I just thought of a potential quagmire affecting the deductibility of MR of those affected CA taxpayers’ Federal return. All of the figures from the Federal Return are reported to the the FTB in an electronic tax return filing, incl line 6 of Schedule A (used to report property taxes for a principal residence).
If the FTB’s software can flag both (electronically-filed) returns, it would be reasonable to believe that the CA taxpayer would not be able to report a different property tax amount on line 6 of Schedule A than they do on line 73 of their Form 540, without getting flagged.
Again, FTB workers would have to be available to go thru paper tax return filings which include a copy of the taxpayers Federal return to determine the property tax amount reported to the IRS on their Schedule “A” filed with their Federal return. These “human scanners” could actually be their lowest-paid clerical workers or even temporary contract help.
It would be worth it for the FTB to go thru all this for its “debut tax year (2012)” this because the prevention of present and future deductibility of MR is for the life of the taxpayer’s ownership of that parcel if that ownership period does not exceed the life of the bonds . . . a potentially long-overlooked HUGE income tax revenue stream to the State!
Edit: Here is the actual link referred to by First Tuesday:
