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CurtE350
Returning Member

California 540NR - Part II Section B - Additional Income/Line 5/Column E - CA Amounts - Passive Activity Loss Amount ?

I live in Texas and own a rental property in CA.   I have a passive activity real estate rental loss that I am not able to  take on my federal taxes (-$30K)  since my MAGI is over $150,000 (married filing jointly).   In Section B, line 5, Column A, I understand that I need to enter 0, which is the same number I am reporting from my federal form 1040.    I am confused if I should enter 0 in column E for CA amounts or the -$30K passive activity loss in column E.    Since I have a loss attributed  to the property and it is located in CA, I'm thinking I need to enter the passive activity loss of -$30K even if I can't deduct from my federal taxes.   Which number should I enter?  I appreciate any guidance or help!  

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7 Replies
DanielV01
Expert Alumni

California 540NR - Part II Section B - Additional Income/Line 5/Column E - CA Amounts - Passive Activity Loss Amount ?

California has it's own passive activity loss deduction.  If you have no other taxable income in California, then for 2020 the calculations won't make a difference:  whether a zero or a negative number, you have no taxable California income, and therefore, no California tax.  But that doesn't mean you shouldn't report it correctly, as it could have future-year implications.  On this website:  California Nonresident Tax Instructions, you will see the following instructions: 

 

Line 5 – Rental Real Estate, Royalties, Partnerships, S Corporations, Trusts, etc.

Adjustments to federal income or loss you reported in column A generally are necessary because of the difference between California and federal law relating to depreciation methods, special credits, and accelerated write-offs. As a result, the recovery period or basis used to figure California depreciation may be different from the recovery period or amount used for federal purposes. For more information, see the instructions for Schedule CA (540NR), column B and column C, line 3.

California law does not conform to federal law for material participation in rental real estate activities. Beginning in 1994, and for federal purposes only, rental real estate activities conducted by persons in real property businesses are not automatically treated as passive activities. Get form FTB 3801, for more information.

Use form FTB 3801, to figure the total adjustment for line 5 if you have:

  • One or more passive activities that produce a loss.
  • One or more passive activities that produce a loss and any nonpassive activity reported on federal Schedule E (Form 1040), Supplemental Income and Loss.

Use form FTB 3885A, to figure the total adjustment for line 5 if you have:

  • Only nonpassive activities which produce either gains or losses (or a combination of gains and losses).
  • Passive activities that produce gains.

LLCs that are classified as partnerships for California purposes and limited liability partnerships (LLPs) are subject to the same rules as other partnerships. LLCs report distributive items to members on Schedule K-1 (568), Member’s Share of Income, Deductions, Credits, etc. LLPs report to partners on Schedule K-1 (565), Partner’s Share of Income, Deductions, Credits, etc.

Get FTB Pub. 1001, for more information about accumulation distributions to beneficiaries for which the trust was not required to pay California tax because the beneficiary’s interest was contingent. 

 

 

It is complex, but here is the CA form to calculate passive activity loss:  2020 Form 3801 Passive Activity Loss Limitations  

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CurtE350
Returning Member

California 540NR - Part II Section B - Additional Income/Line 5/Column E - CA Amounts - Passive Activity Loss Amount ?

Thanks, Daniel.  I appreciate it.   The part that concerns me is "...But that doesn't mean you shouldn't report it correctly, as it could have future-year implications. "  I can't seem to find proper guidance in the documentation regarding what to properly record in the CA Amount column -  $0 or $-30K.    

DanielV01
Expert Alumni

California 540NR - Part II Section B - Additional Income/Line 5/Column E - CA Amounts - Passive Activity Loss Amount ?

@CurtE350  It is complicated, as I mentioned in my post.  The correct figure is probably neither $0 nor -$30K, because of how California calculates the loss.  But what is the future implication that makes it a good idea to figure out?  A future rental gain in California.  Passive activity losses are limited.  When the loss is limited, certain losses may be disallowed in the current year.  But when passive activity gain is reported, the losses are carried forward and applied against that gain.  So that is why you ideally do want to figure out what the Passive Loss Limitation is, and what Passive Loss is reportable in 2020 to CA, as the rest is "limited" and therefore carries forward until it can be applied.  That could happen in a future year in which you have gain from your passive activity in California that would be taxable.

 

But a 0 or a negative number is going to produce the same result for California this year:  0 tax.

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California 540NR - Part II Section B - Additional Income/Line 5/Column E - CA Amounts - Passive Activity Loss Amount ?

I posted a similar question (nonRes & no other CA income) for 2021 that was never answered. I had losses in 2020 and 2021. TT 2020 had the total 2020 loss in the referenced spot. TT 2021 had a number that had no relationship to either loss. I wish to know where the number came from.

 

Why ac TT not figure out the 3801 for me?

California 540NR - Part II Section B - Additional Income/Line 5/Column E - CA Amounts - Passive Activity Loss Amount ?

Does the value in that slot have any affect on loss carryover to following year?

California 540NR - Part II Section B - Additional Income/Line 5/Column E - CA Amounts - Passive Activity Loss Amount ?

California 540NR - Part II Section B - Additional Income/Line 5/Column E - CA Amounts - Passive Activity Loss Amount

Being told that the value in that slot has no effect on my 2021 taxes does not help me know if it has any affect on my carry forward to future years.

Please answer before fining time!

California 540NR - Part II Section B - Additional Income/Line 5/Column E - CA Amounts - Passive Activity Loss Amount ?

I have gone round and round on this site trying to get an answer to a very similar question. Today I found my own answer.

I went through every FORM in my TT Fed& CA returns. There  is a CA worksheet, Sch E Wks (name of property). In it is found the gain/loss, carryover from earlier and to future returns. I have verified that having a loss or 0 in the slot in question mane n difference.

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