California canceled debt addback in ProConnect (Form 1099-C)

California no longer allows the exclusion for TY15 or TY16. Entering the cancelation of debt income will create the addback on Schedule CA, line 21f.

Per the CA Form 540 Instructions (page 5):

Mortgage forgiveness debt relief: California law does not conform to federal law regarding the discharge of indebtedness from the disposition of your principal residence occurring on or after January 1, 2014. Enter the amount of discharge on line 21f, column C.

Assembly Bill No. 1393
CHAPTER 152

An act to amend Section 17144.5 of the Revenue and Taxation Code, relating to taxation, and declaring the urgency thereof, to take effect immediately.

[ Approved by Governor  July 21, 2014. Filed with Secretary of State  July 21, 2014. ]

LEGISLATIVE COUNSEL'S DIGEST

AB 1393, Perea. Personal income taxes: income exclusion: mortgage debt forgiveness.
The Personal Income Tax Law provides for modified conformity to specified provisions of federal income tax law relating to the exclusion of the discharge of qualified principal residence indebtedness, as defined, from an individual?s income if that debt is discharged after January 1, 2007, and before January 1, 2013, as provided. The federal American Taxpayer Relief Act of 2012 extended the operation of those provisions to qualified principal residence indebtedness that is discharged before January 1, 2014.
This bill would conform to the federal extension, discharge indebtedness for related penalties and interest, and make legislative findings and declarations regarding the public purpose served by the bill.
This bill would declare that it is to take effect immediately as an urgency statute.

To enter the Cancelation of debt of qualified principal residence exclusion for federal purposes and generate an amount on line 21f, column c on Schedule CA:

1. Go to Input Return > SS Benefits, Alimony, Misc. Income, (SS Bene, Misc, Inc.)
2. Scroll down to the Alimony and Other Income section
3. Enter the applicable amounts under the Cancelation of Debt subsection in:
   • Cancelation of debt (1099-C)
   • Qualified principal residence exclusion
   • Both entries are required to generate the exclusion on the Federal Form 1040

To enter a CA Short Sale and Cancelation of Debt per the FTB Tax News:

1. Go to Input Return > SS Benefits, Alimony, Misc. Income, (SS Bene, Misc, Inc.)
2. Scroll down to the Alimony and Other Income section
3. Enter the applicable amounts under the Cancelation of Debt subsection in:
   1. Cancelation of debt (1099-C) 
   2. Qualified principal residence exclusion 
4. Check the box, COD income attributable to short sale pursuant to CCP section 580e [CA] code 180