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for a single person or a married couple . To apply the

The pro forma federal Form 1040 is used only to assist

you in completing your California tax return . DO NOT file

correct dollar limits on the California tax return, an RDP

the pro forma federal Form 1040 with the IRS.

might be required to reduce the amount of a deduction

reflected on a federal tax return .

To complete the pro forma federal Form 1040 or the

Another category of adjustment occurs when the

worksheet, follow the federal Form 1040 instructions

substantive rule for a transaction is different for a married

along with the instructions provided in this publication .

person . For example, no gain or loss is recognized when

spouses transfer property among themselves . Since

General Information

an RDP is treated as a spouse for California purposes,

no gain or loss is recognized for California purposes

In general, for taxable years beginning on or after

when one RDP transfers property to his or her domestic

January 1, 2010, California law conforms to the Internal

partner . However, this transfer is not likely to get the same

Revenue Code (IRC) as of January 1, 2015 . However,

treatment for federal purposes and gain or loss might be

there are continuing differences between California and

recognized for federal purposes .

federal law . When California conforms to federal tax law

RDP adjustments include, but are not limited to

changes, we do not always adopt all of the changes

the following:

made at the federal level . For more information, go to

•

Division of community property

ftb.ca.gov and search for conformity . Additional

•

Capital losses

information can be found in FTB Pub . 1001,

•

Transactions between RDPs

Supplemental Guidelines to California Adjustments, the

•

Sale of residence

instructions for California Schedule CA (540 or 540NR),

•

Dependent care assistance

and the Business Entity tax booklets .

•

Investment interest

The instructions provided with California tax forms are a

•

Qualified residence acquisition loan & equity

summary of California tax law and are only intended to

loan interest

aid taxpayers in preparing their state income tax returns .

•

Expense depreciation property limitations

We include information that is most useful to the greatest

•

Individual Retirement Account

number of taxpayers in the limited space available . It is

•

Education loan interest

not possible to include all requirements of the California

•

Rental real estate passive loss

Revenue and Taxation Code (R&TC) in the instructions .

•

Rollover of publicly traded securities gains into

Taxpayers should not consider the instructions as

specialized small business investment companies

authoritative law .

There are three possible methods to file if you are an

Compensation for Federal Taxes Imposed on

RDP .

Employer-Provided Health Benefits – For taxable

If you do not have any RDP adjustments:

years beginning on or after January 1, 2013 and

before January 1, 2019, California allows an exclusion

1 . Combine federal Form 1040, U .S . Individual Income

from gross income for reimbursements received by

Tax Return, line 37 from each individual federal

an employee from an employer to compensate for

Form 1040 filed with the IRS and transfer the

additional federal income taxes incurred by the employee

combined amount to Form 540, California Resident

on employer-provided health care benefits for the

Income Tax Return, or Form 540NR (Long or Short),

RDP . For federal income tax purposes the benefits are

California Nonresident or Part-Year Resident Tax

taxable because the employee’s domestic partner is not

Return, line 13 .

considered the employee’s spouse .

Note: RDPs who split their community income on their

federal tax return and have no RDP adjustments may

use this method .

If you have RDP adjustments, you will need to recalculate

your federal adjusted gross income (AGI), before

completing your California income tax return . You may

use either one of the following methods:

2 . Complete the California RDP Adjustments Worksheet

(included in this publication) .

3 . Complete a pro forma federal Form 1040 using the

same filing status used on your California tax return .

A pro forma federal Form 1040, is a federal tax return

completed in the same manner that a married couple

would report income and expenses .

Page 2 FTB Pub . 737 2016

California Rdp Adjustments Worksheet - Recalculated Federal Adjusted Gross Income - 2016 Page 2

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