It is the member’s responsibility to consider and apply any applicable limitations. The passive loss rules apply to the items attributable to each publicly traded partnership (PTP) that is not treated as a corporation under IRC Section 7704. Thus, members who do not materially participate in the operations of a PTP are allowed to deduct their share of the PTP’s losses only to the extent of passive income from the same PTP or when the entire interest is sold (IRC Section 469(k)). See the instructions for form FTB 3801 and form FTB 3802 for rules to calculate and report income, gains, and losses from passive activities that you held through each PTP you owned during the taxable year.
Line 18a through Line 18c – Tax-exempt Income and Nondeductible Expenses
The information you need to compute credits related to rental real estate activities other than the low-income housing credit is provided with an attached schedule. These credits may be limited due to passive activity limitation rules. If you have losses, deductions, credits, etc., from a prior year that were not deductible or usable because of certain limitations they may be taken into account in determining your net income, loss, etc., for this year.
- If you have an amount on Schedule K-1 (568), line 13d, get the instructions for the federal Schedule K-1 (Form 1065), box 13.
- Get the instructions for federal Schedule K-1 (Form 1065), At‑Risk Limitations, and federal Pub.
- Intangible means without physical existence, in contrast to buildings, vehicles, and computers.
- The instructions provided with California tax forms are a summary of California tax law and are only intended to aid taxpayers in preparing their state income tax returns.
- If you are not an individual member, report the amounts as instructed on your California tax return.
Basis Rules
The LLC business income apportioned to California are entered in column (e). LLC nonbusiness income from real and tangible property will also be entered in column (e). Nonbusiness intangibles are sourced or allocated at the member level and must be entered on Table 1 instead. For more information, see General Information D, Nonbusiness Income, and General Information E, Unitary Members. Resident members will use only the information in column (c) and column (d) to report their share of the LLC’s income or loss.
Line 11b and Line 11c – Total Other Income and Total Other Loss
The farmworker housing credit has been consolidated into the low-income housing tax credit. For more information, get form FTB 3521, Low-Income Housing Credit. The law firm chart of accounts amount on line 3, column (d) is a passive activity amount for all members.
Loss Limitations
If a loss is reported on line 1, column (d), report the loss on the applicable line of form FTB 3801 or form FTB 3802 to determine how much of the loss is allowable. The amount reported on line 1, column (d), is your share of the ordinary income (loss) from the trade or business activities of the LLC. For individual members, where this amount is reported depends on whether or not this amount is a passive activity. Other limitations may apply to specific deductions such as the investment interest expense deduction.
Get form FTB 3885A, Depreciation and Amortization Adjustments, and get federal Pub. 534, Depreciating Property Placed In Service Before 1987, and federal Pub. If the amounts on line 10a and line 10b relate to rental activity, the IRC Section 1231 gain (loss) is a passive activity amount. If the amounts on line 10a and line 10b relate to a trade or business activity and you are a limited partner, the IRC Section 1231 gain (loss) is a passive activity amount. If the member is a corporation or another business entity owned by a corporation Cal. 18 section 25137‑1 requires that nonbusiness income from intangibles be allocated in accordance with the rules of R&TC Sections to 25127.
Line 22 – More than one activity for passive activity purposes
Amounts realized on the sale or exchange of property shall not be reduced by the cost of goods sold or the basis of property sold. If you have an income summary amount on Schedule K-1 (568), line 8 or line 9, column (d), report this amount on Schedule D (540 or 540NR), line 2. Part-year resident members must consider their period of residency and nonresidency in the computation of total California income. Each of these limitations is discussed separately in the following instructions.
