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Changes to 2010 Forms

Updates to the Schedule P (540NR) Instructions on 02/13/2013 –– Instructions for 540NR Schedule P, Alternative Minimum Tax and Credit Limitations - Nonresidents and Part-Year Residents

We replaced text on:

  1. Page 2, Column 1, B – Who Must File, Bullet 4
  2. Page 3, Column 2, Line 8
  3. Page 4, Column 1, Line 13
  4. Page 5, Column 1, Line 13h
  5. Page 5, Column 1, Line 13l
  6. Page 5, Column 2, Line 13m
  7. Page 5, Column 2, Line 13n
  8. Page 5, Column 2, Line 13o
  9. Page 5, Column 2, Line 13o, Bullet 3
  10. Page 5, Column 2, Line 13o, Paragraph after last bullet
  11. Page 6, Column 2, Line 29

Previous Version

  1. Schedule P (540NR), Part 1, line 21, is more than Part II, line 22, and you have one or more adjustments on line 4 or line 7 through line 13o.
  2. Instead, include these types of depreciation when you figure adjustments for line 5, line 11, line 13h, line 13m, or line 13n, whichever applies.
  3. Line 13 – Other adjustments and preferences. Enter the amount of any other adjustments or preferences that apply to you on line 13a through line 13o.
  4. Line 13h – Loss limitations. Use line 13n for nonpassive tax shelter farm activities.
  5. Line 13l – Qualified small business stock exclusion (R&TC Section 18152.5) California law provides an exclusion similar to the federal exclusion under IRC Section 1202 for 50% of the gain on the sale of qualifying small business stock originally issued after August 10, 1993, and held for five years. However, for California purposes, 80% of the issuing corporation’s payroll as measured by total dollar value must be attributable to employment located within California, and at least 80% of the value of the assets of the corporation must be used by the corporation in the active conduct of one or more qualified trades or businesses in California. If you excluded gain as allowed under R&TC Section 18152.5, multiply the excluded amount by 50% and enter it on this line as a positive amount.
  6. Line 13m
  7. Line 13n
  8. Line 13o
  9. Line 13o, Line 13b through line 13n
  10. Line 13o, Combine the amounts for all your related adjustments and enter the total on line 13o.
  11. Line 29, Adjustments and preferences. Follow the instructions for Part 1, line 7 through line 13o. Enter on line 29a through 29t the amounts that relate to income and deductions shown on Schedule CA (540NR), Part II, column E.

Revised Version

  1. Schedule P (540NR), Part 1, line 21, is more than Part II, line 22, and you have one or more adjustments on line 4 or line 7 through line 13n.
  2. Instead, include these types of depreciation when you figure adjustments for line 5, line 11, line 13h, line 13l, or line 13m, whichever applies.
  3. Line 13 – Other adjustments and preferences. Enter the amount of any other adjustments or preferences that apply to you on line 13a through line 13n.
  4. Line 13h – Loss limitations. Use line 13m for nonpassive tax shelter farm activities.
  5. Note: text deleted.
  6. Line 13l
  7. Line 13m
  8. Line 13n
  9. Line 13o, Line 13b through line 13m
  10. Line 13o, Combine the amounts for all your related adjustments and enter the total on line 13n.
  11. Line 29, Adjustments and preferences. Follow the instructions for Part 1, line 7 through line 13n. Enter on line 29a through 29s the amounts that relate to income and deductions shown on Schedule CA (540NR), Part II, column E.

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.

Back to Tax Form Changes for 2010