Instructions For Form 568 - Limited Liability Company Return Of Income - State Of California Franchise Tax Board - 2005 Page 18
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29Instructions for Schedule D (568)
Capital Gain or Loss
Schedule K (568) and Schedule K-1 (568) for more information. Also,
General Information
refer to the instructions for federal Schedule D (1065).
In general, California law conforms to the Internal Revenue Code (IRC)
Nonresident and Part-Year Resident Partners, get FTB Pub. 1100,
as of January 2005. However, there are continuing differences between
Taxation of Nonresidents and Individuals Who Change Residency
California and federal law. When California conforms to federal tax law
Note: With the enactment of AB 1115 (Stats. 2001, Ch 920) capital loss
changes, we do not always adopt all of the changes made at the federal
carryover and capital loss limitations for nonresident members and part-
level. For more information regarding California and federal law, visit our
year resident members, for the portion of the year they were nonresi-
Website at and search for conformity. Additional
dents, are determined based upon California source income and loss
information can be found in FTB Pub. 1001, Supplemental Guidelines to
items only for the computation of their California taxable income.
California Adjustments, the instructions for California Schedule CA (540
Moreover, the character of their gains and losses on the sale or
or 540NR), and the Business Entity tax booklets.
exchange of property used in trade or business or certain involuntary
Note, the instructions provided with California tax forms are a summary
conversions (IRC Section 1231) are determined for purposes of
of California tax law and are only intended to aid taxpayers in preparing
calculating their California taxable income by netting California sources
their state income tax returns. We include information that is most
Section 1231 gains and losses only.
useful to the greatest number of taxpayers in the limited space available.
California law conforms to federal law for the recognition of gain on a
It is not possible to include all requirements of the California Revenue
constructive sale of property in which the LLC held an appreciated
and Taxation Code (R&TC) in the tax booklets. Taxpayers should not
interest.
consider the tax booklets as authoritative law.
Qualified Small Business Stock
Internet Access
R&TC Section 18152.2 is similiar to IRC Section 1202 regarding the
You can download, view, and print California tax forms and publications
exclusion of 50% of the gain on the sale of qualifying small business
from our Website at .
stock originally issued after August 10, 1993, that was held for more
Access other state agencies’ websites through the State Agency Index on
than five years. However, for California purposes, at least 80% of the
California’s Website at
issuing corporation’s payroll must be attributable to employment located
within California, and at least 80% of the value of the corporation’s
Purpose
assets must be used by the corporation to actively conduct one or more
qualified trades or businesses in California.
Use Schedule D (568), Capital Gain or Loss, to report the sale or
exchange of capital assets, except capital gains (losses) that are
R&TC Section 18038.5 also provides for the deferral of gain from the
specially allocated to any members. Do not use this form to report the
sale of small business stock that has been held for six months or more,
sale of business property. For sales of business properties, use
if qualified replacement stock is purchased within 60 days after the sale
California Schedule D-1, Sale of Business Property.
giving rise to the gain. Report gain deferred from the sale of qualified
small business stock in accordance with the instructions contained in
Enter specially allocated capital gains (losses) received from limited
Revenue Procedure 98-48.
liability companies (LLCs) classified as partnerships, partnerships,
S corporations, and fiduciaries on Schedule D (568), line 3. Enter capital
Note: The LLC also must separately state the amount of the gain that
gains (losses) that are specially allocated to members on Schedule K-1
qualifies for the 50% exclusion under R&TC Section 18152.5 on
(568), Member’s Share of Income, Deductions, Credits, etc., line 4d. Do
Schedule K, line 7. Each member must determine if he or she qualifies
not include these amounts on Schedule D (568). See the instructions for
for the gain at the member level.
Instructions for Form FTB 3885L
Depreciation and Amortization
• Before January 1, 1987: California did not allow depreciation under
A Purpose
the federal Accelerated Cost Recovery System (ACRS). Continue to
Use form FTB 3885L, Depreciation and Amortization, to compute
calculate California depreciation in the same manner as in prior years
depreciation and amortization allowed as a deduction on Form 568,
for those assets.
Limited Liability Company Return of Income. Attach form FTB 3885L to
• On or after January 1, 1987: California provides special credits and
Form 568.
accelerated write-offs that affect the California basis for qualifying
Depreciation is the annual deduction allowed to recover the cost or other
assets. California does not conform to all the changes to federal law
basis of business or income producing property with a determinable
enacted in 1993. Therefore, the California basis or recovery periods
useful life of more than one year. Land is not depreciable.
may be different for some assets.
Amortization is an amount deducted to recover the cost of certain capital
Additional differences may occur for the following:
expenses over a fixed period.
Luxury Automobile Depreciation
In general, California conforms to federal law for assets placed in service
• California generally conforms to the federal 2003 increase (IRC
on or after January 1, 1987. See California Revenue and Taxation Code
Section 280F) for the limitation on luxury automobile depreciation.
(R&TC) Section 17250.
However, California does not conform to IRC Section 168(k)
provisions (30% and 50% additional first year depreciation). In
B Federal/State Calculation Differences
addition, SUVs and minivans that are built on a truck chassis are now
California law has not always conformed to federal law with regard to
included in the definition of trucks and vans when applying the 6,000
depreciation methods, special credits, or accelerated write-offs.
pound gross weight limit.
Consequently, the recovery periods and the basis on which the deprecia-
• Amortization of Certain Intangibles (IRC Section 197): Property
tion is calculated may be different from the amounts used for federal
classified as Section 197 property under federal law is also Sec-
purposes. Reportable differences may occur if all or part of your assets
tion 197 property for California purposes. There is no separate
were placed in service:
Schedule D (568)/FTB 3885L Instructions 2005
Page 31
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