Section 17049 Of Chapter 2. Imposition Of Tax From California Revenue And Taxation Code >> Division 2. >> Part 10. >> Chapter 2.
17049
. (a) If an item of income was included in the gross income of
an individual for a preceding taxable year or years because it
appeared that the individual had an unrestricted right to that item,
a deduction is allowable for the taxable year based on the repayment
of the item by the individual during the taxable year, and the amount
of that deduction exceeds three thousand dollars ($3,000), then the
tax imposed by this part for the taxable year on that individual
shall be the lesser of the following:
(1) The tax for the taxable year computed with that deduction.
(2) An amount equal to (A) the tax for the taxable year computed
without that deduction, minus (B) the decrease in tax under this part
for the preceding taxable year or years which would result solely
from the exclusion of the item or portion thereof from the gross
income required to be shown on the California return of that
individual for the preceding taxable year or years.
(b) If the decrease in tax determined under subparagraph (B) of
paragraph (2) of subdivision (a) for the preceding taxable year or
years exceeds the tax imposed for the taxable year, computed without
the deduction, that excess shall be considered to be a payment of tax
on the last day prescribed for the payment of tax for the taxable
year, and shall be refunded or credited in the same manner as if it
were an overpayment for the taxable year.
(c) Subdivision (a) does not apply to any deduction allowable with
respect to an item which was included in gross income by reason of
the sale or other disposition of stock in trade of the taxpayer, or
other property of a kind which would properly have been included in
the inventory of the taxpayer if on hand at the close of the prior
taxable year, or property held by the taxpayer primarily for sale to
customers in the ordinary course of his or her trade or business.
(d) If the tax imposed by this part for the taxable year is the
amount determined under paragraph (2) of subdivision (a), then the
deduction referred to in subdivision (a) shall not be taken into
account for any purpose of this part, or Part 10.2 (commencing with
Section 18401), other than this section.
(e) For purposes of determining whether paragraph (1) or paragraph
(2) of subdivision (a) applies, in any case where the exclusion
referred to in subparagraph (B) of paragraph (2) of subdivision (a)
results in a net operating loss or capital loss for the prior taxable
year, or years, that loss shall, for purposes of computing the
decrease in tax for the prior taxable year, or years, under
subparagraph (B) of paragraph (2) of subdivision (a), be carried over
to the same extent and in the same manner as is provided under
Section 17276, 17276.1, 17276.2, 17276.4, 17276.5, or 17276.7, or
Section 1212 of the Internal Revenue Code, as applicable for
California purposes, except that no carryover beyond the taxable year
shall be taken into account.
(f) For purposes of this part, the net operating loss or capital
loss described in subdivision (e) shall, after the application of
paragraph (1) or (2) of subdivision (a) for the taxable year, be
taken into account under Section 17276, 17276.1, 17276.2, 17276.4,
17276.5, or 17276.7, or Section 1212 of the Internal Revenue Code, as
applicable for California purposes, for taxable years after the
taxable year to the same extent and in the same manner as either of
the following:
(A) A net operating loss sustained for the taxable year, if
paragraph (1) of subdivision (a) applied.
(B) A net operating loss or capital loss sustained for the prior
taxable year, or years, if paragraph (2) of subdivision (a) applied.
(g) Regulations promulgated by the Secretary of the Treasury under
Section 1341 of the Internal Revenue Code shall apply, except to the
extent that those regulations conflict with this section, provisions
of this part, or with regulations promulgated by the Franchise Tax
Board.