Capital Loss Carryover for Investments Sold in GA prior to moving to CA

Question

I moved to California mid January in 2023 from Georgia and have lived in California for the rest of 2023. While in Georgia, just prior to moving, I sold several mutual funds and had capital losses.

I entered in all of my mutual funds sold for the 1099-B on my Federal return, but now I'm doing my partial residency state return for California and it's telling me that I have a resident California capital loss carryover and that I need to do a Schedule D 540NR Capital Loss Carryover Worksheet and just linked me a pdf.

My first question is, shouldn't it be GA residency since I sold the investments while I still maintained residency in GA? And if so, how to I modify my federal return so that my CA state return doesn't assume that I sold the investments in CA and instead recognizes that they were sold in GA?

It's strange to me that it said this when I specifically had to put the date sold for each investment and told the state return that I was not a CA resident during that time.

And secondly, do I need to fill out this worksheet now or do I do this when I file my taxes for 2024?

Finally, am I correct in assuming that I need to file a partial residency state return for both CA and GA?

MatthewD · Answer

Just ignore the California Alert. That is going to show up even when you don't allocate any loss to CA.

Yes, you are not required to allocate any of that loss to CA, since the transaction occurred in GA.

seb · Answer

Hey thanks for you help. A few more questions if that's ok.

"Make sure you do that on the Part-year resident income pages. "

So in my California return, I clicked on the "State" dropdown at the top and then clicked on "California Income". (I hope that's the right section) On that page it has a section for "Capital Gain or Loss" and shows the "Federal Adjusted Amount". My problem is, it shows the loss there, and it's grayed out so I can't even edit it. Next to it, it shows "California Amount", which I tried to set to zero in hopes that it would recognize that there was no loss in California. But that didn't help.  Because when I go to "State" > "State Summary" it still says "We've calculated that you have a resident California capital loss carryover of x" with x being the amount of the loss. I wonder if I don't need to just delete both my State returns and start with Georgia first, to see if it decides to assign it to Georgia, but that seems like a pain.

And just as a follow up question, you said I only need to fill out the form if I allocate the loss to CA. Are you saying that this is something that I'm legally allowed to do in California? Or were you speaking more generally that if it was actually a loss in California and not Georgia, that I would use that form to carry it over to 2024?

MatthewD · Answer

Hello,

First, you are right, that capital loss should be allocated to GA, not CA.  Make sure you do that on the Part-year resident income pages.

You will only need to fill that out if you allocate the loss to CA.

Yes, you need to file a part-year return for CA and GA.