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An example would be a shareholder’s working interest in oil and gas property (i.e., the shareholder’s interest is not limited) if the shareholder does not materially participate in the oil and gas activity. If the S corporation has a disaster loss carryover deduction and there is income in the current taxable year, enter the total amount from the 2022 form FTB 3805Q, Part III, line 2. The loss may not reduce the current taxable year income below zero. IRC Sections 1400Z-1 and 1400Z-2 provide a temporary deferral of inclusion of gross income for capital gains reinvested in a qualified opportunity fund, and exclude capital gains from the sale or exchange of an investment in such funds.

This service is available in English and Spanish to callers with touch-tone telephones. To make any elections relating to the order of distribution, the corporation must attach a statement to a timely filed original Form 100S or amended Form 100S for the year in which the election is made. The corporation must identify the election it is making and state that each shareholder consents to the election. A corporate officer must sign the statement under penalties of perjury on behalf of the corporation. The statement of election to make a deemed dividend must include the amount of the deemed dividend distributed to each shareholder.

Schedule J – Add-On Taxes and Recapture of Tax Credits

A QSub is not treated as a separate entity and all assets, liabilities, and items of income, deduction, and credit of the QSub are treated as belonging to the parent S corporation. The activities of the QSub are treated as activities of the parent S corporation. California S corporations generally follow IRC Section 469 and the regulations thereunder that allow losses from passive activities to be applied only against income from passive activities. California requires taxpayers who exchange property located in California for like-kind property located outside of California under IRC Section 1031, to file an annual information return with the FTB.

For more information, see IRC Section 179 and R&TC Section 17201. Do not include specially allocated ordinary gains and losses or net gains or losses from involuntary conversions due to casualties or thefts on this line. When completing the California Schedule K and Schedule K-1 (100S), refer to the Schedule K Federal/State Line References chart included https://turbo-tax.org/taxhow-schedule-m/ in this tax booklet, that shows the specific line references between the federal and state schedules. Attach one copy of each Schedule K-1 (100S) to the Form 100S filed with the FTB. Keep one copy of each Schedule K-1 (100S) for the S corporation’s records, and give each shareholder a copy of Schedule K-1 (100S) on or before the due date of Form 100S.

Shareholders’ Share of Income, Deductions, Credits, etc.

California allows a qualified taxpayer an exclusion from gross income for any amount received from the Fire Victims Trust. If the S corporation has a gain from the sale, exchange or disposition of property for which an IRC Section 179 expense deduction was claimed in a prior year, special rules apply. For federal purposes, the gain is no longer included in income at the entity level. However, it must be included in the taxable income of the S corporation for California purposes on Form 100S, line 4. See General Information FF, Property Subject To IRC Section 179 Recapture, for more information. Special rules apply for gains from the sale, exchange or disposition of property for which an IRC Section 179 expense deduction was claimed in a prior year.

Report purchases of items that would have been subject to sales tax if purchased from a California retailer unless the receipt shows that California tax was paid directly to the retailer. For example, generally, purchases of clothing would be included, but not exempt purchases of food products or prescription medicine. For more information on nontaxable and exempt purchases, visit the California Department of Tax and Fee Administration’s website at cdtfa.ca.gov. To figure tax credits, complete and attach the appropriate form for each credit claimed on Form 100S.

Credits

If the S corporation is the parent of a QSub and made payments for the QSub annual tax, include the total amount of QSub annual tax payment made during 2022 on line 32 along with the total estimated tax payments. See General Information DD, Qualified Subchapter S Subsidiary (QSub), for more information. Be sure to complete Schedule QS included in this tax booklet and attach https://turbo-tax.org/ it to the return. Federal Form 8886 is required to be attached to any return on which a deduction, loss, credit, or any other tax benefit is claimed or is reported, or any income the S corporation reported from an interest in a reportable transaction. If the S corporation is required to file this form with the federal return, attach a copy to the S corporation’s Form 100S.

In column (b), enter the amounts from federal Schedule K. In column (c), enter the adjustments resulting from differences between California and federal law (not adjustments relating to California source income). In column (d), enter the worldwide income computed under California law. Be sure to give each shareholder a copy of either the Shareholder’s Instructions for Schedule K-1 (100S) included in this booklet or specific instructions for each item reported on the shareholder’s Schedule K-1 (100S).

For full-year residents this income should be subtracted on Kentucky Schedule M and part-year residents should make the subtraction under the Adjustments to Income section on Form 740-NP. The subtraction should be labeled “active duty military pay.” Schedule M-3 is required when the corporation’s total assets at the end of the year are $10 million or more. The calculation for Schedule M-3 is done in reverse from the form itself. The first step in the calculation is the equalization of the taxable income reported on Schedule M-3, Part II, line 30, column (d), which must match Form 1120, page 1, line 28.