California NR

[LawrenceGR]

I have a couple who received an estate K-1 that includes Div & Int of about $1800. I have started a 540NR and it is showing a balance due. Can this be right? This is the first year I have ever had this many other states, I dodn't know if this is good or not. I normally tell my clients when they move out of Mich to find someone there who is more knowlegeable on the local tax laws. Thanks for any help you may have.

[S T]

Federal AGI

What is your Federal AGI?

Also then you have Ca Adjustments on taxable vs non taxable income?

I am thinking the $1800 might not generate tax to Calif even as a NR.

What software are you using?

Sandy

[LawrenceGR]

Fed

AGI is about 70K, the only taxable income they would have to CA is int & divs. I am using Proseries. I have another Ca return to do yet today so I'm getting use to looking at their forms.

[Roland Slugg]

Your post wasn't clear about where the T/Ps live now. Are they California residents? Were they California residents for part of 2007?

California taxes nonresidents on income from California sources, which means income earned while working in California, income from a business located in California, income from rents of property in California, etc. but not investment or retirement income received from a California payor. Your clients' dividend and interest income would not be subject to California tax if they were not residents.

California taxes part-year residents on income from all sources while California residents and on income from California sources while nonresidents. For more information see FTB Pub 1100, which you can view by clicking here: http://www.ftb.ca.gov/forms/07_forms/07_1100.pdf

[gkaiseril]

This link might be more helpful for a non-resident couple:

http://www.ftb.ca.gov/forms/07_forms/07_540nrfile.pdf

If this income were from an accumulation of trust income you would be required to file.

Further the gross income and adjusted gross income limits for a MFJ with no dependents would also indicate the couple is not subject to CA income tax if they are non-residents of CA.

[LawrenceGR]

Roland

I failed to mention these people live in Michigan, this K-1 is from a trust.
the only part I can figure that is taxable to CA is the div & int. I think my software is calulating the numbers right but I just want to get a second opinion from some one who is more up to speed with the State of Cal.

[Roland Slugg]

I failed to mention these people live in Michigan, this K-1 is from a trust.

You DID mention that the K-1 was of the F-1041 variety.

As I wrote above, your clients ARE NOT taxed by California on that interest and dividends. Portfolio income, including that passed through via K-1s, is taxed only by the recipient's state of residence.

[LawrenceGR]

Thanks

for the help. As I said before I don't do many other states. It nice to have people around the country willing to chime in.

[LawrenceGR]

Update

I called the state of Ca just for my own piece of mind. They said I was indeed required to file since, there was income where CA was the source and their income exceeded the filing minimum.

[ED SMITH]

You have to use schedule CA (540)NR, for the adjustments. It should take care of it. If there is still tax, use form S and take an offsetting credit for the tax to avoid double taxation.

Make sure that no tax was withheld on the California income (some estates do this). They should have been issued a 592 if it was.

Curiously, I recently did a CA-MI combination, where the now CA residents sold their MI property. They were credited on CA return for the taxes they had to pay to MI.

[gkaiseril]

Most states provide a credit for taxes paid by residents to other states while a resident. This credit is usually limited to the equivalent tax resident state's equivalent tax.

[joanmcq]

Yes, you wouldn't use a Sch S for a nonresident. You would take a credit on the MI return for taxes paid to CA, not the other way around.

[LawrenceGR]

After

all this I'm a "Bonehead" the CA K-1 shows no amonts in column E (CA source amounts). It amazing how simply things can be if you just read the information. Thanks again to all of you for your helpful insight. Signed The Bonehead.