The LLC should attach a schedule that shows the amount of any investment income and expenses included in any other lines of this Schedule K-1 (568). Use these amounts, if any, to adjust line 20a and line 20b to determine your total investment income and total investment expenses from this LLC. If you have credits that are passive activity credits, complete form FTB 3801-CR (corporations use form FTB 3802), in addition to the credit forms referenced. Get the instructions for form FTB 3801-CR (or form FTB 3802) for more information.
- Use the instructions below to report passive income and losses after the passive loss limitations have been computed.
- You must attach a copy of Schedule K-1 (568) to your California tax return to claim the tax paid by the LLC on your behalf.
- This is added to apportioned business income and nonbusiness intangible income allocated to California and becomes a part of California taxable income.
- If taxes were allocated to you or withheld on you by the LLC, the LLC must provide a completed Form 592, Resident and Nonresident Withholding Statement.
- The information reported in box 16 of the federal Schedule K‑1 (Form 1065), does not apply to California and therefore there is no line 16.
Line 5 through Line 11a – Portfolio Income
If you have an amount on Schedule K-1 (568), line 5, column (c), report this amount on Schedule CA (540), Part I, Section A, line 2, or on Schedule CA (540NR), Part II, Section A, line 2, column B or column C, whichever is applicable. Use the following instructions to determine where to enter the line 2 amount. You can compute the basis of your LLC interest by adding items that increase your basis and then subtracting items that decrease your basis. If your return is ever examined, you may be required to provide your computations and the supporting documents for your membership interest. Do not include Social Security numbers or any personal or confidential information. For a complete listing of the FTB’s official Spanish pages, visit La página principal en español (Spanish home page).
- If you have an amount on Schedule K-1 (568), line 13e, column (c), enter this amount on Schedule CA (540), Part II, line 21 or on Schedule CA (540NR), Part III, line 21.
- For more information, see R&TC Section or go to ftb.ca.gov and search for doing business.
- Follow the instructions for form FTB 3801 or form FTB 3802 for reporting income, gains, and losses from PTPs.
- Market Assignment – R&TC Section requires all taxpayers to assign sales, other than sales of tangible personal property, using market assignment.
- A method of taxation by which all of the activities comprising a single trade or business are viewed as a single unit, regardless of whether those activities are conducted by divisions of a single entity or by commonly owned or controlled entities.
Distributive Items of Business Income
If you have an amount reported on Schedule K-1 (568), line 7, column (c), report this amount on Schedule CA (540), Part I, Section B, line 5, or on Schedule CA (540NR), Part II, Section B, line 5, column B or column C, whichever is applicable. Unitary members cannot use the California source information reflected Retail Accounting in column (e). Such members must use the information in Tables 1 and 2 as described in the instructions that follow, and in the Line Instructions. Nonapportioning LLCs do not need to fill out column (e) on Schedule K‑1 (568) if the member is a resident and the “Yes” box is checked on Question H. However, the final determination of residency is made at the member level. If the LLC is uncertain as to the residency status of the member, it should fill out column (e) for that member. Only intangible assets that are purchased are recorded by a business.
Line 12 – Expense Deduction for Recovery Property
Generally, cash flow California tax law conforms to federal tax law concerning basis limitation. You may not claim your share of an LLC loss (including a capital loss) that is greater than the adjusted basis of your LLC interest at the end of the LLC’s taxable year. A method of taxation by which all of the activities comprising a single trade or business are viewed as a single unit, regardless of whether those activities are conducted by divisions of a single entity or by commonly owned or controlled entities.
Apportionment of Business Income – Nonunitary Business
- For more information, get the instructions for federal Schedule K-1 (Form 1065), box 17, Alternative minimum tax (AMT) items.
- Use the information reported on line 17a through line 17f, column (d) as well as your adjustments and tax preference items from other sources to complete Schedule P (100, 100W, 540, 540NR, or 541), Alternative Minimum Tax and Credit Limitations.
- Members should follow federal reporting requirements as detailed in federal Form 1065, U.S.
- Form FTB 3526 will help you determine how much of your total investment interest is deductible.
- Nonapportioning LLCs do not need to fill out column (e) on Schedule K‑1 (568) if the member is a resident and the “Yes” box is checked on Question H. However, the final determination of residency is made at the member level.
- If your return is ever examined, you may be required to provide your computations and the supporting documents for your membership interest.
Federal and California law allows spouses that are the sole owners of an eligible business entity (including an LLC) to be treated as two owners or one owner, for purposes of applying rules to determine the classification of that entity for tax purposes. If the spouses elect to be a single owner, the LLC could be disregarded as a separate entity but may not be classified as a partnership. Similarly, if the spouses elect to be two owners, the entity may be classified as a partnership but cannot be disregarded as a separate entity. This election is not available to Registered Domestic Partners (RDPs).
Income (Loss)
If you have losses from passive activities, or a combination of income, gains, and losses from passive activities, you must first complete form FTB 3801 or form FTB 3802 to determine if any of your losses are limited by the passive loss rules. Use the instructions below to report passive income and losses after the passive loss limitations have been computed. The amounts reported on Schedule K-1 (568), line 1 and line 15f, are normally passive activity income (loss) or credits from the trade or business of the LLC if you are a member who did not materially participate in the trade or business activities of the LLC. The amounts reported on Schedule K-1 (568), line 2, line 3, line 15b, line 15c, and line 15d are from rental activities of the LLC and are passive activity income (loss) or credits to all members. There is an exception to this rule for losses incurred by qualified investors in qualified low-income housing projects.