Question

14. At the time Lincoln moved to California last year, he had a capital loss carryover of $12,750 from previous years when he resided in New York. The capital loss was not related to California source income. Provided Lincoln has no capital gain or loss for the current year, how much of this capital loss carryover will Lincoln be allowed to claim on his California state return this year?

    a)$ 0 b) $ 1,500 c) $ 3,000 d) $12,750

15. Bill is a restaurant employee and is depreciating items on Form 2106 using ACRS as the chosen form of depreciation for California. This may cause Bill to have a different:

    1. a) Taxable income on the federal and state returns

    2. b) Standard deduction

    3. c) Gross income on the federal and state returns

    4. d) Amount on Schedule CA (540), line 37

16. Jennifer owns a small landscaping business and is completing her California tax return. She is unsure if she will need to file Form FTB 3885A this year. When should Form FTB 3885A be used?

    1. a) When Listed Property is being depreciated

    2. b) When Special Depreciation is claimed

    3. c) When there is a difference between depreciation amounts on the California and federal

       tax returns

    4. d) When claiming a Section 179 deduction

17. Carter recently moved to California and has several items which he has been depreciating over the years. Which statement about depreciation is true?

    1. a) He will be required to change his depreciation method.

    2. b) He must change his method of depreciation for the state return only if an unacceptable

       method was used prior to California residency.

    3. c) He may change his method of depreciation if it allows a better deduction.

    4. d) He must change his method of depreciation for the state return to straight-line.

18. Jeff purchased and placed in service $215,000 of Section 179 property during the tax year. He wants to take the maximum Section 179 deduction allowed on his California return. His taxable business income for the year was $75,000. How much can Jeff deduct under Section 179 on his California return?

    a) $ 75,000 b) $ 25,000 c) $215,000 d) $ 10,000

19. When computing capital gain or loss when a capital asset is sold or disposed of, generally, California law complies with federal law. However, if the California basis of an asset differs from that of the federal, an adjustment would be required. Which one of the following would cause a difference?

    1. a) California allows an accelerated deduction for certain property for solar energy systems, pollution control devices, and property used in an Enterprise Zone, Local Agency Military Base Recovery Area, Targeted Tax Area, or Los Angeles Revitalization Zone.

    2. b) Special tax credits not allowed under federal law which are authorized by California law may affect asset basis.

    3. c) Prior to 1987, California did not allow the use of ACRS depreciation.

    4. d) All of the answer choices would cause a difference in the basis.

20. Gary owns a small business and uses independent contractors for the work which he’s not able to do himself. Gary must follow independent contractor reporting requirements if he files which of the following forms?

    1. a) Schedule C

    2. b) Form 1099-MISC

    3. c) Form 1040

    4. d) Form W-2

Answer 1

The capital loss can be deducted to the amount of capital gain.

Since there is no capital gain, therefore, no capital loss can be taken against capital gain.

Capital losses can be deducted from the ordinary income up to $3,000.

Since the capital loss carryover is $12,750 and no capital gains, therefore the maximum

amount of $3000 can be deducted from ordinary income.

Hence the option (c) is correct.