This might be a tricky question. My domicile is in Nevada where there is no state income tax. I sold my home in California and fully understand that I need to pay CA state income tax on the proceeds. The problem that I'm running into is that most tax software wants to create the state return using information from the IRS 1040. This might not seem like a big deal but what happens is that the CA state return contains AGI that includes income (quite a lot) that was not realized in CA AND then the state income tax is computed on this huge AGI where it should really just be the proceeds from the home. I suggested to one tax preparer to create a 1040 that ONLY contains the proceeds from the home and then a state return will be based on THAT AGI. Now of course this is not a valid 1040. Any thoughts?
