California Taxation of New Residents and Nonresidents

California Taxation of New Residents and Nonresidents

This publication is distributed with the understanding that the authors and publisher are not engaged in rendering legal, accounting or other professional advice and assume no liability in connection with its use. Tax laws are constantly changing and are subject to differing interpretation. In addition, the facts and circumstances in your particular situation may not be the same as those presented here. Therefore, we urge you to do additional research and ensure that you are fully informed before using the information contained in this publication. Federal law prohibits unauthorized reproduction of the material in Spidell's California Taxation of New Residents and Nonresidents manual. All reproduction must be approved in writing by Spidell Publishing, Inc.? This is not a free publication. Purchase of this electronic publication entitles the buyer to keep one copy on his/her computer and to print out one copy only. Printing out more than one copy -- and any electronic distribution of this publication -- is prohibited by international and United States copyright laws and treaties. Illegal distribution of this publication will subject the purchaser to penalties of up to $100,000 per copy distributed.

California Taxation of New Residents and Nonresidents

Table of Contents

California Taxation of New residents and Nonresidents.......................................................................... 1 Definitions .................................................................................................................................................... 1 Residency............................................................................................................................................... 1 Domicile................................................................................................................................................. 2 So why are domicile and residency important? ........................................................................ 2 Nonresident........................................................................................................................................... 3 546-day rule....................................................................................................................................3 Failing the test ................................................................................................................................ 4 Partial year may not be enough...................................................................................................5 Temporary or transitory purpose ...................................................................................................... 5 Cases of absence for temporary purposes..................................................................................6 Presumption of residence....................................................................................................................6 Presumption of nonresidency.............................................................................................................7 Hyatt: The tax case that just won't quit ...................................................................................... 7 NBA player drops the residence ball..........................................................................................7 Changing residence..............................................................................................................................8 Amending tax return .................................................................................................................... 8 Using a friend's address ............................................................................................................... 8 How does a taxpayer become a nonresident? .................................................................................. 9 Medical licenses aren't enough..................................................................................................10 Community property.........................................................................................................................10 Community income ........................................................................................................................... 11 Cases.............................................................................................................................................. 11 Resident with nonresident spouse..........................................................................................................12 Filing status ......................................................................................................................................... 12 Domicile for nonresident spouse ..................................................................................................... 12 Nonresident spouse's income was community property ...................................................... 14 Reporting income and change of residency .......................................................................................... 14 Part-year resident ........................................................................................................................ 14 Nonresident to resident .............................................................................................................. 15 Resident to nonresident .............................................................................................................. 15 Computation of taxable income .............................................................................................................. 15 Wages ................................................................................................................................................... 15 Stock options ....................................................................................................................................... 16 Nonqualified stock options ........................................................................................................ 16 Employee stock purchase plans ................................................................................................ 18 Incentive stock options ............................................................................................................... 18 Restricted stock options..............................................................................................................19

?2016

i

Spidell Publishing, Inc.?

California Taxation of New Residents and Nonresidents

Table of taxation of stock options .................................................................................................... 20 IRA distributions ................................................................................................................................ 21

Contribution to 401(k) not treated as basis .............................................................................. 22 Keogh and SEP plans .................................................................................................................. 22 Roth conversions ......................................................................................................................... 22 Capital gains ....................................................................................................................................... 23 Sale of stock .................................................................................................................................. 23 Capital loss carryovers ...................................................................................................................... 23 Part-year residents.......................................................................................................................23 Installment sales -- real property .................................................................................................... 25 Always a nonresident ................................................................................................................. 25 Former California residents ....................................................................................................... 25 California residents -- formerly nonresidents ........................................................................ 26 Installment sales -- intangible assets .............................................................................................. 26 Sales and exchanges of principal residences .................................................................................. 26 Passive activities ................................................................................................................................. 27 Nonresidents ................................................................................................................................ 27 Former nonresidents ................................................................................................................... 27 Former residents .......................................................................................................................... 27 Part-year residents.......................................................................................................................27 Net operating losses...........................................................................................................................29 NOL carryback.............................................................................................................................29 Nonresidents' gross income .................................................................................................................... 30 Personal services ................................................................................................................................ 30 Sourcing rules for nonresident service businesses ................................................................. 30 Pension income...................................................................................................................................30 Pensions received after taxpayer becomes a resident ............................................................ 30 Pensions exempt by treaty ......................................................................................................... 31 Pensions received by nonresidents ........................................................................................... 31 Life insurance retirement income..............................................................................................31 Residents and part-year residents.............................................................................................32 Pension and IRA deduction for nonresidents ......................................................................... 32 Intangible property ............................................................................................................................ 32 Business situs ............................................................................................................................... 32 Interest income.............................................................................................................................33 Goodwill from personal services............................................................................................... 33 Nonresident investors.................................................................................................................33 Alimony ............................................................................................................................................... 34 Real property and tangible personal property...............................................................................34

Spidell Publishing, Inc.?

ii

?2016

California Taxation of New Residents and Nonresidents

Cancellation of debt ........................................................................................................................... 34 Income from real property ......................................................................................................... 34 Credit card debt ........................................................................................................................... 34

Miscellaneous...................................................................................................................................... 35 Corporate liquidations................................................................................................................35 Contingent fees ............................................................................................................................ 35

Beneficiaries ........................................................................................................................................ 35 Depreciation ........................................................................................................................................ 36 Allocation of income for employees ................................................................................................ 36

Salary allocation...........................................................................................................................36 Entertainers and athletes ............................................................................................................ 36 Different formulas for different athletes .................................................................................. 38 Sporting events and pay-per-view............................................................................................38 Transportation employees..........................................................................................................40 Other allocation cases ................................................................................................................. 41 Computing the tax .................................................................................................................................... 41 California method of computing tax ............................................................................................... 41 Cases on point .............................................................................................................................. 44 Credits......................................................................................................................................................... 44 Other State Tax Credit ....................................................................................................................... 44 Exception for taxes paid to Oregon...........................................................................................45 How to calculate the credit ........................................................................................................ 46 Installment sales .......................................................................................................................... 46 Tax paid in different years ......................................................................................................... 46 Credit for tax paid to Maryland counties.................................................................................47 Additional time allowed to amend for tax paid to another state ......................................... 47 Other State Tax Credit -- a double-tax situation .................................................................... 47 Revised Texas Franchise Tax ..................................................................................................... 48 Military personnel.....................................................................................................................................48 Nonresident California military personnel .................................................................................... 48 Spouses of nonresident military personnel .................................................................................... 48 MSRRA provisions ...................................................................................................................... 49 Withholding on spouse's wages................................................................................................49 Military personnel nonmilitary wages ..................................................................................... 49 Computation of income for nonresident military personnel ....................................................... 49 California military personnel assigned to stations outside California ...................................... 50 Combat zone was not residence ................................................................................................ 51 Retirees.......................................................................................................................................... 51 Nonresident aliens .................................................................................................................................... 51

?2016

iii

Spidell Publishing, Inc.?

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download