State tax filing

1.  Does the above additional information impact the conclusion that there is no need to file a CA tax return (her total income was greater than her standard deduction; but not greater than $12,950)?  No, the additional information does not change anything since the $2,700 was not income received as a resident of CA or relevant to CA.  This income should not be reported on the CA return, only on her MO return. 

2.  How would I correct the CA Form 3800 line 1 amount (that turbo tax is populating) that is showing the approx. $2,700 of unearned income?  Shouldn't line 1 on CA Form 3800 be $0 (if all passive income was earned in state of residence-MO)?  I think you are suggesting in your reply to delete the entire form?  Or do I override the Line 1 amount and input a $0?  Yes, I am suggesting you delete the entire form.  This form is for those kids who have passive income that is taxable to CA.  Her passive income is not taxable to CA so there is no need to include the form on her return. 

If you are given the option to override, I am assuming you are using the desktop version of TurboTax.  When you are in the CA step by step section, you should see adjustments to income.  

To verify, you are filling out a 540NR correct?  If you are filling out a regular 540, it will not give you this option.  If you are filling out the NR, you should come to a section that asks about making adjustments to the CA income that is not taxable to CA.  Here you will remove her passive income and delete the Form 3800.

Basically, your daughter must file a CA 540NR return that ONLY reports her CA source income.  

"Do I need to file?

As a nonresident, you pay tax on your taxable income from California sources.

Sourced income includes, but is not limited to:

• Services performed in California
• Rent from real property located in California
• The sale or transfer of real California property
• Income from a California business, trade or profession"