Turbotax includes non-California properties in California form 3801 as a California non-resident

Forum|Forum|2 years ago
April 12, 2024
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I'm a California non-resident who owns California rental properties.

When TurboTax generates California form 3801 ("Passive Activity Loss Limitations"), it automatically pulls in my non-California properties, and my non-California properties' loss is used to offset California's properties' income, which I feel is wrong.

From FTB website: https://www.ftb.ca.gov/forms/2021/2021-3801-instructions.html, "In determining California taxable income, nonresidents compute prior year items by taking into account only those items with a California source".

I think non-California source properties should be taken out from CA-3801's calculation. However, I couldn't find any way to remove the non-California properties from CA 3801 form. I tried to delete the out-of-state properties in CA 3801 worksheets in "forms" view. However, TurboTax automatically adds back the worksheet before filing.

Is there anyway to exclude non-California properties in CA 3801 calculation?

zzdh3760Author

Any ideas?

DaveF1006

Yes, go to step by step in your return and go to your state tab, edit California. Then navigate to a page that says "Here is the income California handles Differently". Now go to Business>Rental or Royalty Adjustment. Now select edit to the properties that are out of state. First screen asks if there are any Passive or At Risk loss Carryovers.

If there is an amount in the next screen that is recorded with a negative number remove it. if there is no entry, you might try putting a positive number to negate the loss reported on the 3801 or some other manipulation to get this out of Form 3801. You may even try placing a zero in the box.

Let us know if this works and enjoy the rest of your year.

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