Bob Aldrich wrote:

- quote -

As I noted in my response to your other thread - YES, at
least in my case.

The California Taxpayers Advocate office (or a name similar
to that) processed an amended return (I had lost years of
time with the franchise tax board; the taxpayers advocate
was an accidental discovery that saved me several thousand
dollars) exactly as described for IRC 1341.

With one exception; that office became confused between the
years being recalculated (95,6,7 I think) and the year of
the repayment (98). They did not accept the recalculation
of 95 as that year was now (I'll guess my correspondance
with them was in 2000) too old. Even though the repayment
and tax year being filed was 1998 - 1995 was just part of
the computation.

Well, when you are getting several thousand back that you
had thought lost do you pursue another 400 or so at the risk
(dealing with tax authories IS a risk) of losing it all in
another "interpretation"? I accepted the minor loss,
thankfull for all that office had done for me.

Another poster noted that "the payment" had to be taxable
for there to be a tax refund. It is the original payments,
of course, that he referred to (the insurance payments) that
were taxable. And as that poster pointed out, SS is not
taxed by California - and that is what makes IRC 1341 so
important in this case.

dick w

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"Bob Aldrich" <nospam[at]msn.com> wrote:

- quote -

California does not conform to IRC Sec. 1341.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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Bob Aldrich wrote:

- quote -

California follows ALL federal rules that it doesn't itself
"redefine." CA R&TC sections 17041-43 define GI, AGI, and
TI (taxable income) as those terms defined in the IRC
(sections 61-63) "except as modified in this title [the
R&TC]."

I don't recall any state statute that redefines the "claim
of right" transaction for state purposes, so I conclude that
it does. The R&TC is online and searchable.

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Bob Aldrich wrote:

- quote -

Here's the answer sent in reply to your other post
"Repayments of prior year Income":

As far as I can tell, CA does not have the credit available
for a repayment. However, CA does conform to federal law
relating to Misc. itemized deductions. There is one overall
caveat relating to this deduction. You can't take the
deduction unless the payment was taxed by CA. CA does not
tax social security.

--
Alan
http://taxtopics.net

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IRC Sec 1341 allows a taxpayer to claim a deduction in the
current year for a repayment of an amount that was included
in income in an earlier year.

Alternately, it allows the taxpayer to claim a current year
refundable credit for the tax difference in the earlier year
based on recalculation of the earlier year tax, with and
without the repayment. Since my client has very little 2003
income, any deduction is wasted, and the credit alternative
is a life saver.

Does anyone know if California follows the Fed regarding the
1341 credit?

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