2, first paragraph
  4. Page 14, column 3, first paragraph
  5. Page 14, column 1, second paragraph
  6. Page 14, column 2, second paragraph
  7. Page 14, column 3, second paragraph

Previous Version

  1. N/A –– (Added two new paragraphs)
  2. Mortgage Relief upon sale or other disposition of principal residence
  3. For taxable years 2007 through 2012, federal law allows an exclusion of income from discharge of indebtedness from the disposition of your principal residence. See federal Publication 544, Sales and Other Disposition of Assets, for more information. California partially conforms to the federal provisions for taxable years 2007 and 2008 only.
  4. Enter the amount of debt relief for federal purposes on Schedule CA (540 or 540NR), line 21f, column C.
  5. Payments received from the Hokie Spirit Memorial Fund
  6. Federal law provides an exclusion from gross income, for payments from the Hokie Spirit Memorial Fund to the victims of the tragic event at Virginia Polytechnic Institute & State University. California does not conform.
  7. Enter on Schedule CA (540 or 540NR), line 21f, column C, the amount of the payment that qualifies for the federal exclusion.

Revised Version

  1. Mortgage Forgiveness Debt Relief Extended – California law partially conforms to the federal Mortgage Forgiveness Debt Relief Act of 2007 and the Emergency Economic Stabilization Act of 2008 for discharges of indebtedness occurring on or after January 1, 2009. California limits the amount of qualified principal residence indebtedness to $800,000 ($400,000 for married/RDP filing separately)(the federal limit is $2,000,000/$1,000,000 for MFS) and debt relief to $500,000 ($250,000 for married/RDP filing separately). For more information, go to ftb.ca.gov and search for mortgage forgiveness.

    Hokie Spirit Memorial Fund Exclusion - California law conforms to federal law to exclude from income any amount received from the Hokie Spirit Memorial Fund for the events at Virginia Polytechnic Institute and State University on April 16, 2007. The income is excluded from gross income for any taxable year and is thus retroactive in its application.
  2. Mortgage forgiveness debt relief
  3. For taxable years 2007 through 2012, federal law allows an exclusion of income from discharge of indebtedness from the disposition of your principal residence. Federal law limits the amount of qualified principal residence indebtedness to $2,000,000 ($1,000,000 for married filing separate). See federal Publication 544, Sales and Other Disposition of Assets, for more information. California partially conforms to the federal provisions for discharges of indebtedness occurring on or after January 1, 2009. California law limits the amount of qualified principal residence indebtedness to $800,000 ($400,000 for married/RDP filing separate) and debt relief to $500,000 ($250,000 for married/RDP filing separate).
  4. If the amount of debt relief for federal purposes is more than the California limit, include the amount in excess of the California limit on Schedule CA (540 or 540NR), line 21f, column C.
  5. (Text eliminated.)
  6. (Text eliminated.)
  7. (Text eliminated.)

Reason for the changes

Change 1:
The Conformity Act of 2010 (SB 401) placed California law in modified conformity with federal law for mortgage forgiveness debt relief on discharges of indebtedness occurring on or after January 1, 2009 and placed California law in conformity with federal law to exclude from income any amounts received from the Hokie Spirit Memorial Fund retroactively to the 2007 taxable year.

Change 2-4:
The Conformity Act of 2010 (SB 401) placed California law in modified conformity with federal law for mortgage forgiveness debt relief on discharges of indebtedness occurring on or after January 1, 2009.

Change 5-7:
The Conformity Act of 2010 (SB 401) placed California law in conformity with federal law to exclude from income any amounts received from the Hokie Spirit Memorial Fund retroactively to the 2007 taxable year.

Impact

These revisions may decrease tax liability.

Back to Tax Form Changes for 2009