Instructions For Schedule Ca (540) - California Adjustments - Residents

Line 8 – Taxable Interest

Get FTB Pub. 1001 if you received dividends from:

If you did not receive any of the kinds of income listed below, make no entry

• Non-cash patronage dividends from farmers’ cooperatives or

on this line in either column B or column C.

mutual associations.

Enter in column B the interest you received from:

• A CFC.

• Distributions of pre-1987 earnings from S corporations.

• U.S. savings bonds (except for interest from series EE U.S. savings

• Undistributed capital gains for RIC shareholders.

bonds issued after 1989 that qualified for the Education Savings Bond

Program exclusion).

Line 10 – Taxable Refunds, Credits, or Offsets of State and Local Income

• U.S. Treasury bills, notes, and bonds.

Taxes

• Any other bonds or obligations of the United States and its territories.

California does not tax the state income tax refund received in 2013. Enter in

• Interest from Ottoman Turkish Empire Settlement Payments.

column B the amount of state tax refund entered in column A.

• Interest income from children under age 19 or students under age 24

Line 11 – Alimony Received

included on the child’s federal tax return and reported on the California tax

If you are a nonresident alien and received alimony not included in your

return by the parent. For more information, get form FTB 3803, Parents’

federal income, enter the alimony on this line in column C. Otherwise, make

Election to Report Child’s Interest and Dividends

no entry on this line.

Certain mutual funds pay “exempt-interest dividends.” If the mutual fund

Line 12 – Business Income or (Loss)

has at least 50% of its assets invested in tax-exempt U.S. obligations and/or

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

in California or its municipal obligations, that amount of dividend is exempt

generally are necessary because of the difference between California and

from California tax. The proportion of dividends that are tax-exempt will be

federal law relating to depreciation methods, special credits, and accelerated

shown on your annual statement or statement issued with Form 1099-DIV,

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

Dividends and Distributions.

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

Enter in column C the interest you identified as tax-exempt interest on your

Adjustments are figured on form FTB 3885A, Depreciation and Amortization

federal Form 1040 (or Form 1040A), line 8b, and which you received from:

Adjustments, and are most commonly necessary because of the following:

• The federally exempt interest dividends from other states, or their municipal

• Before January 1, 1987, California did not allow depreciation under the

obligations and/or from mutual funds that do not meet the 50% rule above.

federal accelerated cost recovery system. Continue to figure California

• Non-California state bonds.

depreciation for those assets in the same manner as prior years.

• Non-California municipal bonds issued by a county, city, town, or other

• On or after January 1, 1987, California provides special credits and

local government unit.

accelerated write-offs that affect the California basis of qualifying assets.

• Obligations of the District of Columbia issued after December 27, 1973.

Refer to the bulleted list below.

• Non-California bonds if the interest was passed through to you from

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

S corporations, trusts, partnerships, or Limited Liability Companies (LLCs).

adjustment for line 12 if you have:

• Interest or other earnings earned from a Health Savings Account (HSA) are

not treated as taxed deferred. Interest or earnings in a HSA are taxable in

• One or more passive activities that produce a loss.

the year earned.

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

• Interest on any bond or other obligation issued by the Government of

sive activity reported on federal Schedule C (Form 1040), Profit or Loss

American Samoa.

From Business.

• Interest income from children under age 19 or students under age 24

Use form FTB 3885A to figure the total adjustment for line 12 if you have:

included on the parent’s federal tax return and reported on the California

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

tax return by the child.

combination of gains and losses).

Make no entries in either column B or column C for interest you earned on

• Passive activities that produce gains.

Federal National Mortgage Association (Fannie Mae) Bonds, Government

Get FTB Pub. 1001 for more information about:

National Mortgage Association (Ginnie Mae) Bonds, and Federal Home

Loan Mortgage Corporations (FHLMC) securities, or grants paid to low

Income related to:

income individuals.

• Business, trade, or profession carried on within California that is an integral

Get FTB Pub. 1001 if you received interest income from the following sources:

part of a unitary business carried on both within and outside California.

• Loans made in an enterprise zone (EZ) or the former Los Angeles

• Pro-rata share of income received from a CFC by a U.S. shareholder.

Revitalization Zone (LARZ).

Basis adjustments related to:

• Items listed above passed through to you from S corporations, trusts,

• Property acquired prior to becoming a California resident.

estates, partnerships, or LLCs.

• Sales or use tax credit for property used in an EZ, Local Agency Military

Line 9 – Ordinary Dividends

Base Recovery Area (LAMBRA), Targeted Tax Area (TTA), or former LARZ.

Generally, no difference exists between the amount of dividends reported in

• Reduced recovery periods for fruit-bearing grapevines replaced in a

column A and the amount reported using California law. However, California

California vineyard on or after January 1, 1992, as a result of phylloxera

taxes dividends derived from other states and their municipal obligations.

infestation; or on or after January 1, 1997, as a result of Pierce’s disease.

Add dividends received from the following and enter in column B:

• Expenditures for tertiary injectants.

• Property placed in service on an Indian reservation after January 1, 1994,

• Dividend income from children under age 19 or students under age 24

and before January 1, 2014.

included on the parent’s or child’s federal tax return and reported on the

• Amortization of pollution control facilities.

California tax return by the opposite taxpayer. For more information, get

• Discharge of real property business indebtedness.

form FTB 3803.

• Vehicles used in an employer-sponsored ridesharing program.

Add dividends received from the following and enter in column C:

• An enhanced oil recovery system.

• Controlled foreign corporation (CFC) dividends in the year distributed.

• Joint Strike Fighter property costs.

• Regulated investment company (RIC) capital gains in the year distributed.

• The cost of making a business accessible to disabled individuals.

• Distributions of pre-1987 earnings from an S corporation.

• Property for which you received an energy conservation subsidy from a

• Dividend income from children under age 19 or students under age 24

public utility on or after January 1, 1995, and before January 1, 1997.

excluded on the parent’s or child’s federal tax return and reported on the

• Research and experimental expenditures.

California tax return by the opposite taxpayer. For more information, get

form FTB 3803.

Page 2 Schedule CA (540) Instructions 2013

Instructions For Schedule Ca (540) - California Adjustments - Residents - 2013 Page 2

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