Schedule D (Form 540) - California Capital Gain Or Loss Adjustment - 2013 Page 3
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4Instructions for California Schedule D (540)
California Capital Gain or Loss Adjustment
References in these instructions are to the Internal Revenue Code (IRC) as of January 1, 2009, and to the California Revenue and Taxation Code (R&TC).
General Information
Specific Line Instructions
In general, for taxable years beginning on or after January 1, 2010,
Line 1 – List each capital asset transaction.
California law conforms to the Internal Revenue Code (IRC) as of
Column (a) – Description of Property. Describe the asset you sold or
January 1, 2009. However, there are continuing differences between
exchanged.
California and federal law. When California conforms to federal tax law
Column (b) – Sales Price. Enter in this column either the gross sales
changes, we do not always adopt all of the changes made at the federal
price or the net sales price. If you received a Form 1099-B, Proceeds
level. For more information, go to ftb.ca.gov and search for conformity.
From Broker and Barter Exchange Transactions; Form 1099-S, Proceeds
Additional information can be found in FTB Pub. 1001, Supplemental
From Real Estate Transactions; or similar statement showing the gross
Guidelines to California Adjustments, the instructions for California
sales price, enter that amount in column (b). However, if box 2a of
Schedule CA (540 or 540NR), and the Business Entity tax booklets.
Form 1099-B indicates that gross proceeds less commissions and
The instructions provided with California tax forms are a summary of
option premiums were reported to the IRS, enter that net amount in
California tax law and are only intended to aid taxpayers in preparing
column (b). If you entered the net amount in column (b), do not include
their state income tax returns. We include information that is most useful
the commissions and option premiums in column (c).
to the greatest number of taxpayers in the limited space available. It is
Column (c) – Cost or Other Basis. In general, the cost or other basis
not possible to include all requirements of the California Revenue and
represents the cost of the property plus purchase commissions and
Taxation Code (R&TC) in the tax booklets. Taxpayers should not consider
improvements, minus depreciation, amortization, and depletion. Enter
the tax booklets as authoritative law.
the cost or adjusted basis of the asset for California purposes. Use your
For purposes of California income tax, references to a spouse, husband,
records and California tax returns for years before 1987 to determine the
or wife also refer to a California registered domestic partner (RDP),
California amount to enter in column (c). If you used an amount other
unless otherwise specified. When we use the initials RDP they refer to
than cost as the original basis, your federal basis may be different from
both a California registered domestic “partner” and a California registered
your California basis. Other reasons for differences include:
domestic “partnership,” as applicable. For more information on RDPs,
• Depreciation Methods and Property Expensing – Before 1987,
get FTB Pub. 737, Tax Information for Registered Domestic Partners.
California law disallowed the use of accelerated cost recovery system
and disallowed the use of an asset depreciation range 20% above or
Purpose
below the standard rate. Before 1999, California had different limits
on the expensing of property under IRC Section 179. California law
Use California Schedule D (540), California Capital Gain or Loss
permits rapid write-off of certain property such as solar energy systems,
Adjustment, only if there is a difference between your California and
pollution control devices, and property used in an Enterprise Zone, Local
federal capital gains and losses.
Agency Military Base Recovery Area, Targeted Tax Area, or Los Angeles
Get FTB Pub. 1001, for more information about the following:
Revitalization Zone.
• Disposition of property inherited before 1987.
• Inherited Property – The California basis of property inherited from a
• Gain on the sale or disposition of a qualified assisted housin g
decedent is generally the fair market value at the time of death.
development to low-income residents or to specific entities
• S Corporation Stock – Prior to 1987, California law did not recognize
maintaining housing for low-income residents.
S corporations; therefore, your California basis in S corporation stock
• Capital loss carryback.
may differ from your federal basis. In general, your California basis
Installment Sales. If you sold property at a gain (other than publicly
will be cost- adjusted for income, loss, and distributions received after
traded stocks or securities) and you will receive a payment in a tax year
1986, while your stock was California S corporation stock. Your federal
after the year of sale, report the sale on the installment method unless
basis will be cost-adjusted for income, loss, and distributions received
you elect not to do so. Get form FTB 3805E, Installment Sale Income.
during the time your stock qualified for federal S corporation treatment.
Also, use that form if you received a payment in 2013, for an installment
Effective for taxable years beginning on or after January 1, 2002, any
sale made in an earlier year.
corporation with a valid federal S corporation election is considered
an S corporation for California purposes. Existing law already requires
You may elect not to use the installment sale method for California by
federal C corporations to be treated as C corporations for California
reporting the entire gain on Schedule D (540) (or Schedule D-1, Sales of
purposes.
Business Property, for business assets) in the year of the sale and filing
your return on or before the due date.
• Special Credits – California law authorizes special tax credits not
allowed under federal law or computed differently under federal law. In
At-Risk Rules and Passive Activity Limitations. If you dispose of (1) an
many instances if you claimed special credits related to capital assets,
asset used in an activity to which the at-risk rules apply, or (2) any part of
you must reduce your basis in the assets by the amount of credit.
your interest in an activity to which the at-risk rules apply, and the amounts
in the activity for which you are not at risk, get and complete federal
• Qualfied Small Business Stock – California does not conform to the
Form 6198, At-Risk Limitations, using California amounts to figure your
qualified small business stock deferral and gain exclusion under IRC
California deductible loss under the at-risk rules. Once a loss becomes
Section 1045 and IRC Section 1202. Enter the entire gain realized in
allowable under the at-risk rules, it becomes subject to the passive activity
column (e).
rules. Get form FTB 3801, Passive Activity Loss Limitations.
Schedule D (540) Instructions 2013 Page 1
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