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Changes to 2011 Forms

Updates to the 100S Booklet on 02/12/2013 –– California S Corporation Franchise or Income Tax Booklet

We replaced text on:

  1. Page 5, Column 1, California nonconformity list, Bullet 5
  2. Page 17, Column 2, Line 10b, item f
  3. Page 51, California Tax Forms and Publications, 817 California Corporation Tax Forms and Instructions, 5th form
  4. Page 30, Tangible Property Expense Worksheet, Line 2 and Line 3

Previous Version

  1. The change in the percentage of the gain exclusion for the sale of qualified small business stock acquired after February 17, 2009, and before January 1, 2011.
  2. Eligible gain from the sale or exchange of qualified small business stock (defined in R&TC Section 18152.5). Also report on an attachment to Schedule K and Schedule K-1 (100S) the name of the corporation that issued the stock and the adjusted basis of that stock.

    The exclusion allowed under R&TC Section 18152.5 for small business stock is not allowed for an S corporation but is allowed for the shareholder.
  3. FTB 3565, Small Business Stock Questionnaire
  4. Text below:
Tangible Property Expense Worksheet
1 Maximum dollar limitation for California.... 1 25,000
2 Total cost of IRC Section 179 property placed in service.... 2 200,000
3 Threshold cost of IRC Section 179 property before reduction in limitation.... 3
4 Reduction in limitation. Subtract line 3 from line 2. If zero or less, enter -0-.... 4

Revised Version

  1. The qualified small business stock deferral and gain exclusion under IRC Section 1045 and IRC Section 1202.
  2. Note: text deleted.
  3. Note: text deleted.
  4. Text below:
Tangible Property Expense Worksheet
1 Maximum dollar limitation for California.... 1 25,000
2 Total cost of IRC Section 179 property placed in service.... 2
3 Threshold cost of IRC Section 179 property before reduction in limitation.... 3 200,000
4 Reduction in limitation. Subtract line 3 from line 2. If zero or less, enter -0-.... 4

Reason for the changes

Items 1 - 3
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.

Item 4
The threshold cost is on the incorrect line.

Impact

Item 1 - 3
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.

Item 4
This revision may cause a reduction in the IRC Section 179 expense deduction which will results in an increase in the net income and an increase in the tax liability.

Back to Tax Form Changes for 2011