Discussion:Sale of California Home
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Discussion Forum Index --> Advanced Tax Questions --> Sale of California Home
Discussion Forum Index --> Tax Questions --> Sale of California Home
Donniecastleman (talk|edits) said: | 16 February 2009 |
| Hi California preparers,
Someone about to become my tax client sold a house in 2005 in California and got a letter asking for 21K in taxes on gain on the sale of the home, does the 250K exclusion on the sale of a home for a single taxpayer drop down to California state? I'm about to dig into my software and see if there's a specific form but wanted to give him an answer ASAP, thanks! | |
Donniecastleman (talk|edits) said: | 16 February 2009 |
| Hmm, sources say no from what I'm reading. | |
| 16 February 2009 | |
| Donniec - not sure what you mean by "drop down" but the 250k exclusion rules in Cal are the same as the fed. Was the sale shown on the schedule D with the exclusion also shown? Or was it just not reported because it qualified for no taxable gain? I know the rules say if there is no taxable gain after the exclusion you do not need to report it but we always show it on the D anyway. | |
| February 16, 2009 | |
| Donnie -
If excluded for Federal, should be for CA also. But, Calif is in a world of hurt financially right now....and seems to be grasping at straws/trying to intimidate folks into paying when they probably don't. Maybe just a legitimate error. Do your client's have a 'non Calif' address? Was the return when the sale was reported a CA Non-resident? Just grasping here - if you need help, I have a taxpayer advocate number for the Franchise Tax Board somewhere... | |
Michaelstar (talk|edits) said: | 16 February 2009 |
| Actually, I am unaware of any state that does not comply with the sec 121 exclusion that assesses taxes. Obviously, for those states that do not assess individual taxes this is a mute point. | |
| 16 February 2009 | |
| That's moot, Michael, not mute <G>.
Donnie, was your client a California resident in 2005? If he was a nonresident, did he file a nonresident California return? If no return was filed, the easiest thing to do probably is to file a 2005 540NR reporting the sale and the exclusion. My guess is that the FTB has notice of the sale but no information with regard to basis or eligibility for the exclusion. Did the client get a letter from FTB or a filing enforcement Notice of Proposed Assessment? That may also affect the form of your response. | |
Donniecastleman (talk|edits) said: | 16 February 2009 |
| When I say drop down, I mean that the federal is top priority and then the state comes in a close second. I'm assuming that we simply have to report the gain and zero it out. And that's a really good idea about reporting home sales on Schedule D just in case something goes awry on reporting by the real estate industry. | |
Michaelstar (talk|edits) said: | 16 February 2009 |
| Not when the State is looking for $$!
I have also always reported the sale on schedule D. Lacerte has a box to check and "Section 121 exclusion" prints directly below the sale that was reported. If your program does not have that capability - then force it. Thank you Katie :-} | |
| February 16, 2009 | |
| There was a big discussion sometime last year concerning the report/not report issue on sale of residence when the entire gain is excluded.
If memory serves me correctly, the consensus was that the IRS specifically says DO NOT REPORT. I almost always report it (Lacerte does have a 'force' box) just for matching purposes. I know there are those that disagree..... | |
| February 16, 2009 | |
| Found it...Discussion:When a 1099S is issued on sale of personal residence - if no taxable gain, ignore?. | |
Michaelstar (talk|edits) said: | 16 February 2009 |
| Belle - you are correct.
I'll report it on my clients return and could really give a hoot if the IRS specifically says not to report it. It is disclosure being provided so as not to leave the sale of the property which also generates a 1099-S just hanging out there open to questions later on down the road. I can certainly better explain a notice generated by a tax authority asking for information that was already shown on the return than trying to explain to the client that "they" want us to leave it off but they got a notice showing tax, penalties and interest from income the sale (did not!) generate. | |
| 17 February 2009 | |
| California does conform to most of IRCSec. 121. The differences are presented at REVENUE AND TAXATION CODE SECTION 17152. -- Larry Hess, CPA | Albuquerque, NM | |
