What is entered for RIC Capital Gains Earned under California "Other Interest and Dividend Adjustments?"

Forum|Forum|2 years ago
April 1, 2024
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This prompt implies we should enter any capital gains under "2a" in 1099-DIV from mutual funds, ETFs, etc. Entering a number here causes a subtraction from investment income, which I don't understand. Also, FTB Pub 1001 only mentions undistributed capital gains from RICs - not capital gains earned and distributed in the same year. This seems like a turbotax error.

MonikaK1

If RIC gains were earned and distributed in the same year, and they were reported on the Federal return, then you wouldn't have a California adjustment to enter in the box for "RIC Capital Gains Distributed (not in federal income)" on the Other Interest and Dividend Adjustments screen in the California interview.

California Publication 1001 includes an explanation of the differences between California and Federal law for Dividend Income.

According to Pub 1001, California taxes the undistributed capital gain from a Regulated Investment Company (RIC) in the year distributed rather than in the year earned:

If capital gain from a RIC is earned in one year and distributed in a later year, enter the capital gain included in federal income for the year earned on Schedule CA (540), Part I or Schedule CA (540NR), Part II, Section A, line 3, column B and enter the capital gain for the year distributed on Schedule CA (540), Part I or Schedule CA (540NR), Part II, Section A, line 3, column C.

If your Dividend Income included a capital gain distribution for qualified small business stock—RICs, a portion of the gain may be excluded from the Federal return under certain circumstances. See the IRS instructions for Form 1099-DIV for more information.

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cstephenleeAuthor

Thanks very much for the reply. But I'm actually referring to the field that is labeled: "RIC Capital Gains Earned (in federal income)." Again, the implication seems to be that I'm supposed to enter in my capital gains from 1099-DIV 2a. But I don't see this addressed in Pub 1001.

mglauner

No, this means enter any Adjustment (plus or minus) to reporting Interest or Dividends in California that differs from the Federal amount reported.

For most, there is no entry to be made here.

For some, there is interest reported on the Federal return that is not taxable in CA, so that amount would be subtracted out.

These can include:

U.S. savings bonds (except for interest from series EE U.S. savings bonds issued after 1989 that qualified for the Education Savings Bond Program exclusion).
U.S. Treasury bills, notes, and bonds.
Any other bonds or obligations of the United States and its territories.
Interest from Ottoman Turkish Empire settlement payments.
Interest income from children under age 19 or students under age 24 included on the child’s federal tax return and reported on the California tax return by the parent. For more information, get form FTB 3803, Parents’ Election to Report Child’s Interest and Dividends.

Certain mutual funds pay “exempt-interest dividends.” If the mutual fund has at least 50% of its assets invested in tax-exempt U.S. obligations and/or in California or its municipal obligations, that amount of dividend is exempt from California tax. The proportion of dividends that are tax‑exempt will be shown on your annual statement or statement issued with federal Form 1099-DIV, Dividends and Distributions. For more information, get FTB Pub. 1001.

Here's more info on California Adjustments.

@cstephenlee