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California conformity with 3-year federal treatment of covid distributions

Gregory Gandrud
Level 1

Does anyone know if California definitely conforms to the federal law which allows Qualified Coronavirus Distributions to be spread over three years?

I know they conform to no RMD for 2020 and they conform to no penalty for early distribution of qualified distributions.

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Just-Lisa-Now-
Level 15
Level 15

This is what Spidell sent me when I asked them about it last month

Here is an excerpt from our Federal and California Tax Update Webinars, where we discussed this issue. "The taxpayer includes the income from the IRA distribution over a three-year period unless the taxpayer elects to include all the income in the year of the distribution. California conforms. (IRC §§402(c), 403(a)(4), 403(b)(8), 408(d)(3), 457(e)(16); R&TC §17507) A taxpayer can make a different election for California purposes and, for example, report all the income in 2020 for California purposes but spread the income over three years for federal purposes or vice versa. (R&TC §17024.5)"


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

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abctax55
Level 15

Per Spidell (which should be your go-to for all tax things CA), they confirmed with the FTB that California conforms pursuant to Sec. 17501.

(I wanna be a member of the pot stirring club too)
Gregory Gandrud
Level 1

Section 17501 speaks to deferred compensation but not to distributions therefrom. The FTB site does not say that California conforms. I had previously read the Spidell guidance but I'm being cautious until the FTB confirms it and posts it on their own site.

 

17501. (a) Subchapter D of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to deferred compensation, shall apply, except as otherwise provided. (b) Notwithstanding the specified date contained in paragraph (1) of subdivision (a) of Section 17024.5, Part I of Subchapter D of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to pension, profitsharing, stock bonus plans, etc., and Part III of Subchapter D of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to rules relating to minimum funding standards and benefit limitations, shall apply, except as otherwise provided, without regard to taxable year to the same extent as applicable for federal income tax purposes. (c) The maximum amount of elective deferrals (as defined in Section 402(g)(3)) for the taxable year that may be excluded from gross income under Section 402(g) of the Internal Revenue Code, as applicable for state purposes, shall not exceed the amount of elective deferrals that may be excluded from gross income under Section 402(g) of the Internal Revenue Code, as in effect on January 1, 2010, including additional elective deferrals under Section 414(v) of the Internal Revenue Code, as in effect on January 1, 2010. (d) (1) For taxable years beginning on or after January 1, 2002, the basis of any person in the plan, account, or annuity shall be increased by the amount of elective deferrals not excluded as a result of the application of subdivision (c). (2) Any basis described in paragraph (1) shall be recovered in the manner specified in Section 17085. (e) Notwithstanding the limitations provided in subdivision (c), any income attributable to elective deferrals in taxable years beginning on or after January 1, 2002, in conformance with Part I of Subchapter D of Chapter 1 of Subtitle A of the Internal Revenue Code, as applicable for federal and state purposes, shall not be includable in the gross income of the individual for whose benefit the plan or account was established until distributed pursuant to the plan or by operation of law. (Amended by Stats. 2010, Ch. 14, Sec. 30. (SB 401) Effective January 1, 2011.)

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Just-Lisa-Now-
Level 15
Level 15

This is what Spidell sent me when I asked them about it last month

Here is an excerpt from our Federal and California Tax Update Webinars, where we discussed this issue. "The taxpayer includes the income from the IRA distribution over a three-year period unless the taxpayer elects to include all the income in the year of the distribution. California conforms. (IRC §§402(c), 403(a)(4), 403(b)(8), 408(d)(3), 457(e)(16); R&TC §17507) A taxpayer can make a different election for California purposes and, for example, report all the income in 2020 for California purposes but spread the income over three years for federal purposes or vice versa. (R&TC §17024.5)"


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

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abctax55
Level 15

Ok then... you can let us know.  Spidell usually knows their stuff.

(I wanna be a member of the pot stirring club too)
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Just-Lisa-Now-
Level 15
Level 15

You may be waiting for awhile, the FTB website is sorely lacking in detailed information about most things.


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪