Deductions & credits

Here's an example with screen shot from TTAX Premier 2020

Notice the Federal Refund and CA Refund.  The LTCG amount amount would be 10,000

Now. after once the OK/Continue button is click, the amount change automatically.  Fed Refund reduce to 4968.  Which mean 7744 is taxed on 10K gain

What am I missing/doing wrong here.