Changes to 2010 Forms
Updates to the Schedule K-1 (568) Instructions on 02/13/2013 –– Instructions for 568 Schedule K-1, Member's Share of Income, Deductions, Credits, etc.
We replaced text on Page 6, Column 1, Bullet 5.
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 (568) and Schedule K-1 (568). Any differences between IRC Section 1202 and R&TC Section 18152.5 should be included on line 11b and line 11c, column (c).
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.
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.