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| Ottoman Turkish Empire must be deducted from federal gross income by filling out California CA. If you have settlement payments from persecution during the Ottoman Turkish Empire, benefit from being able to exclude the interest from these on your California tax return. |
| Exempt interest dividends (Mutual Funds) |
| Interest income from Mutual Funds is exempt interest for federal tax purposes. Most interest you receive is taxable and you must pay taxes to the Internal Revenue Service on such interest. However, some interest you receive may be tax-exempt interest. For example, interest from Series EE and Series I bonds issued after 1989 may be excluded from income if it is used to pay for qualified educational expenses and you meet other qualifications. |
| But what is a mutual fund? It is an investment company that pools money from many people and in turn invests that pooled money in stocks, bonds and other investments. Accordingly, when using a mutual fund, your investment is more secured since your investment is more spread out. You also a better investment opportunity because there is more pooled together for large investments. The idea that you have professionals doing the work for you makes it a less risky investment. The company invests in large amounts of securities at once so the costs associated with these investments are smaller that if you were to invest on your own. Don’t get me wrong, there are still risks in investing in these types of securities. The return you received from investing in a mutual fund is a type of dividend and most are tax exempt interest dividends. |
| California does not tax dividends paid by a mutual fund that is due to interest received from U.S. obligations, California State or municipal obligations if at least 50% of the fund’s assets would be exempt from California tax when held by the individual. However, California does tax any dividends derived from other states or municipalities in other states. California taxes any income regardless of source unless it is specifically excludable for California tax purposes. If the item is an item that is tax free for California tax purposes, this same item would have to be included if it is paid by another state. Include on Schedule CA line 8, column B any value of U.S. and California or municipal obligations that is at least 50% of the fund’s total assets, enter the part that is attributed to U.S. obligations and which was included in federal adjusted gross income. On the other hand, if the dividends received were for a state other than California or any other state municipalities and which were exempt for federal tax purposes, you must subtract them from California gross income by entering that amount in Schedule CA line 8, column C. If the interest income derived is not of a California source, usually you would be liable for the tax on these for California tax purposes. |
| Noncash patronage dividend from farmers' cooperatives or mutual associations |
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People who are mutually associated in their trade will often do better in their business due to the mutual cooperation of various members. The more people involved, the strong the association will become. Mutual associations are especially useful in pooling money together to promote the products. It is a common practice for farmer’s to joint together and form such mutual associations for marketing and distribution of their produce. Taxability of patronage dividends depends on when you receive it or on when you redeem them. Patronage dividends you receive in cash from a cooperative organization are includable in your income. However, you do not have to include patronage dividends which were received on property bought for your personal use, or on capital assets or depreciable property bought for business use. However, you must take into account the adjusted basis and if the dividend is more, you will need to report the excess to the Internal Revenue Service. These rules apply to both taxable and tax-exempt cooperatives. |
| Noncash patronage dividends are taxed by federal when they are received. However, California allows you to choose when to report the dividends. California will let you elect to report your dividend in gross income either |
| Copyright © 2014 [Hera's Income Tax School]. All Annual Federal Tax Refresher Course rights reserved. |
| Revised: 07/09/15 |
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