Page 2May 1998
The stock sold is from a smallbusiness located in California andheld for more than six months.
The proceeds from the sale are usedwithin 60 days to purchase the stock of another small business located inCalifornia.You do not need to make an adjustmentfor California purposes for yourindividual clients who meet theseconditions. So, disregard the relatedinstructions in the 1997 FTB Publication1001, “Supplemental Guidelines toCalifornia Adjustments.” Your clientsthat file business entity returns are notaffected by this law change.
Survivor annuity benefits for a publicsafety officer killed in the line of duty.
Previously, survivor benefits received bya spouse, former spouse or child of apublic safety officer killed in the line of duty on or after January 1, 1997,generally were includible in income forCalifornia purposes. Now, California lawconforms to federal law providing thatsurvivor benefits received in taxable yearsbeginning after December 31, 1996, fromdeaths occurring after that date, areexcluded from gross income.For your individual clients who excludethese survivor annuity benefits from the1997 federal return, disregard the 1997“Instructions for Schedule CA, CaliforniaAdjustments (540 and 540NR)” thatpertain to the California adjustment forsurvivor annuity benefits.
Gain on the sale of livestock sold due toflood or other weather-relatedconditions.
Previously, Californiaallowed special treatment for gains on thesale of livestock after December 31, 1996,due to droughts. Now, California lawconforms to federal law that allows thespecial treatment for livestock sales due tofloods and other weather-relatedconditions in addition to droughts.As a result, for both individual andbusiness entity clients who make a federalelection to defer recognition of gain or totreat the sale as an involuntaryconversion, do not make an adjustment
Volume 98-3 May 1998
is a bimonthlypublication of the Taxpayer AdvocateBureau, California Franchise TaxBoard. Its primary objective is toprovide information to income taxpreparers about state income taxlaws, regulations, policies andprocedures.
Members of the Board:
Kathleen Connell, ChairState ControllerDean AndalChair, State Board of EqualizationCraig L. BrownDirector, Department of Finance
Executive Officer:Gerald H. GoldbergEditor:Pat Huberty
To update or correct your address or to subscribe to TAX NEWS (send $12 for a one-year subscription), write:
TAX NEWSP.O. Box 520Rancho Cordova, CA 95741-0520or call: (916) 845-7070.
To view TAX NEWS on the Internet or to request an electronic mailsubscription, contact FTB on the Internet:
For information about a client’saccount, contact:
Tax Practitioner Support Unit
(916) 845-7057 (phone)(916) 845-6377 (fax)
For recorded answers to questionson California taxes, to order formsor check on a refund, call:
(800) 338-0505From outside U.S. (916) 845-6600
To send a facsimile about a client’saccount, transmit to:
(800) 852-5711From outside U.S. (916) 845-6500
TDD (800) 822-6268
FTB on the Internet
Printed on recycled paper.
1998 Law Means Changes to 1997 Tax Returns
For the last six months of 1998, theinterest rate on under- and over-payments of California income taxeswill continue to be 9 percent. Thefollowing table lists interest ratessince 1988.
1 Jan. 1988 - 31 Mar.198811%1 Apr. 1988- 30 Sept.198810%1 Oct. 1988 - 30 June 198911%1 July 1989 - 31 Dec. 198912%1 Jan. 1990 - 30 June 1990 11%1 July 1990 - 31 Dec. 199011%1 Jan. 1991 - 30 June 199111%1 July 1991 - 31 Dec.199110%1 Jan. 1992 - 30 June 199210%1 July 1992 - 31 Dec. 1992 9%1 Jan. 1993 - 30 June 1993 8%1 July 1993 - 31 Dec. 1993 7%1 Jan. 1994 - 30 June 1994 7%1 July 1994 - 31 Dec. 1994 7%1 Jan. 1995 - 30 June 1995 8%1 July1995 - 31 Dec.1995 9%1 Jan. 1996-30 June1996 9%1 July1996 -31 Dec.1996 9%1 Jan.1997-30 June1997 9%1 July1997-31 Dec.1997 9%1 Jan.1998-30 June1998 9%1 July1998-31 Dec.1998 9%
for California purposes. For individualclients, disregard the instructions in the1997 FTB Publication 1001.
Sale of principal residence.
For 1997,SB 519 has reinstated the filingrequirement for taxpayers who have gainfrom the sale of their principal residence.Your individual clients now need toconsider gain from the sale of a principalresidence as gross income in determiningwhether they need to file a Californiareturn for 1997. They should check thefiling requirements on page two of the1997 personal income tax booklet under“Do I Have to File?”
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