Ftb Pub. 1005 - Pension And Annuity Guidelines - Franchise Tax Board (Page 4 of 8) in pdf

Example 2 –

You were a California resident in 1998 and you received an IRA distribution of $800. The only other distribution received from your IRA was in

1997. The amount of the 1997 distribution was $700. You made the following contributions and deductions in prior years:

Year

Contributions

Federal Deductions

California Deductions

1981

$1,500

1982

2,000

1,500

1983

2,000

1,500

Total

$5,500

$4,500

Determination: You would complete Worksheet I as follows.

Worksheet I — Part A Pre-1987 California Basis

Example 2

(If you have already computed your California basis as of 12/31/97; skip to Part B.)

$ 5,500

1 Enter your total federal deductions claimed prior to 1987 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,500

2 Enter your total California deductions claimed prior to 1987 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,000

3 Total California basis. Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

700

4 Enter your California basis recovered in prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 California basis as of 12/31/97. Subtract line 4 from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

300

Worksheet I — Part B Adjustment to Federal AGI and Remaining Pre-1987 California Basis

Example 2

800

1 Enter your taxable distribution from your federal Form 1040, line 15b (or line 16b), Form 1040A, line 10b (or line 11b) . . . . .

300

2 Enter your California basis as of 12/31/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 Enter the smaller of line 1 or line 2. Enter this amount on Schedule CA (540 or 540NR), line 15b or line 16b, column B,

300

or Form 540A, Side 2, Part I, line 5 or line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 Remaining California basis as of 12/31/98. Subtract line 3 from line 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Included in your federal AGI is the $800 IRA distribution. Only $500 ($800 – $300) of the distribution is taxable by California in 1998. Your adjustment to fed-

eral AGI is $300. Your California basis has now been fully recovered. When you receive a distribution in later years, the amount of the distribution taxable for

federal purposes will also be the amount taxable by California. No adjustment to federal AGI will be necessary.

Example 3 –

You were a California resident in 1998 and you received your first IRA distribution. The distribution was $1,000. For federal purposes, you included

$800 in income and $200 was treated as the nontaxable recovery of your federal basis. You made the following contributions and deductions in prior years:

Federal

Contributions

California Deductions

Deductions

Year

Before 1987

After 1986

Before 1987

After 1986

1984

$2,000

$ 0

2,000

1985

2,000

1986

2,000

1987

$2,000

$ 0

Total

$6,000

$2,000

$6,000

$ 0

Determination: You would complete Worksheet I as follows.

Worksheet I — Part A Pre-1987 California Basis

Example 3

(If you have already computed your California basis as of 12/31/97; skip to Part B.)

$ 6,000

1 Enter your total federal deductions claimed prior to 1987 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2 Enter your total California deductions claimed prior to 1987 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 6,000

3 Total California basis. Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 Enter your California basis recovered in prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 California basis as of 12/31/97. Subtract line 4 from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 6,000

Worksheet I — Part B Adjustment to Federal AGI and Remaining Pre-1987 California Basis

Example 3

$ 800

1 Enter your taxable distribution from your federal Form 1040, line 15b (or line 16b), Form 1040A, line 10b (or line 11b). . . . . .

$6,000

2 Enter your California basis as of 12/31/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 Enter the smaller of line 1 or line 2. Enter this amount on Schedule CA (540 or 540NR), line 15b or line 16b, column B,

$ 800

or Form 540A, Side 2, Part I, line 5 or line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,200

4 Remaining California basis as of 12/31/98. Subtract line 3 from line 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Because your California basis is more than the distribution, none of your IRA distribution will be taxed by California in 1998. Your adjustment to federal AGI

is $800. You have a remaining California IRA basis of $5,200. You will recover your remaining California basis in later years. Use Worksheet II on page 7, to

keep track of your California basis and its recovery. You would complete Worksheet II as follows:

Worksheet II – Summary of California Basis

Example 3

California

Federal

California

Remaining

Deduction

Taxable

Pre-1987

Basis in

Total