How much of Matt's sale income is taxable on his California income tax return?

The correct answer reflects the fact that a significant portion of Matt's income from the sale is considered taxable under California income tax law. In California, capital gains from the sale of property are generally subject to state taxation. Depending on various factors such as the type of property sold and the duration of ownership, income from sales can fall under different tax treatments.

In this case, if Matt's specific circumstances indicate that 80% of his sale income is taxable, it would be attributed to the capital gains tax structure, where gains are often subjected to taxation at ordinary income tax rates. This structure means that not all sale income is considered taxable, as there may be exclusions or deductions to consider, but in this scenario, the taxable portion is substantial.

Understanding how tax treatment applies to gains from sales is important for accurately preparing a tax return and ensuring compliance with state regulations.