Virginia assistance, please - and some NC also?

[FEDUKE404]

Client moved from VA to NC in middle of 2009.

Both states have exemptions/etc pro-rated based upon income received while a resident of the individual states.

Virginia part-year resident form (VA 760PY) has been prepared.

Here is the problem: Upon moving, client converted personal residence into rental property. In theory the rental income (it is +) after the move from VA is therefore non-resident income.

The rental income will be taxable to NC, and of course also taxable to VA. (NC would allow an offset related to taxes paid to VA on such income.)

Since non-resident VA income is normally handled on VA 763, what is the solution?? Is it in any way possible to slide all of the rental income onto the VA 760PY??

Suggestions??

Actually, a similar (reverse) issue may potentially arise with the NC return, with non-NC income prior to the move, and more non-NC income (but while a legal resident of NC) after the move.

Thanks in advance!

FE

[Burke]

Wow. That is a unique one. Never tried to do a PY and a NR in the same year. It might be possible. Did you try it? I think I would and send both with a letter. PS: Exemptions in VA are based on time lived in state. Itemized deductions are based on those actually paid when a resident. Due to this fact, I believe sliding the income onto the PY would have the same effect. Try it and see. Also, on the PY be sure to separate income by spouses. Then you have the option to allocate all exemptions (except their own) and all deductions including child care to the higher income spouse, which is more advantageous.

[FEDUKE404]

VA allocations

... PS: Exemptions in VA are based on time lived in state. Itemized deductions are based on those actually paid when a resident...

Are you sure? While VA 760PY asks for the dates of residency, it appears the actual allocations are made based only upon income. (NC has a similar approach.)

Thankfully the federal return will use the standard deduction, so that is one less complication. And the client is also single. I guess things could be worse....

FE

[JohnH]

Not sure about this, but I THINK you can handle the VA income entirely using the PY schedule. NC doesn't offer much in the way of allocation guidance in unusual circumstances, but in several situations I've attached my own spreadsheet to the NC return to explain a forced entry on Lines 54 and/or 55, and have never once heard a word back about it.

[Burke]

Are you sure? While VA 760PY asks for the dates of residency, it appears the actual allocations are made based only upon income. (NC has a similar approach.)
Thankfully the federal return will use the standard deduction, so that is one less complication. And the client is also single. I guess things could be worse....
FE

What software are you using? The items I mentioned are as I said. If you click on the exemption amount box on the VA PY (in ATX), the ratio comes up that is used to calculate the exemption. If you change the dates of residency, you will see it changes also. If he moved mid-year, and income in both states is approximately equal, it might appear to be based on income, but it is not. If he is taking the standard deduction on fed, he has to take it on state as well. In that case, it is based on income. The form is a nightmare. Just wait until you have one that itemizes, and has a spouse.

[FEDUKE404]

Proration is correct

What software are you using? The items I mentioned are as I said. If you click on the exemption amount box on the VA PY (in ATX), the ratio comes up that is used to calculate the exemption. If you change the dates of residency, you will see it changes also. If he moved mid-year, and income in both states is approximately equal, it might appear to be based on income, but it is not. If he is taking the standard deduction on fed, he has to take it on state as well. In that case, it is based on income. The form is a nightmare. Just wait until you have one that itemizes, and has a spouse.

I stand corrected - the exemption amount (starting at $930) does in fact change on line 12 of Form 760PY when residency dates are modified.

And now we return our viewers to the original challenge.....

FE