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
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
