CA tax return - Cost segregation study with retroactive depreciation adjustment

[ptax255]

Hi, client has done a cost segregation study for a property rented for a few years now. On the federal side, the 5-15yr property is being bonus-depreciated. I understand the adjustment will be different than federal, because CA doesn't allow bonus depreciation. Any other things I should consider for CA that are different than federal?

- Do I enter the adjustment on CA schedule E as other expense similar to federal or different wording?

- Do I file form federal form 3115? with CA? note this shows the larger depreciation amount. Do I write in the smaller CA amount? Does FTB has its own form 3115? I couldn't find one.

Thank you!

[Karl · Accepted solution]

California does not have its own version of 3115.

Correct, no bonus depr in CA, but you can use the shorter lives from the cost seg study components breakout for CA lives to accelerate the timeline of MACRS.

You'll show the fed/state difference adjustments on FTB Form 3885A. Those should roll up to Schedule CA540 for fed/state diffs.

The 3115 will be with the Fed return that should go with the CA return when you file. Your software may give additional diagnostics of what it wants attached and how it wants it configured.