Margaret CPA in OH Posted June 24, 2008 Report Share Posted June 24, 2008 I have a client, Ohio resident, with CA rental property. In 2007 he actually has a small net income. I don't see where to carry over his py losses to offset this. He has never been able to take advantage of these losses for CA purposes. Any suggestions? Quote Link to comment Share on other sites More sharing options...
jainen Posted June 24, 2008 Report Share Posted June 24, 2008 >>for CA purposes. Any suggestions?<< What purposes do you have in mind? California passive losses work very much like the federal. You could probably take your numbers from the federal Form 8582 if you haven't been separately tracking California losses as such. It doesn't matter that he is a non-resident. Use exactly the same form as residents--Form 3801. Just be sure you understand that California taxation is based on his world-wide income, not simply his California rental. Quote Link to comment Share on other sites More sharing options...
joelgilb Posted June 25, 2008 Report Share Posted June 25, 2008 He should have been preparing CA returns with the losses to do the carryforward, but my understanding is that CA is pretty lax in this respect Quote Link to comment Share on other sites More sharing options...
MAMalody Posted June 25, 2008 Report Share Posted June 25, 2008 I always understood that if there was no taxable income and a passive loss was generated, that it was lost in CA and could not be carried forward. I had a client like this about 12 years ago, a non-resident. Quote Link to comment Share on other sites More sharing options...
joelgilb Posted June 25, 2008 Report Share Posted June 25, 2008 I always understood that if there was no taxable income and a passive loss was generated, that it was lost in CA and could not be carried forward. I had a client like this about 12 years ago, a non-resident. Have a client that went to Ernst and they always did a return for passive losses in CA but had to create custom schedules to show and explain the carryforward. CA when there was income did allow the cfds Quote Link to comment Share on other sites More sharing options...
jainen Posted June 25, 2008 Report Share Posted June 25, 2008 >>I had a client like this about 12 years ago, a non-resident.<< It's hard to accept this assertion without a lot more detail. California has a complex tax system that does not always immediately conform to federal changes and updates. Out-of-state preparers are often confused as to what is currently the law. Furthermore, even on the federal level passive loss rules are sometimes mixed up with at-risk rules, filing status, and many other matters. If the client's rental activity produced a net operating loss, for example, California would indeed have limited carryforwards during that time period. Add some non-resident basis issues, and you could end up way out on the edge of reality. Quote Link to comment Share on other sites More sharing options...
Margaret CPA in OH Posted June 25, 2008 Author Report Share Posted June 25, 2008 This is a great discussion and quite educational for me. I will be reviewing these responses in a few days but have to put this on hold for the time being. My father-in-law just passed away yesterday so my energies are redirected at the moment. Thanks, Jainen, for pointing me in the right direction. My client had no forms 3801 so I will have to figure out next steps. I don't really understand what you mean about CA taxation being based on his worldwide income, however, as the NR forms all have columns to specifically id CA income. I will have to get back to this. Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted June 25, 2008 Report Share Posted June 25, 2008 I beleive you could get those carryforwards. For example, they would be released if the property was sold. I think the real question is how the taxpayer treated the losses for CA purposes in the years of losses. Were California returns filed every year? Tom Lodi, CA Quote Link to comment Share on other sites More sharing options...
jainen Posted June 25, 2008 Report Share Posted June 25, 2008 >>CA taxation being based on his worldwide income<< What I mean is that his tax is calculated on world-wide income as if he were a California resident. Only after you do that is it prorated for the ratio of California-source income. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted June 25, 2008 Report Share Posted June 25, 2008 Our sympathies are with you while you deal with family matters. May you have strength to give your husband strength. Quote Link to comment Share on other sites More sharing options...
MAMalody Posted June 26, 2008 Report Share Posted June 26, 2008 In my case, the only CA based item was the passive loss. There was no other CA income. Client had been a nonresident for the second or third year at this time, lived in MD. I also contacted FTB about the issue and was told that he could not take it in the current year and was not able to carry it forward. Quote Link to comment Share on other sites More sharing options...
Margaret CPA in OH Posted June 28, 2008 Author Report Share Posted June 28, 2008 Thank you, Lion, for your kind words. This has been harder on my husband that I expected. He is the firstborn, that may have something to do with it. MAMalody, the situation you describe is the same with my client. There is no other CA income or activity. The client used to live there years ago and kept the house when moving to Ohio. I will contact FTB I think. Jainen, I did find the 3801 and it does indicate to attach to the CA NR return so will look deeper into that, as well. For 2007, the potential tax is less than $100, but the point is to do it correctly and, if possible, to now offset py losses. It's been a tough week. I'll get to this on Monday. Thanks again to all and have a great weekend. Quote Link to comment Share on other sites More sharing options...
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