Is CA-541 Necessary for my situation?

[Mateo101]

My mom passed away early October 2024. My brother and I inherited her home (50/50 via trust) and then sold/closed on the house about 2 weeks after her death in October 2024. I am the trustee of her trust, and I completed form 1041 to realize a capital loss for the eligible selling costs for her home. 

I produced 2 K-1s to split the capital loss 50/50 with my brother.

The trust had no income and I closed out the trust by distributing all the assets in December of 2024.

My question is: Do I need to file CA-541 or can I skip it since the trust had no income?

[RobertB4444 · Accepted solution]

Yes, you must file form CA-541 if the gross income for the year is greater than $10,000 regardless of what the net income is.  

Here are the rules for who must file CA-541.

@Mateo101 

[Mateo101]

Thanks @RobertB4444 , so does the fact that we inherited the home outright imply that we received income?

[RobertB4444 · Accepted solution]

It does.  You received the sale price of the home as gross income.  The net income is negative so you won't owe any taxes.  But California expects a return.

@Mateo101 

[gregd1525]

Hi Robert,

You said this:  if the gross income for the year is greater than $10,000

Similar situation - wife's mother passed, left behind a commercial building.  I have a California K-1 (541) for income around $3500, but other members of the family got a similar cut.  Is your $10k reference for everyone, or the individual?

Also, I have opened the "open form" section in TurboTax Home and Business.  I found "Schedule K-1 Worksheet - Estates and Trusts" but the form I have is titled "beneficiary's share of income, deductions, credits, etc."  Am I using the correct form?  I'm thinking probably not because my form has sections A, B, C, D and E near the top - but the form in TurboTax does not show those - it starts with rows 1-14.  

[RobertB4444]

I apologize - I was referring only to that person with the $10,000 reference.  California requires you to file a non-resident tax return if you have any income from California sources at all.  $3,500 is enough.  You probably don't owe anything but you are required to file.

The important information is in part III of the form that you have.  That is where those boxes 1 through 14 are.  Enter the numbers from that section into the corresponding boxes and the system will put the numbers where they belong.

@gregd1525 

[gregd1525]

thank you