California Personal Income Tax Audit Issues: Why the tax man cometh!
These issues typically involve substantiation or interpretation of the facts:
• Gains and Losses from Sales of Stock: When shares of stocks are sold, FTB will ask for substantiation for the gains/losses. Adjustments are typically found in the computation of stock basis.
• Real Property Sales: FTB will typically ask for substantiation of purchase costs, improvements, and repairs. Adjustments are made when the documentation provided does not reconcile to the amounts claimed.
• Like-Kind Exchanges: FTB will look at all aspects of the exchange. Common adjustments are for certain requirements not being met, when there is a difference in the calculation of boot, or when the property basis is unsubstantiated.
• Charitable Contributions: FTB will ask for appraisal reports for large non-cash donations to support the claimed fair market value (FMV) of donated items. Adjustments occur when they find that FMV is overstated.
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Common Audit Issues and Audit Tips: