We're moving from CA to FL in May, to be closer to my wife's family in
Europe. Obviously CA has state income tax & FL doesn't.
Here's my question:
I sold an asset, taxable Federally as a long term capital gain, in
September 2004. I will be paid for the sale in 3 equal installments
(2004, 2005, 2006).
I paid taxes on the first installment in 2004, at the rate of 15%
federally and 9.7% to CA.
As a Florida resident beginning in May, 2005, will I have to pay CA
taxes on the 2005 and 2006 installments? |
Request for Question Clarification by
pafalafa-ga
on
20 Apr 2005 07:11 PDT
I'm no expert on this -- and GA is no substitute for advice from a tax
professional -- but...
My general understanding is that money is regarded as income during
the year in which it is actually received. This is probably how
you're reporting this for federal tax purposes, and I imagine it would
be the same for the purpose of state taxes in CA and FL.
Since you will have lived part of 2005 in CA and part in FL, I would
guess you have to pay pro-rated state taxes to CA for the five months
that you lived there.
For 2006, you should be home free.
But again, it would take a tax professional to give you a definitive
answer to this, and GA is simply not the place for that type of
advice, as the disclaimer notes at the bottom of the page.
Does that jive with your understanding of things? What sorts of
additional information would you like to have to make for a full
answer to your question?
Let me know.
pafalafa-ga
|
Clarification of Question by
sdchap-ga
on
20 Apr 2005 12:34 PDT
While I understand fully that GA is no substitute for advice from a
tax professional, I'm hoping that someone can direct me to some fairly
definitive references (ideally tax code citations).
|
Request for Question Clarification by
pafalafa-ga
on
20 Apr 2005 12:48 PDT
The pertinent guidelines are probably the ones in this document:
http://www.ftb.ca.gov/forms/misc/1100.pdf
Taxation of
Nonresidents
and Individuals
Who Change
Residency
FTB Publication 1100
Good luck figuring it out, though. I really think you might need a
tax professional for this one.
paf
|
Clarification of Question by
sdchap-ga
on
23 Apr 2005 01:33 PDT
Thank you, PAF. While the answer wasn't what I was hoping for, it was,
it seems, accurate. I will, of course, confir with a tax professional.
|
Dear SD Chap,
Pafalafa-ga is on the right track...but not exactly.
As much as our exalted state of California would like to
tax you for the life of the installment agreement, and used to...
they may no longer do so.
Here's how it works.
Any money you receive while you are a resident of California
will be taxed in California. So, no, you don't get to pro-rate
the income. It's all or nothing. So, if you get the 2005 pay
before you leave California...report it on your California return
for 2005. If it arrives when you're in Florida, exclude it from
your California tax return.
As for the future, file a change of address with the State of
California as soon as you leave. Use Form 3533
http://www.ftb.ca.gov/individuals/faq/ivr/619.html
Register to vote in Florida and get a new drivers license right away.
Then, any income you get after you establish yourself as a Florida
resident will only be taxed for IRS purposes.
But, do meet with a Florida tax professional. While Florida doesn't
have an income tax, they do have some other taxes - on intangible assets.
http://sun6.dms.state.fl.us/dor/taxes/new.html
I hope this helps.
Best wishes,
Your TaxMama-ga |
Request for Answer Clarification by
sdchap-ga
on
28 Apr 2005 00:25 PDT
Dear Taxmama,
I'm preparing to meet with a tax specialist regarding this issue, and
I'd like to be as prepared as possible.
Can you please refer me to the appropriate tax code (or other
reference, such as the seemingly opposing one provided earlier by
PAF-ga)? I'd be most grateful.
Best regards,
Steve
|
Clarification of Answer by
taxmama-ga
on
28 Apr 2005 05:02 PDT
Dear SD Chap,
You'll find this discussion about a state trying to tax
alimony paid to a non-resident fun (if you enjoy that kind
of thing). Many relevant tax codes are cited at the bottom.
http://www.taxanalysts.com/www/taxpolicyreadings.nsf/0/A97EF47112BF752F85256E14007A1763?OpenDocument
Here's another discussing a 1996 law with respect to states,
particualarly California and NY, not being able to tax pensions.
It includes an example of someone receiving some payments during
the year, first in California an the rest in Nevada - much like
your situation with the installment payments.
http://www.pmstax.com/ftp/state/bull9602.pdf
Best wishes
Your TaxMama-ga
|
Request for Answer Clarification by
sdchap-ga
on
28 Apr 2005 07:46 PDT
Dear Taxmama,
I'm a bit slow on the uptake, so I don't understand how the references
to the 1996 pension law and to alimony payments would supersede the
new 2003 CA law referenced by Pafalafa. (Believe me, I WANT your
references to apply! :-) . I just don't see how they possibly could.)
The CA FTB Publication 1100 referenced by Pafalafa (at
http://www.ftb.ca.gov/forms/misc/1100.pdf (especially page 6)) seems
unequivocal:
"Example 8 . . . . . . . .
In September 1999, while a
California resident, you sold
stock (intangible property) in an
installment sale. On February 1,
2002, you became a Florida
resident, and on May 1, 2002,
you received installment proceeds
comprised of capital gain
income and interest income.
. . . . . Determination:
The capital gain income from
the sale of the stock is taxable
by California because you were
a California resident when you
sold the stock. The interest
income is not taxable by
California because you were a
nonresident of California when
you received the proceeds."
Doesn't that seem to mean, point-blank, that I'll have to pay CA
income tax in 2005 and 2006 on the capital gains from the 2004 sale of
my asset, even if in 2005 and 2006 I'm a FL resident?
Thanks again,
SD Chap
|
Clarification of Answer by
taxmama-ga
on
28 Apr 2005 10:09 PDT
Hi SD Chap
Those citations were other examples of situations
where California cannot tax income once you leave
the state.
I know California feels entitled to tax you.
Let me find out where Federal law supercedes that.
If I am wrong, and it's all in my imagination,
then, despite your wonderful rating, we will arrange
to have the Google Answers Editors return your money.
Stand by - I am going to do some digging for you.
Give me a week, since I am just about to head out on vacation.
Best wishes
Your TaxMama-ga
|
Clarification of Answer by
taxmama-ga
on
04 May 2005 11:37 PDT
Dear SD Chap,
I just got back. So now I will do some more looking for you.
Just a question - what did you sell on an installment sale?
I got the impression from one of the references you pointed to that
you sold stock?
Was it publicly traded stock or stock you received as an employee?
Or was it a business, or????
Please clarify. That will make the search a little easier.
Best wishes
Your TaxMama-ga
|
Request for Answer Clarification by
sdchap-ga
on
05 May 2005 00:20 PDT
Dear TaxMama,
Thank you for being so conscientious and thorough with your reply. In
answer to your question, the asset was an extraordinarily valuable
domain name.
Best regards,
Steve
|
Request for Answer Clarification by
sdchap-ga
on
11 May 2005 12:55 PDT
Dear TaxMama,
Just curious (sitting on pins and needles, actually!) about whether
you've had any luck with info regarding my potential liberation from
CA?
Gratefully,
Steve
|
Clarification of Answer by
taxmama-ga
on
11 May 2005 13:11 PDT
Hi Steve,
Sorry to take so long.
I am SO not getting any help from my usual sources.
And I'm afraid that I don't have the time to do the digging
I'd like to do (through ALL the tax acts since the beginning
of the Clinton administration).
You've been a doll and I wish I could do a better job for you.
But, I'm going to have to ask the Google Editors to pull this answer
and refund your money.
May I suggest that you go to NATP to get a definitive answer
with citations? They have a tax research team that will get
you the specifics.
http://www.natptax.com/research_center.html
Regretfully,
Your TaxMama-ga
|
Request for Answer Clarification by
sdchap-ga
on
12 May 2005 04:14 PDT
Dear TaxMama,
Thank you. The referral to the NATP site was in itself well worth the
Google Answers fee. (I've now emailed them, and I'm eagerly awaiting
their response.) No need to request a refund from Google. At least
we're on the right track!
Best regards,
Steve
|
Request for Answer Clarification by
sdchap-ga
on
12 May 2005 12:16 PDT
Oops, back to square one:
"Dear Stephen:
NATP provides research services for federal income tax questions and
does not handle state income tax questions.
You may want to access the California Franchise Tax Board website to
check if the answer to your question could be found there. Another
option would be to try www.taxprofessionals.com. You can find a tax
professional who could assist you."
|
Clarification of Answer by
taxmama-ga
on
13 May 2005 15:37 PDT
Hi Steve,
OK, I went to THE expert in California tax law.
She says "There is no federal law th[at] supercedes
this. Sale of intangibles is taxable to a nonresident
if the income was sourced to CA or was part of a business."
So, I was completely wrong.
Please, Steve, request a refund.
I am having trouble getting it issued due to the 5 stars
and your apparent satisfaction.
I really apologize. It must have been wishful thinking.
But, that would explain why I couldn't find anything to
support my position after so much digging.
Best wishes
Your TaxMama-ga
|
,
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