Question

For which of the following reason(s) should a taxpayer use FTB Form 3885A - Depreciation and Amortization Adjustments?

A. If there is a difference between the amount of depreciation and amortization allowed as a deduction using California law and the amount allowed using Federal law
B. If reporting a difference for assets related to a passive activity
C. If reporting depreciation expense from Federal Form 2106 - Employee Business Expenses
D. All of the above

Answer 1

A taxpayer should use the FTB Form 3885A for any adjustments needed between California and federal law regarding depreciation and amortization, including differences due to passive activities and employee business expenses.

Step-by-step explanation:

A taxpayer should use the FTB Form 3885A - Depreciation and Amortization Adjustments when there is a difference in the amounts of depreciation and amortization between California law and Federal law, for reporting differences concerning passive activities, and for reporting depreciation expenses from Federal Form 2106 - Employee Business Expenses.

Depreciation and amortization can differ between state and federal calculations due to different laws and regulations. It is essential for the taxpayer to reconcile these differences on their state tax return. The form helps to ensure that depreciation deductions are accurately reflected as per California's tax rules, potentially affecting taxable income. Furthermore, it addresses differences related to passive activities, which have specific rules for how losses and deductions are reported, as well as employee business expenses that are subject to depreciation.