Just to wrap it up -
Turbo tax removes the worthless stock for the reasons listed. CA does has limits on capital gains deductions that are different from Federal.
There is a bug in the program in that when the amount is adjusted and the loss is added back to AGI for California, it should be moved to a Capital Loss on Schedule D. While there is a limit, it does become a loss carry forward and can be used against future capital gains or limited against income. But the program does not do that, so it has to be done manually. Worked through a session with on-line Turbo Tax support so got some confirmation.
Thanks for all the input.
