Ftb Pub. 1005 - Pension And Annuity Guidelines - Franchise Tax Board (Page 5 of 8) in pdf

Change of Residency

your California basis is computed differently than

Do not include in your California basis any roll-

previously explained.

over contributions made while you were a non-

California does not impose tax on retirement

resident.

Compute your California basis by subtracting

income, including income from an IRA, received

your federal nondeductible contributions (federal

You recover your California basis before any of

by a nonresident after 12/31/95.

basis) from the total of (1) your California nonde-

the distribution is taxable. The taxable amount of

If you made IRA contributions when you were a:

ductible contributions; and (2) the earnings on

your IRA distribution is the total of your California

•

the IRA while you were a nonresident of

deductible contributions plus all the earnings on

Resident and received IRA distributions

before 1/1/96, when you were a nonresident,

California.

your IRA while you are a California resident.

•

Nonresident and received IRA distributions at

any time when you were a resident,

Example 4 —

You became a California resident on 1/1/86. In 1985 while you were a nonresident, the earnings on your IRA were $200. You received your first

distribution from your IRA in 1998. The distribution was $4,000, all of which was taxable for federal purposes. You made the following IRA contributions and deduc-

tions in prior years:

Earnings

California

Deductions

While A

IRA

Year

Contributions

Federal

California

Nonresident

Basis

1985

$2,000

$200

$2,200

1986

2,000

1,500

500

1987

2,000

1988

2,000

$2,700

Determination: Your California basis is $2,700 (your $2,500 nondeductible contributions plus your $200 in earnings while you were a nonresident of

California). Therefore, $2,700 of the $4,000 IRA distribution is not taxable by California. Your adjustment to federal AGI is $2,700. 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 5 —

You became a nonresident of California on 12/31/86. In March 1995, you received a total distribution from your IRA of $3,150. You had made the

following IRA contributions and deductions: (Note: If you were a nonresident and received a total distribution after 12/31/95, no part of the distribution would be taxable

by California.)

Earnings

California

Deductions

While A

IRA

Year

Contributions

Federal

California

Nonresident

Basis

1986

$ 2,000

$2,000

$1,500

$ 500

1987 – 1995

1,150

$1,650

Determination: Your California basis is $1,650 (your $500 nondeductible contribution plus your $1,150 in earnings while you were a nonresident of

California). Therefore, $1,650 of the $3,150 IRA distribution is not taxable by California. Your Schedule CA (540NR), line 15b, column B, adjustment is

$1,650. Your IRA distribution that you must report on Schedule CA (540NR), line 15b, column E is $1,500 ($3,150 - $1,650).

Example 6 —

You became a California resident on 1/1/86. In 1985, while you were still a nonresident of California, you received a $50,000 lump-sum distribution

from your employer’s retirement plan and rolled over the distribution to an IRA. The earnings on your IRA in 1985 were $2,000. You received your first distribution

from your IRA in 1998. The distribution was $4,000, all of which was taxable for federal purposes. Your California basis is determined as follows:

Earnings

California

Rollover

While A

IRA

Year

Contributions

Nonresident

Basis

1985

$50,000

$2,000

Determination: Your California basis is $2,000, the amount of earnings in the IRA while you were a nonresident. Therefore, $2,000 of the $4,000 IRA distri-

bution is not taxable by California. Your Schedule CA (540), line 15b, column B, adjustment is $2,000. 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.

Simplified Employee Pension (SEP)

California source income to total self-employment

if there was a difference between your federal

income.

self-employment income and your California self-

employment income (residents, part-year resi-

Deduction

Self-employment income

dents or nonresidents of California).

from Schedule CA

Beginning with taxable year 1996, your allowable