This question is regarding the treatment of K1 distribution for Trusts the state of California For 2019 the federal distribution to beneficiaries allocates the distribution between Interest, Dividends and capital gains. For sake of argument and simplicity assume that the distribution turns out to be 60% Dividends & interest and 40% capital gains for the federal K1. TurboTax Business calculates the California state K1 distribution according to state tax laws and currently adds back the 40% dividends but also retains the 40% capital gains giving 100% dividends and 40% capital gains. I believe there is an error in the program. According to California tax code should the K1 distribution be 100% dividends or 60% dividends and 40% capital gains (like the federal)?
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