Questions about basis calculations for CA Non-Residents:
Client is NV resident that files a 540NR. Client owns 75% of an S-Corporation that has historical activity in both CA & NV (mostly NV). Now the S-Corp is 100% CA.
1. Do we calculate his individual stock basis using the CA sourced amounts on his K-1 (column E) or the full CA amounts (column D)?
2. If any CA Sec. 179 on the S-Corp’s K-1 was disallowed on his individual return (client never got the deduction as it does not carryover). Does his basis still decrease by the disallowed Sec. 179?
I believe his basis is the same for CA as for federal as it’s basis in the shares and shouldn’t matter whether there was some CA source and some nonsource income. If you are saying the 179 was not allowed under CA law, you would not decrease basis except to the extent CA would have allowed it. If the t/p just couldn’t use it due to lack of business income, it will carry forward and reduce basis whether used or not.
Regarding the 179 – There is sufficient business income. The only reason the Sec. 179 is disallowed is because the taxpayer receives multiple K-1s from other passthrough entities and in total the Sec. 179 exceeds the amount allowed under CA law. Would his basis in the activity with the disallowed 179 still be reduced?