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I am filing taxes for 2020 as CA non-resident because I have provided a CA address on my US trading account. I have foreign earned income, foreign interest, dividends from the trading account, and US capital gains as components of my income. There are column D and column E in schedule CA with column D representing the result obtained by adjusting federal entries by California specific adjustments, and column E expecting "(income earned or received as a CA resident and income earned or received from CA sources as a nonresident)". I was not a CA resident during 2020. Also, the foreign income and interest have nothing to do with CA. Should they still appear in column E?

If not, I don't see the corresponding subtractions to include in column B to offset the values in column A that contains the federal entries. I am assuming that the entries in columns D and E should be consistent with each other in some way. I don't clearly understand the purpose of columns B through D when column E clearly expects the tax payer to declare only CA sourced income or income obtained as a resident of CA. Can someone help? Thank you.

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Columns B and C deal with differences between California law and federal law on each piece of income. The additions and subtractions in columns B and C have nothing to do with your residency or source of income. That may be your source of confusion. You can think of column D as your income taxable in California as if all of your worldwide income were taxable in California. So your foreign income, out-of-state income, and California income should all be included in column D. It is only in column E that you specify the portion of the amounts in column D should be taxable in California due to being a resident or having a source in California.

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  • Thank you. Let me take a concrete example. I have foreign interest and foreign wages which according to you should be included in column D. I am filing as non-resident. So will there be zeroes in column E for these entries? Also, I have US sourced dividend income and capital gains which I will indicate in column D. Will they appear in column E as they are in column D? I don't know at present how to tease out California sourced income from US dividends and capital gains. <continued in next message> May 17 at 17:46
  • Should I be spending time on this activity at all, or should I show all of the US capital gains and dividends as California sourced income in column E? May 17 at 17:46
  • @user2371765: If the amounts are not taxable in California because you are a California nonresident and it is not California-source income, it would not be included in Column E. It is up to you to determine how much of Column D to put into Column E according to the rules on what is California-source income in Publication 1031.
    – user102008
    May 17 at 22:15
  • @user2371765: So Column A would be identical to your federal tax return. If foreign income was excluded from federal taxes, you need to add it back in as California additions in Column C. There are other things that might differ between federal and California that you might need to include in Columns B or C, e.g. HSAs. By the time you get to Column D it should be your worldwide income as taxed by California law if hypothetically it were all taxable by California. There is no addition or subtraction to get to Column E -- you enter the amount that you determine should go in Column E directly.
    – user102008
    May 17 at 22:20
  • I showed the foreign wages/income and foreign interest on my federal, but took a tax credit using Form 1116. So should I include it in column C? I don't think I should, but I just want to confirm. I did not invest in HSAs or in IRAs. 1031 (Page 7 Interest and dividends) led me to the below codes.findlaw.com/ca/revenue-and-taxation-code/… where I read that a qualifying security includes stocks. But I don't quite understand the rest. As for capital gains, page 9 on 1031 indicates that capital gains are not sourced in CA if one is not a resident of CA. May 18 at 0:50

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