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Posted by Katie on March 27, 2007, 12:43 am
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> I've read the threads from 2003 and 2004 about whether
> CA-VPDI is deductible on the federal 1040 Schedule A. It
> appears no consensus was ever reached. So let me re-raise
> the issue, with another interesting tidbit:
>
> Line 39 of the 2006 California form 540 Schedule CA says:
>
> "Enter total of federal Schedule A (Form 1040), line 5
> (State Disability Insurance, Voluntary Plan Disability
> Insurance, and state and local income tax, or General Sales
> Tax) and line 8 (foreign taxes only). See instructions."
>
> The instructions simply reinforce the assumption that Line 5
> of federal Schedule A (Form 1040) may contain VPDI.
>
> So, it seems clear that the CA Franchise Tax Board believes
> CA-VPDI may be deductible on the federal return. Or are
> they just making it clear that, whether or not it's
> deductible on the federal return (which is ambiguous at
> best), it is definitely NOT deductible on the state return?
>
> Damian [always does his own taxes by hand]
Well, I went back and reviewed the same discussion, and then
looked to see whether there was anything new on this subject
from the IRS. It appears that Rev. Rul. 81-194 has not been
superseded or modified, nor have the other rulings the IRS
issued on similar plans (Rev Ruls. 81-192 and 193, one
relating to NY and the other to NJ plans) at the same time.
So my opinion, for whatever it's worth, is VPDI is not
deductible for federal income tax purposes (by the
employee). I'm not sure the FTB form instructions are
intended to express an opinion about that' they just want to
make it clear that none of these payments are deductible for
state purposes.
However, Dieter Stussy, who is a former IRS Revenue Agent in
California, said that in his day, at least, the IRS agents
did not distinguish between SDI and VPDI for deduction
purposes. And as several of us pointed out in the 2003
discussion, the amounts are so small, taxpayer by taxpayer,
that it is unlikely that anyone would make an issue of it.
So ... let your conscience be your guide <G>.
Katie in San Diego
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