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State of California Franchise Tax Board

Changes to 2009 Forms

Updates to the Schedule K-1 (565) Instructions on 02/13/2014 –– Instructions for 565 Schedule K-1, Partner's Share of Income, Deductions, Credits, etc.

We replaced text on Page 5, Column 2, Line 11b and Line 11c, seventh bulleted sentence.

Previous Version

Note: new text added.

Revised Version

Eligible gain from the sale or exchange of qualified small business stock (as defined in R&TC Section 18152.5 and issued after August 10, 1993). Also, the name of the corporation that issued the stock and the adjusted basis of that stock should be reported on the attachment to Schedule K (565) and Schedule K-1 (565). Any differences between IRC Section 1202 and R&TC Section 18152.5 should be included on line 11b and line 11c, column (c).

Reason for the changes

AB 1412 (Stats. 2013, ch. 546), signed by the Governor on October 4, 2013, retroactively allows the Qualified Small Business Stock (QSBS) deferral and 50 percent gain exclusion for tax years 2008 through 2012.

Impact

This revision may decrease the tax liability for taxpayers who did not report a QSBS exclusion or deferral for taxable years beginning on or after January 1, 2008.

Back to Tax Form Changes for 2009


Updates to the Schedule K-1 (565) Instructions on 02/21/2013 –– Instructions for 565 Schedule K-1, Partner's Share of Income, Deductions, Credits, etc.

We replaced text on Page 5, Column 2, Bullet 9.

Previous Version

Eligible gain from the sale or exchange of qualified small business stock (as defined in R&TC Section 18152.5 and issued after August 10, 1993). Also, the name of the corporation that issued the stock and the adjusted basis of that stock should be reported on the attachment to Schedule K (565) and Schedule K-1 (565). Any differences between IRC Section 1202 and R&TC Section 18152.5 should be included on line 11b and line 11c, column (c).

Revised Version

Note: text deleted.

Reason for the changes

The Court of Appeal’s held in Cutler v. Franchise Tax Board (2012) 208 Cal. App. 4th 1247, that the qualified small business stock exclusion and deferral statutes under California Revenue and Taxation Code (R&TC) Sections 18152.5 and 18038.5 are unconstitutional. These sections are now invalid and unenforceable.

Impact

This revision increases the tax liability for taxpayers who reported a qualified small business stock exclusion or deferral for taxable years beginning on or after January 1, 2008.

Back to Tax Form Changes for 2009

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