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• Gain or loss on stock and bond transactions.

California law does not conform to federal law for material participation in

• Installment sale gain reported on form FTB 3805E, Installment Sale

rental real estate activities. Beginning in 1994, and for federal purposes only,

Income.

rental real estate activities conducted by persons in real property businesses

• Gain on the sale of personal residence where depreciation was allowable.

are not automatically treated as passive activities. Get form FTB 3801, Passive

• Flow-through gain or loss from partnerships, fiduciaries, S corporations,

Activity Loss Limitations, for more information.

or LLCs.

Use form FTB 3801, Passive Activity Loss Limitations, to figure the total

• Capital loss carryover from your 2006 California Schedule D (540NR).

adjustment for line 17 if you have:

Get FTB Pub. 1001, Supplemental Guidelines to California Adjustments, for

• One or more passive activities that produce a loss.

more information about:

• One or more passive activities that produce a loss and any nonpassive

• Disposition of S corporation stock acquired before 1987.

activity reported on federal Schedule E.

• Gain on the sale or disposition of a qualified assisted housing

Use form FTB 3885A, Depreciation and Amortization Adjustments, to figure

development to low-income residents or to specified entities maintaining

the total adjustment for line 17 if you have:

housing for low-income residents.

• Only nonpassive activities which produce either gains or losses (or a

• Undistributed capital gain for RIC shareholders.

combination of gains and losses).

• Gain or loss on the sale of property inherited before 1/1/87.

• Passive activities that produce gains.

• Capital loss carrybacks.

LLCs that are classified as partnerships for California purposes and

• Capital gains distribution for children between the ages of 14 and 18.

limited liability partnerships (LLPs) are subject to the same rules as other

Line – Other Gains or (Losses)

partnerships. LLCs report distributive items to members on Schedule K-1

Generally, no adjustments are made on this line. However, the California basis

(568), Member’s Share of Income, Deductions, Credits, etc. LLPs report to

of your other assets may differ from your federal basis due to differences

partners on Schedule K-1 (565), Partner’s Share of Income, Deductions,

between California and federal law. Therefore, you may have to adjust the

Credits, etc.

amount of other gains or losses. Get Schedule D-1, Sales of Business

Get FTB Pub. 1001, Supplemental Guidelines to California Adjustments, for

Property, for more information.

more information about accumulation distributions to beneficiaries for which

Line 5 – Total IRA Distributions

the trust was not required to pay California tax because the beneficiary’s

Beginning with tax year 2002, calculate your IRA basis as if you were a

interest was contingent.

California resident for all prior years. Generally, no adjustments are made on

Line 8 – Farm Income (Loss)

this line. However, there may be significant differences in the taxable amount

Adjustments to federal income or loss you report in column A generally are

of a distribution (including a distribution from conversion of a traditional

necessary because of the difference between California and federa law relating

IRA to a Roth IRA) depending on when you made your IRA contributions.

to depreciation methods, special credits, and accelerated write-offs. As a

California did not conform to the $2,000 or 100% of compensation annual

result, the recovery period or the basis you should use to figure California

contribution limit permitted under federal law from 1982 through 1986.

depreciation may be different from the amount used for federal purposes.

During these years, California limited the deduction to the lesser of 15% of

For more information about the types of income and adjustments that often

compensation or $1,500 and disallowed a deduction altogether to individuals

require adjustments, see the instructions for Schedule CA (540NR), line 12.

who were active participants in qualified government plans. Any amount an

Use form FTB 3801, Passive Activity Loss Limitations, to figure the total

individual contributed in excess of California deduction limits during these

adjustment for line 18 if you have:

years creates a basis in the IRA.

• One or more passive activities that produce a loss.

Get FTB Pub. 1005, Pension and Annuity Guidelines, for more information and

• One or more passive activities that produce a loss and any nonpassive

worksheets for figuring the adjustment to enter on this line, if any.

activity reported on federal Schedule F.

Coverdell ESA formerly known as Education (ED) IRA – If column A includes

Use form FTB 3885A, Depreciation and Amortization Adjustments, to figure

a taxable distribution from an ED IRA, you may owe additional tax on that

the total adjustment for line 18 if you have:

amount. Get form FTB 3805P, Additional Taxes on Qualified Plans (Including

IRAs) and Other Tax-Favored Accounts. Report only the taxable amount of the

• Only nonpassive activities which produce either gains or losses (or a

distribution on line 21f.

combination of gains and losses).

• Passive activities that produce gains.

Line 6 – Total Pensions and Annuities

Generally, no adjustments are made on this line. However, if you received Tier

Line 9 – Unemployment Compensation

2 railroad retirement benefits or partially taxable distributions from a pension

California excludes unemployment compensation from taxable income. Enter

plan, you may need to make the adjustments.

on line 19, column B, the amount of unemployment compensation shown in

column A.

If you received a federal Form RRB 1099-R for railroad retirement benefits

and included all or part of these benefits in taxable income in column A, enter

Paid Family Leave Insurance (PFL) benefits, also known as, Family

the taxable benefit amount in column B.

Temporary Disability Insurance. Payments received from the PFL Program

If you began receiving a retirement annuity between 7/1/86 and 1/1/87, and

in 2007, are reported on your Form 1099-G in column B, line 19. For

elected to use the three-year rule for California purposes and the annuity rules

additional information, get FTB Pub. 1001, Supplemental Guidelines to

for federal purposes, enter in column C the amount of the annuity payments

California Adjustments.

you excluded for federal purposes.

Line 20 – U.S. Social Security Benefits

You may have to pay an additional tax if you received a taxable distribution

California excludes U.S. social security benefits or equivalent Tier 1 railroad

from a qualified retirement plan before reaching age 59½ and the distribution

retirement benefits from taxable income. Enter in column B the amount of

was not rolled over into another qualified plan. See Long Form 540NR, line

U.S. social security benefits or equivalent Tier 1 railroad retirement benefits

41 instructions; or form FTB 3805P, Additional Taxes on Qualified Plans

shown in column A.

(Including IRA’s) and Other Tax-Favored Accounts.

Line 2 – Other Income

Line 7 – Rental Real Estate, Royalties, Partnerships, S corporations,

a. California Lottery Winnings

Trusts, etc.

California excludes California lottery winnings from taxable income. Enter

Adjustments to federal income or loss you reported in column A generally

in column B the amount of California lottery winnings included in the

are necessary because of the difference between California and federal law

federal amount on line 21 in column A.

relating to depreciation methods, special credits, and accelerated write-

Make no adjustment for lottery winnings from other states. They are

offs. As a result, the recovery period or basis used to figure California

taxable by California.

depreciation may be different from the recovery period or amount used for

federal purposes. For more information, see the instructions for Schedule CA

(540NR), line 12.

Page Schedule CA (540NR) Instructions 2007 (REV 01-08)

Instructions For Schedule Ca (540nr) - California Adjustments - Nonresidents Or Part-Year Residents - 2007 Page 4

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