I do not do many CA returns so any assistance would be appreciated. My client owns two rental real estate properties, both in CA, and had loss carryforwards on both of them. The carryforward loss reduced the Property A income but the property was still quite positive net-income wise. The carryforward on Property B put the property at even more of a loss but Property A was so profitable that the full deduction was still allowed, so in total the carryforwards reduced the overall Sch E profit by $70k on the federal return.
On the CA return on Form 540, line 14 "California adjustments - subtractions" decreases by $70k when I put in the carryforwards but line 16 "California adjustments - additions" increases by $70k so the carryforwards are not actually reducing the tax liability in CA at all. How do I properly put this into the software?
CA starts with the federal AGI, if that 70k loss was already included in the Fed AGI, are you sure you need to make an adjustment on CA?
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