ftb publication 1100 - taxation of nonresidents and individuals

State of CaliforniaFranchise Tax Board

Taxation ofNonresidentsand IndividualsWho ChangeResidency

FTB Publication 1100(REV 04-2014)

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FTBPublication1100(REV04-2014)

A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

B. TaxComputationMethod . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3–4

C. InstallmentSales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 – 6

D. IndividualRetirementAccounts,Employer-Sponsored RetirementPlans,andCompensation . . . . . . . . . . . . . . . . . . . 7 – 9

E. StockOptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10–11

F. DeferredGainsandLosses(like-kindexchanges) . . . . . . . . . . . . 12–13

G. GainsandLossesFromtheSaleofTradeorBusinessProperty. . . . . 14

H. CapitalGainsandLosses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15–18

I. PassiveActivities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19–22

J. NetOperatingLosses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23–28

K. BasisinPass-ThroughEntities. . . . . . . . . . . . . . . . . . . . . . . . . . . 29–31

L. Partnerships,Scorporations,andCertainTrusts . . . . . . . . . . . . . 32–35

M. AlternativeMinimumTax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 – 37

Contents

A. IntroductionThispublicationprovidesinformationonthecurrentmethodforcomputingtaxifyouareanonresidentorpart-yearresidentofCaliforniaandhowtocalculatelosscarryovers,deferreddeductions,anddeferredincomeifyou:

• HavealwaysbeenaCalifornianonresident.• ChangeresidencyfromCalifornia(moveout).• ChangeresidencytoCalifornia(movein).

FTBPublication1031,Guidelines for Determining Resident Status,willhelpyoudetermineyourresidencystatusandwhetheryourincomeistaxablebyCalifornia.

Key Stateabbreviationsusedinthispublication:

CA –California WY –WyomingNY–NewYork TX –TexasWA–Washington NV –NevadaFL–Florida

FTBPublication1100(REV04-2014) PAGE3

California Taxable Income

Californiaadjustedgrossincome(AGI)lessCaliforniaitemizedorstandarddeductions.

California AGI GrossincomeanddeductionsderivedfromCaliforniasourcesforanypartofthetaxableyearduring

whichyouwereanonresidentplus all items of gross income and all deductions, regardless of source, foranypartofthetaxableyearduringwhichyouwerearesident.

Total AGI Theadjustedgrossincomefromallsourcesfortheentiretaxableyear.

California Itemized or Standard Deductions DeterminedbyapplyingtheratioofCaliforniaAGItototalAGItoallitemizedorstandarddeductions

allowedtoCaliforniaresidents.

Total Taxable Income TheentiretaxableincomedeterminedasifyouwereaCaliforniaresidentforthecurrenttaxable

year,andforallpriortaxableyearsforanycarryoveritems,deferredincome,suspendedlosses,orsuspended deductions.

Restate Torefigureprioryearcarryoversorpass-throughentitybasisamountstodeterminetheallowable

amountinthecurrentyear.Prioryeartaxreturnsarenotamended.

Registered Domestic Partner TwopersonswhofiledaDeclarationofDomesticPartnershipwiththeCaliforniaSecretaryofState.

B. Tax Computation Method

Proratedtax =

CAtaxableincomex Taxontotaltaxableincome Totaltaxableincome

FortaxableyearsbeginningonorafterJanuary12002,ifyouareanonresidentorapart-yearresident,youdetermineyourCaliforniataxbymultiplyingyourCaliforniataxableincomebyaneffectivetaxrate.TheeffectivetaxrateistheCaliforniataxonallincomeasifyouwereaCaliforniaresidentforthecurrenttaxableyearandforallpriortaxableyearsforanycarryoveritems,deferredincome,suspendedlosses,orsuspendeddeductions,dividedbythatincome.Usethefollowingformula:

Key Definitions


Itemized or standard deductions — DividetheCaliforniaAGIbythetotalAGI(theresultcannotexceed1.0):CAAGITotalAGITax rate — Dividethetaxontotaltaxableincomebythetotaltaxableincome:TaxontotaltaxableincomeTotaltaxableincomeCredits — DividetheCaliforniataxableincomebythetotaltaxableincome:CAtaxableincomeTotaltaxableincomeThispercentagedoesnotapplytorenter’scredit,otherstatetaxcredit,orcreditsconditionaluponatransactionoccurringwhollywithinCalifornia.Californiaallowsthesecreditsinfull.Thefollowingexampleshowshowthecalculationworks.

Example 1 YouwereaFloridaresidentuntilMarch31,2010.WhileaFloridaresident,youearnedandreceivedwageincomeof$15,000andinterestincomeof$1,000.OnApril1,2010,youpermanentlymovedtoCalifornia.WhileaCaliforniaresident,youearnedandreceivedwageincomeof$65,000andinterestincomeof$3,000.Youaresingleandhadthefollowingitemizeddeductionsin2010:

Realestatetaxes: $1,200 (CAhouse) 800 (FLhouse)Mortgageinterest: 17,000 (CAhouse) 3,500 (FLhouse)Charitablecontributions: 1,500 (NYFirefighters’Fund) $24,000

Determination: Calculateyour2010Californiataxliabilityasfollows:CAAGI: $65,000 (CAwages) +3,000 (InterestearnedwhileaCAresident) $68,000 TotalAGI: $80,000 (Wagesfromallsources) +4,000 (Interestincomefromallsources) $84,000CAitemizeddeductions: $24,000 (Totalitemizeddeductions) x.8095 (CAAGI÷TotalAGI) $19,428CAtaxableincome: $68,000 (CAAGI) -19,428 (CAitemizeddeductions) $48,572Totaltaxableincome: $84,000 (TotalAGI) -24,000 (Totalitemizeddeductions) $60,000Taxontotaltaxableincome: $3,440 (Taxtable)Proratedtax: $48,572 (CAtaxableincome) x.0573 (Taxontotaltaxableincome÷totaltaxableincome) $2,783 Proratedexemptioncredit: $99 (Personalexemptioncredit*) x.8095 (CAtaxableincome÷totaltaxableincome) $80 Taxliability: $2,783 (Proratedtax) -80 (Proratedexemptioncredit) $2,703

Percentage Calculations


C. Installment SalesFortaxableyearsbeginningonorafterJanuary1,2002,Californiataxesinstallmentgainsreceivedbyanonresidentfromthesaleoftangiblepropertyandintangiblepropertyonasourcebasis.Californiataxesrealpropertybaseduponwherethepropertyislocated.Installmentgainsfromthesaleofintangiblepropertyaregenerallysourcedtotherecipient’sstateofresidenceatthetimeofthesale.Californiataxesresidentsonallincomeregardlessofsource.

Example 3YouhavealwaysbeenanonresidentofCalifornia.OnJune4,2009,yousoldaparcelof land located in Idaho on an installment basis.During2009and2010,youreceivedinstallment proceeds comprised of capital gain income and interest income.

Determination:YourcapitalgainincomeisnottaxablebyCaliforniabecausethesourceofthegainisIdaho.TheinterestincomeisnottaxablebyCaliforniaandhasasourceinyourstateof residence.

CaliforniataxestheinstallmentproceedsreceivedbyanonresidenttotheextenttheincomefromthesalewasfromaCaliforniasource.

Example 2YouhavealwaysbeenanonresidentofCalifornia.OnMarch1,2009,yousoldaCaliforniarentalpropertyinaninstallmentsale.During2009and2010,youreceivedinstallment proceeds comprised of capital gain income and interest income.

Determination:ThecapitalgainincomeistaxablebyCaliforniainboth2009and2010,becausethepropertywaslocatedinCalifornia.TheinterestincomeisnottaxablebyCaliforniaandhasasourceinyourstateofresidence.

Always a Nonresident


Example 5OnSeptember1,2008,whileanonresidentofCalifornia,yousoldstock(intangibleproperty)inaninstallmentsale.OnJune1,2010,youbecameaCaliforniaresidentandonOctober1,2010,youreceivedinstallment proceeds comprised of capital gain income and interest income.

Determination: YourcapitalgainincomeandinterestincomereceivedonOctober1,2010,aretaxablebyCaliforniabecauseyouwereaCaliforniaresidentwhenyoureceivedtheproceeds.

IfyouareaCaliforniaresidentwhosoldpropertylocatedoutsideCaliforniaontheinstallmentbasiswhileanonresident,yourinstallmentproceedswhileaCaliforniaresidentarenowtaxablebyCalifornia.

Example 4 OnJuly1,2009,whileanonresidentofCalifornia,yousoldaTexasrentalpropertyinaninstallmentsale.OnMay15,2010,youbecameaCaliforniaresidentandonAugust1,2010,youreceivedinstallmentproceeds comprised of capital gain income and interest income.

Determination:YourcapitalgainincomeandinterestincomereceivedonAugust1,2010,aretaxablebyCaliforniabecauseyouwereaCaliforniaresidentwhenyoureceivedtheproceeds.

Example 7InMarch2008,whileaCaliforniaresident,yousoldaparcelofrealpropertylocatedinCaliforniainaninstallmentsale.OnJune1,2010,youbecameaWashingtonresident,andonAugust1,2010,youreceivedinstallmentproceedscomprised of capital gain income and interest income.

Determination: ThecapitalgainincomeistaxablebyCaliforniabecausethepropertyyousoldwaslocatedinCalifornia.TheinterestincomeisnottaxablebyCaliforniabecauseyouwereanonresidentofCaliforniawhenyoureceivedtheproceeds.

IfyouareaformerCaliforniaresident,yourinstallmentproceedsfromthesaleofpropertylocatedoutsideCaliforniathatyousoldwhileyouwereaCaliforniaresidentarenottaxablebyCalifornia.

Example 6 InJune2007,whileaCaliforniaresident,yousoldaparcelofrealpropertylocatedinWashingtoninaninstallmentsale.OnMarch1,2010,youbecameanOhioresident,andonJune1,2010,youreceivedinstallment proceeds comprised of capital gain income and interest income.

Determination: ThecapitalgainincomeisnottaxablebyCaliforniabecausethepropertywasnotlocatedinCalifornia.TheinterestincomeisnottaxablebyCaliforniabecauseyouwereanonresidentofCaliforniawhenyoureceivedtheproceeds.

Example 8InSeptember2007,whileaCaliforniaresident,yousoldstock(intangibleproperty)inaninstallmentsale.OnFebruary1,2010,youbecamea Florida resident, and on May1,2010,youreceivedinstallment proceeds comprised of capital gain income and interest income.

Determination:ThecapitalgainincomefromthesaleofthestockistaxablebyCaliforniabecauseyouwereaCaliforniaresidentwhenyousoldthestock.TheinterestincomeisnottaxablebyCaliforniabecauseyouwereanonresidentofCaliforniawhenyoureceivedtheproceeds.

Change of Residency to California (move in)

Change of Residency From California (move out)


D. Individual Retirement Accounts, Employer-Sponsored Retirement Plans, and Compensation

Example 10YoulivedandworkedexclusivelyinCaliforniauntilyouretiredonDecember31,2009.YoumovedtoNevadaonJanuary1,2010.YourformerCaliforniaemployerpaysitsemployeesonthe5thofeverymonth.OnJanuary10,2010,youreceivedinthemailyourlastpaycheckof$4,000fromyourformerCaliforniaemployer.

Determination:The$4,000ofcompensationistaxablebyCaliforniabecausetheincomehasasourceinCalifornia,thestatewhereyouperformedyourservices.

Thepresentlawsdonotchangethetaxationofdeferredincomesuchasindividualretirementaccount(IRA)income,incomefromemployer-sponsoredretirementplans,andcompensationincome,whetheryouhavealwaysbeenanonresidentofCaliforniaorwereformerlyaCaliforniaresident.CaliforniadoesnottaxtheIRAdistributions,qualifiedpension,profitsharing,andstockbonusplansofanonresident.Californiataxescompensationreceivedbyanonresidentforperformanceofservicesonasourcebasis.IftheservicesareperformedinCalifornia,thecompensationincomeissourcedtoCalifornia.

Example 9YouareanonresidentofCaliforniaandliveandworkinWyoming.YourWyomingemployertemporarilyassignsyoutoCaliforniaforfourmonthstocompleteaproject.Youcontinuetoreceiveyourpaycheckfromyouremployer’sWyomingheadquarters.Youearn$5,000permonth.

Determination: BecauseyouperformedfourmonthsofservicesinCalifornia,$20,000($5,000x4months)ofyourcompensationhasasourceinCaliforniaandistaxablebyCalifornia.

Nonresident


FortaxableyearsbeginningonorafterJanuary1,2002,thepresentlawsaffectthetaxationofyourIRAincome,incomefromemployer–sponsoredretirementplans,andcompensationincomeifyouareaCaliforniaresidentandwereformerlyanonresident.

Individual Retirement Accounts

Example 11 YoubecameaCaliforniaresidentonJanuary1,2001.ThefairmarketvalueofyourIRAonJanuary1,2001,was$9,000.YourcontributionsinexcessofCaliforniadeductionlimitsduring1982-1986were$2,500.YoureceivedIRAdistributionsof$1,500in2001,and$3,000in2002.

Determination:

Taxable year 2001 (prior law): CAIRAbasis,January1,2001 $9,000 (fairmarketvalueon1/1/01) Less:IRAdistribution 1,500 CAIRAbasis,December31,2001 $7,500

Taxable year 2002 (new law): IRAdistribution,2002 $3,000 Less:CAIRAbasis ContributionsinexcessofCAdeductionlimits $2,500 Less:CAIRAbasisrecoveredin2001 1,500 CAIRAbasisavailablein2002 1,000 TaxableIRAincome $2,000

GetFTBPublication1005,Pension and Annuity Guidelines,formoreinformationregardingIRAs.

Younolongerreceiveastepped-upbasisforannualcontributionsandearningsonthemsimplybecauseyouwereanonresidentwhenyoumadethecontributions.Thepresentlawstreatyouasthoughyouwerearesidentforallprioryearsforallitemsofdeferredincome,whichincludesIRAs.Accordingly,youwillbeallowedabasisforcontributionsthatyouactuallymade,whichwouldnothavebeenallowedunderCalifornialawhadyoubeenaCaliforniaresident.Californiadidnotconformtothe$2,000or100percentofcompensationannualcontributionlimitpermittedunderfederallawfrom1982through1986.Duringtheseyears,Californialimitedthedeductiontothelesserof15percentofcompensationor$1,500anddeniedadeductionaltogethertoindividualswhowereactiveparticipantsinqualifiedorgovernmentplans.AnyamountsanindividualcontributedinexcessofCaliforniadeductionlimitsduringtheseyearscreateabasisintheIRA.



Example 13YoulivedandworkedinNewYorkuntilApril30,2010.YoupermanentlymovedtoCaliforniaonMay1,2010.YourformerNewYorkemployerpaystheiremployeesonthe5thofeverymonth.OnMay8,2010,youreceivedinthemailyourlastpaycheckof$3,000fromyourformerNewYorkemployer.

Determination:The$3,000ofcompensationistaxablebyCaliforniabecauseyouwereaCaliforniaresidentwhenyoureceivedtheincome.IfyoualsopaidtaxtoNewYorkonthiscompensation,youareallowedacreditfortaxespaid.

Employer-Sponsored Retirement Plans

CompensationyoureceiveasaCaliforniaresidentthataccruedbeforeyoubecameaCaliforniaresidentisnowtaxablebyCalifornia.

Example 12YoupermanentlymovedfromFloridatoCaliforniaonJanuary1,2009.Youreceivedpensionincomeduring2009throughaqualifiedplanfromyourformerFloridaemployer.

Determination: YourqualifiedpensionincomeistaxablebyCaliforniabecauseyouwereaCaliforniaresidentwhenyoureceivedtheincome.

GetCaliforniaScheduleS,Other State Tax Credit, for more information.

Californiataxesqualifiedpension,profitsharing,andstockbonusplanincomeyoureceiveasaresidentforservicesperformedoutsideCaliforniawhileyouwereanonresident.

Compensation


E. Stock Options

Californiataxesthewageincomereceivedbyanonresidentfromemployeestockoptionsonasourcebasis,whetheryouwerealwaysanonresidentorwereformerlyaCaliforniaresident.

Example 14OnFebruary1,2007,whileaCaliforniaresident,youweregrantednonstatutorystockoptions.YouperformedallofyourservicesinCaliforniafromFebruary1,2007,toMay1,2010,thedateyouleftthecompanyandpermanentlymovedtoTexas.OnJune1,2010,youexercisedyournonstatutorystockoptions.

Determination: TheincomeresultingfromtheexerciseofyournonstatutorystockoptionsistaxablebyCaliforniabecausetheincomeiscompensationforserviceshavingasourceinCalifornia,thestatewhereyouperformedallofyourservices.

Nonresident


IfyouexercisenonstatutorystockoptionswhileaCaliforniaresident,theresultingcompensationistaxablebyCaliforniabecausethewageincomeisrecognizedwhileyouareaCaliforniaresident.Ifyoudisposeofstatutorystockoptionsinadisqualifyingdisposition,theresultingcompensationandcapitalgain,ifany,aretaxablebyCaliforniabecausethewageincomeandcapitalgainarerecognizedwhileyouareaCaliforniaresident.Californiaalsotaxesthecapitalgainincomereceivedbyaformernonresidentfromthesaleofstockinaqualifyingdispositionofstatutorystockoptionsbecausethestockissoldwhilethetaxpayerisaresident.

Example 16OnFebruary1,2006,whileaTexasresident,youweregrantedincentivestockoptions.OnFebruary1,2009,youexercisedyouroptions.OnDecember1,2009,youpermanentlymovedtoCaliforniaandsoldyourstockonMarch1,2010,foragain.

Determination:TheresultingcapitalgainistaxablebyCaliforniabecauseyouwereaCaliforniaresidentwhenyousoldthestock.

Example 15OnMarch1,2006,whileaNevadaresident,youweregrantednonstatutorystockoptions.OnApril1,2010,youretiredandpermanentlymovedtoCalifornia.OnMay1,2010,youexercisedyouroptions.

Determination:ThecompensationresultingfromtheexerciseofyournonstatutorystockoptionsistaxablebyCaliforniabecauseyouwereaCaliforniaresidentwhentheincomewasrecognized.Californiaalsotaxesthecapitalgainincomereceivedbyaformernonresidentfromthesaleofstockinaqualifyingdispositionofstatutorystockoptionsbecausethestockissoldwhilethetaxpayerisaresident.


GetFTBPublication1004,Stock Option Guidelines,foradditionalinformationontheCaliforniataxationofstockoptions.


F. Deferred Gains and Losses (like-kind exchanges)

WhenyouexchangeonekindofpropertyforthesamekindofpropertyundertherequirementsofInternalRevenueCode(IRC)Section1031,yourealizeagainorlossonthetransactionanddeferpayingtaxonthegainorclaimingthelossuntilthepropertyissoldorotherwisedisposedof.AgainorlossfromthesaleorexchangeofrealortangiblepersonalpropertylocatedinCaliforniaissourcedtoCaliforniaatthetimethegainorlossisrealized.

IfyouareanonresidentandexchangerealortangiblepropertylocatedwithinCaliforniaforrealortangiblepropertylocatedoutsideCalifornia,therealizedgainorlosswillbesourcedtoCalifornia.Taxationwillnotoccuruntilthegainorlossisrecognized.FortaxableyearsbeginningonorafterJanuary1,2014,CaliforniaRevenueandTaxationCode(R&TC)Sections18032and24953requireCaliforniaresidentandnonresidenttaxpayerswhodefergainonthesaleorexchangeofCaliforniapropertyforout-of-statereplacementpropertyunderIRCSection1031tofileanannualinformationreturnwiththeFranchiseTaxBoard(FTB).Taxpayersarerequiredtofileaninformationreturnforthetaxableyearoftheexchangeandineachsubsequenttaxableyearinwhichthegainorlossattributabletotheexchangehasnotbeenrecognized.Ifataxpayerfailstofiletherequiredinformationreturn,FTBcanestimatethenetincome,fromanyavailableinformation,includingtheamountofgaindeferred,andproposetoassesstheamountoftax,interest,andpenaltiesdue.

Example 17 AsaresidentofTexas,youexchangedacondominiumlocatedinCaliforniaforlike-kindpropertylocatedinTexas.Yourealizedagainof$15,000ontheexchangethatwasproperlydeferredunderIRCSection1031.YouthensoldtheTexaspropertyinanondeferredtransactionandrecognizedagainof$20,000.

Determination:The$15,000deferredgain(thelesserofthedeferredgainorthegainrecognizedatthetimeyoudisposedoftheTexasproperty)hasasourceinCaliforniaandistaxablebyCalifornia.

California Property Exchanged for Out-of-State Property


Example 18AsaresidentofNevada,youexchangedNevadabusinesspropertyforlike-kindCaliforniabusinessproperty.Yourealizeda$10,000gainontheexchangethatwasproperlydeferredunderIRCSection1031.YouthensoldtheCaliforniabusinesspropertyinanondeferredtransactionandrecognizedagainof$50,000.

Determination:BecausethepropertyislocatedinCalifornia,the$50,000gainhasaCaliforniasourceandistaxablebyCalifornia.

IfyouexchangerealortangiblepropertylocatedoutsideCaliforniaforrealortangiblepropertylocatedwithinCalifornia,thegainrecognizedwhenyousellorotherwisedisposeoftheCaliforniapropertyinanondeferredtransactionhasaCaliforniasourceandistaxablebyCalifornia.

Example 19WhilearesidentofKansas,youexchangedrealpropertylocatedinKansasforlike-kindrealpropertylocatedinCalifornia.Yourealizeda$12,000gainontheexchangethatwasproperlydeferredunderIRCSection1031.YouthenbecameaCaliforniaresidentand,whilearesident,yousoldtheCaliforniapropertyinanondeferredtransactionandrecognizedagainof$40,000.

Determination:Californiataxesthe$40,000gainbecauseyouwereaCaliforniaresidentatthetimeofthesale.IfyoupaidtaxtoKansasonthe$12,000deferredgain,youareallowedacreditfortaxespaid.

Out-of-State Property Exchanged for California Property


Example 21YouarearesidentofFlorida.In2010,yourCaliforniaandnon-CaliforniasourceSection1231gainsandlossesincludeda$2,500Californiagain,a$3,000Californialoss,a$1,000Floridagain,anda$500Florida loss.

Determination:BaseduponthenettingofyourtotalandCaliforniasourceSection1231gainsandlosses,determineyourcapitalgainorordinarylossasfollows:

G. Gains and Losses From the Sale of Trade or Business Property

Whenyousellpropertyusedinatradeorbusinessorcertaininvoluntaryconversions(IRCSection1231property),lossesarenettedagainstgains.IfSection1231lossesexceedSection1231gains,thelossesreceiveordinarytaxtreatment.IfSection1231gainsexceedSection1231losses,thegainsreceivecapitalgaintaxtreatment.Section1231gainsandlossesretainthischaracterizationregardlessofwhetheryouchangeyourresidencystatus.ForpurposesofcomputingCaliforniataxableincome,netonlyCaliforniasourceSection1231gainsand losses.

Taxable Year 2010: Total Taxable CA Taxable Income IncomeCASection1231gain $2,500 $2,500CASection1231loss (3,000) (3,000)FLSection1231gain 1,000FLSection1231loss (500)

Ordinaryloss $0 $(500)

Example 20YouarearesidentofWashington.In2010,yourCaliforniaandnon-CaliforniasourceSection1231gainsandlossesincludeda$3,000Californiagain,a$2,000Californialoss,a$4,000Washingtongain,anda$5,000Washingtonloss.

Determination:BaseduponthenettingofyourtotalandCaliforniasourceSection1231gainsandlosses,determineyourcapitalgainorordinarylossasfollows:

Taxable Year 2010: Total Taxable CA Taxable Income IncomeCASection1231gain $3,000 $3,000CASection1231loss (2,000) (2,000)WASection1231gain 4,000WASection1231loss (5,000)Capitalgain $0 $1,000


Example 22YouhavealwaysbeenaNewYorkresident.In2009,yourCaliforniaandnon-CaliforniasourcecapitalgainsandlossesincludedCaliforniacapitalgainsof$2,000,Californiacapitallossesof$6,000,NewYorkcapitalgainsof$5,000,andNewYorkcapitallossesof$2,000.Youhadnocapitallosscarryoverspriorto2009.

Determination: Netyourcapitalgainsandlossestodeterminethecapitallossesallowedin2009(the$3,000limitationapplies)andthecapitallosscarryoverto2010.

H. Capital Gains and LossesFortaxableyearsbeginningonorafterJanuary1,2002,thepresentlawsproviderulesfordeterminingcapitallosscarryoversandlimitationsifyouareanonresidentofCaliforniaorifyouchangeyourresidencystatus.

IfyouhavealwaysbeenanonresidentofCalifornia,youdeterminecapitallosscarryoversandcapitallosslimitationsbasedonlyuponCaliforniasourceincomeandlossitemsinordertocomputeCaliforniataxableincome.

Taxable Year 2009: Total Taxable CA Taxable Income IncomeCAcapitalgain $2,000 $2,000CAcapitalloss (6,000) (6,000)NYcapitalgain 5,000NYcapitalloss (2,000) Total $(1,000) $(4,000)

Capitallossallowedin2009 1,000 3,000Capitallosscarryoverto2010 $0 $(1,000)



Example 23AssumethesamefactsasExample22.OnJanuary1,2010,youbecomeaCaliforniaresident.During2010,yousellpropertylocatedinWyomingforacapitalgainof$5,000andincura$4,000capitallossfromthesaleofpropertylocatedinCalifornia.

Determination:

FortaxableyearsbeginningonorafterJanuary1,2002,ifyouhavecapitallosscarryoversandwereanonresidentofCaliforniainprioryears,thecapitallosscarryoversneedtoberestatedasifyouhadbeenaCaliforniaresidentforallprioryears.

Step 2: Netyourcapitalgainsandlossesto determine the amount of capital gain income to include in total taxableincome.

Taxable Year 2010: Total Taxable IncomeCAcapitalloss $(4,000)WYcapitalgain 5,000Capitallosscarryover 0Capitalgainincome $1,000

Step 1: Restateyour2009capitallosscarryoverasifyouhadbeenaCaliforniaresidentforallprioryears.

2009 Restatement: Total Taxable IncomeCAcapitalgain $2,000CAcapitalloss (6,000)NYcapitalgain 5,000NYcapitalloss (2,000) Total $(1,000)Capitallossallowedin2009 1,000 Capitallosscarryoverto2010 $0



FortaxableyearsbeginningonorafterJanuary1,2002,ifyouhavecapitallosscarryoversandyoubecomeanonresidentofCalifornia,yourcapitallosscarryoversneedtoberestatedasifyouhadbeenanonresidentofCaliforniaforallprioryears.

Example 24AssumethesamefactsasExamples22and23.OnJanuary1,2011,youbecomeanonresidentofCaliforniaagain.During2011,yousellpropertylocatedinTexasforacapitalgainof$8,000,sellpropertylocatedinCaliforniafora$9,000capitalgain,andincura$5,000capitallossfromthesaleofpropertylocatedinCalifornia.

Determination:Step 1: RestateyourcapitallosscarryoversasifyouhadbeenanonresidentofCaliforniaforallprior

yearsbynettingyourcapitalgainsandlossesfromCaliforniasourcesonly.

2009 Restatement: Total Taxable CA Taxable Income IncomeCAcapitalgain $2,000 $2,000CAcapitalloss (6,000) (6,000)NYcapitalgain 5,000NYcapitalloss (2,000)Total $(1,000) $(4,000)Capitallossallowedin2009 1,000 3,000

Capitallosscarryoverto2010 $0 $(1,000)

2010 Restatement: Total Taxable CA Taxable Income IncomeCAcapitalloss,2010 $(4,000) $(4,000)WYcapitalgain 5,000Capitallosscarryoverfrom2009 (1,000)Capitalgainorloss $1,000 $(5,000)Capitallossallowedin2010 3,000Capitallosscarryoverto2011 $0 $(2,000)

Step 2: NetyourcapitalgainsandlossestodeterminetheamountofcapitalgainincometoincludeintotaltaxableincomeandCaliforniataxableincome.

Taxable Year 2011: Total Taxable CA Taxable Income IncomeCAcapitalgain $9,000 $9,000CAcapitalloss (5,000) (5,000)TXcapitalgain 8,000Total $12,000 $4,000Capitallosscarryoverfrom2010 0 (2,000)Capitalgainincome $12,000 $2,000



Example 25 YoubecameaCaliforniaresidentonJuly1,2009.YourtotalandCaliforniasourcecapitalgainsandlossesfor2009areasfollows:Before July 1, 2009 After July 1, 2009 Totalcapitalgains $10,000 Totalcapitalgains $8,000 CAsourcecapitalgains 7,000 CAsourcecapitalgains 4,000 Totalcapitallosses (2,000) Totalcapitallosses (3,000) CAsourcecapitallosses (1,000) CAsourcecapitallosses (3,000)Yourcapitallosscarryoverfrom2008was$7,000,asifyouhadbeenaCaliforniaresidentforallprioryearsand$5,000,asifyouhadbeenanonresidentforallprioryears.

Determination:Step 1: NetyourtotalcapitalgainsandlossesfortheperiodofresidencyandyourCaliforniasource

capitalgainsandlossesfortheperiodofnonresidency.CAcapitalgains,beforeJuly1,2009 $7,000CAcapitallosses,beforeJuly1,2009 (1,000)Totalcapitalgains,afterJuly1,2009 8,000Totalcapitallosses,afterJuly1,2009 (3,000) Capitalgainbeforecarryoverlosses $11,000

Step 2: ProrateyourcapitallosscarryoveramountsbaseduponperiodsofCaliforniaresidencyandnonresidencyduring2009.Period of Residency Period of Nonresidency2008carryover,asifaCA 2008carryover,asifa residentforallprioryears $(7,000) nonresidentforallprioryears $(5,000)CAresidentdays÷totaldays Nonresidentdays÷totaldays 184÷365 x.5041 181÷365 x.4959Prorated2008capital Prorated2008capital losscarryover $(3,529) losscarryover $(2,479)

Step 3: ComputeyourcapitalgainorlosstoincludeinCaliforniataxableincome.

Taxable Year 2009: CA Taxable IncomeCapitalgainbeforecarryoverlosses $11,000Capitallosscarryover,residentperiod (3,529)Capitallosscarryover,nonresidentperiod (2,479) Capitalgain,2009 $4,992

GetCalifornia540NR, Nonresident or Part-Year Resident Booklet, for more information regarding the reporting of capital gains and losses.

Ifyouchangedyourresidencyduring2009,computeincomeanddeductionsusingresidentrulesfortheperiodoftheyearyouwereaCaliforniaresidentandnonresidentrulesfortheperiodoftheyearyouwereanonresident.ComputeanyprioryearcarryoverlossasifyouwereaCaliforniaresidentforallprioryearsand asifyouwereanonresidentforallprioryears.ProratebothcapitallosscarryoveramountsbasedupontheperiodofCaliforniaresidencyandtheperiodofnonresidencyduringtheyear.

Part-Year Resident


Example 26YouhavealwaysbeenaresidentofTexas.Priorto2009,youwerenotengagedinanypassiveactivities.During2009,youpurchasedrentalpropertiesinbothCaliforniaandTexas.In2009,yourCaliforniaandnon-CaliforniasourcepassiveincomeandlossesincludedCaliforniarentalincomeof$2,000,Californiarentallossesof$30,000,andTexasrentalincomeof$4,000.

Determination:Baseduponthenettingofyourpassiveincomeandlossesandtheallowanceofupto$25,000forrentallosses,determineyourpassivelossesallowedin2009andsuspendedto2010asfollows:

I. Passive Activities FortaxableyearsbeginningonorafterJanuary1,2002,thepresentlawsproviderulesfordeterminingtheamountofallowedpassiveactivitylossesandsuspendedlossesifyouareanonresidentofCaliforniaorifyouchangeyourresidencystatus.

IfyouhavealwaysbeenanonresidentofCalifornia,youdeterminetheallowedpassiveactivitylossesandsuspendedlossesbasedonlyuponCaliforniasourcepassiveincomeandlossitemstocomputeCaliforniataxableincome.OnlyCaliforniasourcepassivelossescarryforwardintothefollowingyear.

Taxable Year 2009: Total Taxable CA Taxable Income IncomeCArentalincome $2,000 $2,000CArentallosses (30,000) (30,000)TXrentalincome 4,000Total $(24,000) $(28,000)Allowedrentallosses 24,000 25,000Suspendedlossto2010 $0 $(3,000)



Example 27 YouhavealwaysbeenaresidentofNewYork.Priorto2009,youwerenotengagedinanypassiveactivities.During2009,youbecameengagedinCaliforniaandnon-Californiapassiveactivities.In2009,yourpassiveincomeandlossesincludedCaliforniasourcepartnershipincomeof$2,000,CaliforniasourceScorporationlossesof$8,000,andNewYorkpartnershipincomeof$3,000.

Determination:Baseduponthenettingofyourpassiveincomeandlosses,determineyoursuspendedlossestobecarriedforwardto2010asfollows:

Example 28 AssumethesamefactsasExample27.OnJanuary1,2010,youbecomeaCaliforniaresident.In2010,yourpassiveincomeandlossesincludeCaliforniasourcepartnershipincomeof$3,000,CaliforniasourceScorporationlossesof$1,000,andNewYorksourcepartnershipincomeof$7,000.

Determination:

FortaxableyearsbeginningonorafterJanuary1,2002,ifyouhadsuspendedpassivelossesandwereanonresidentofCaliforniainprioryears,thesuspendedpassivelossesneedtoberestatedasifyouhadbeenaCaliforniaresidentforallprioryears.

Step 2: Netyourpassiveincomeandlosses to determine the amount of passiveincometoincludeintotaltaxableincome.

Taxable Year 2010: Total Taxable IncomeCApartnershipincome $3,000CAScorporationloss (1,000)NYpartnershipincome 7,000Total $9,000Suspendedpassiveloss,2009 (3,000)Passiveincome,2010 $6,000

Step 1: Restateyour2009suspendedpassivelossasifyouhadbeenaCaliforniaresidentfor2009.

2009 Restatement: Total Taxable IncomeCApartnershipincome $2,000CAScorporationloss (8,000)NYpartnershipincome 3,000Suspendedpassiveloss to2010 $(3,000)

Taxable Year 2009: Total Taxable CA Taxable Income IncomeCApartnershipincome $2,000 $2,000CAScorporationloss (8,000) (8,000)NYpartnershipincome 3,000 Suspendedlossto2010 $(3,000) $(6,000)



FortaxableyearsbeginningonorafterJanuary1,2002,ifyouhavesuspendedpassivelossesandyoubecomeanonresidentofCalifornia,yoursuspendedpassivelossesneedtoberestatedasifyouhadbeenanonresidentofCaliforniaforallprioryears.

Example 29 AssumethesamefactsasExamples27and28.OnJanuary1,2011,youbecomeanonresidentofCaliforniaagain.During2011,yourpassiveincomeandlossesincludeCaliforniasourcepartnershipincomeof$15,000,CaliforniasourceScorporationlossesof$7,000,andNewYorksourcepartnershipincomeof$2,000.

Determination:Step 1: RestateyoursuspendedpassivelossesasifyouhadbeenanonresidentofCaliforniaforall

prioryearsbynettingpassiveincomeandpassivelossesfromCaliforniasourcesonly.

2009 Restatement: Total Taxable CA Taxable Income IncomeCApartnershipincome $2,000 $2,000CAScorporationloss (8,000) (8,000)NYpartnershipincome 3,000Suspendedpassivelossto2010 $(3,000) $(6,000)

2010 Restatement: Total Taxable CA Taxable Income IncomeCApartnershipincome $3,000 $3,000CAScorporationloss (1,000) (1,000)NYpartnershipincome 7,000 Total $9,000 $2,000Suspendedlossfrom2009 (3,000) (6,000)Incomeorsuspendedloss,2010 $6,000 $(4,000)

Step 2: NetyourpassiveincomeandlossestodeterminetheamountofpassiveincometoincludeintotaltaxableincomeandCaliforniataxableincome.

Taxable Year 2011: Total Taxable CA Taxable Income IncomeCApartnershipincome $15,000 $15,000CAScorporationloss (7,000) (7,000)NYpartnershipincome 2,000Total $10,000 $8,000Suspendedlossfrom2010 0 (4,000) Passiveincome,2011 $10,000 $4,000



Example 30YoubecameanonresidentofCaliforniaonOctober1,2010.Yourpassiveactivitiesdidnotincludeanyrentalproperties.YourtotalandCaliforniasourcepassiveincomeandlossesfor2010wereasfollows:Before October 1, 2010 After October 1, 2010 Totalpassiveincome $13,500 Totalpassiveincome $4,500 CApassiveincome 7,500 CApassiveincome 2,500 Totalpassivelosses (3,000) Totalpassivelosses (1,000) CApassivelosses (6,000) CApassivelosses (2,000)

Yoursuspendedpassivelossfrom2009was$7,000,restatedasifyouhadbeenaCaliforniaresidentforallprioryearsand$5,000,restatedasifyouhadbeenanonresidentforallprioryears.

Determination:Step 1: NetyourtotalpassiveincomeandlossesfortheperiodofresidencyandyourCaliforniasource

passiveincomeandlossesfortheperiodofnonresidency.Totalpassiveincome,beforeOctober1,2010 $13,500Totalpassivelosses,beforeOctober1,2010 (3,000)CApassiveincome,afterOctober1,2010 2,500CApassivelosses,afterOctober1,2010 (2,000)Passiveincomebeforesuspendedlosses $11,000

Step 2: ProrateyoursuspendedpassivelosscarryoveramountsbaseduponperiodsofCaliforniaresidencyandnonresidencyduring2010.Period of Residency Period of Nonresidency2009suspendedloss,asifaCA 2009suspendedloss,asifanon- residentforallprioryears $(7,000) residentforallprioryears $(5,000)CAresidentdays÷totaldays Nonresidentdays÷totaldays 273÷365 x.7479 92÷365 x.2521Prorated2009suspendedloss $(5,235) Prorated2009suspendedloss $(1,260)

Step 3: Computeyourpassiveincomeorsuspendedlossfortaxableyear2010.

Taxable Y ear 2010: CA Taxable IncomePassiveincomebeforesuspendedlosses $11,000Suspendedpassiveloss,residentperiod (5,235)Suspendedpassiveloss,nonresidentperiod (1,260)Passiveincome,2010 $4,505

GetFTB3801, Passive Activity Loss Limitations, formoreinformationregardingthereportingofpassiveactivitylosses.

Ifyouchangedyourresidencyduring2010,computeincomeanddeductionsusingresidentrulesfortheperiodoftheyearyouwereaCaliforniaresidentandnonresidentrulesfortheperiodoftheyearyouwereanonresident.ComputeanysuspendedpassivelossesasifyouwereaCaliforniaresidentforallprioryearsand asifyouwereanonresidentforallprioryears.ProratebothsuspendedpassivelossamountsbasedupontheperiodofCaliforniaresidencyandtheperiodofnonresidencyduringtheyear.

Part-Year Resident


J. Net Operating Losses FortaxableyearsbeginningonorafterJanuary1,2002,thenetoperatingloss(NOL)carryovercomputationfortheCaliforniataxableincomeofanonresidentorpart-yearresidentisnolongerlimitedbytheamountofNOLfromallsources.OnlyyourCaliforniasourcedincomeandlossesareconsideredindeterminingifyouhaveaCaliforniaNOL.Suspended Net Operating Loss Carryovers2002and2003Fortaxableyearsbeginningin2002and2003,CaliforniasuspendedNOLdeductions.TaxpayersmaycontinuetocomputeandcarryoveranNOLduringthesuspensionperiod.2008through2011Fortaxableyearsbeginningin2008and2009,CaliforniasuspendedNOLcarryoverdeductionswiththeexceptionofindividualtaxpayerswithnetbusinessincomeoflessthan$500,000.TaxpayersmaycontinuetocomputeandcarryoveranNOLduringthesuspensionperiod.Fortaxableyearsbeginningin2010and2011,CaliforniasuspendedNOLcarryoverdeductionswiththeexceptionofindividualtaxpayerswithmodifiedadjustedgrossincomeoflessthan$300,000.TaxpayersmaycontinuetocomputeandcarryoveranNOLduringthesuspension period. GetFTB3805V,Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations-Individuals, Estates, and Trusts,atftb.ca.govformoreinformationregardingNOLs.

FortaxableyearsbeginningonorafterJanuary1,2002,theNOLcarryovercomputationfortheCaliforniataxableincomeofanonresidentisnolongerlimitedbytheamountofnetoperatinglossfromallsources.OnlyyourCaliforniasourcedincomeandlossesareconsideredindeterminingifyouhaveaCaliforniaNOL.


Example 31 (2001 and 2002 taxable years)YouarearesidentofNevadaandoperatetwobusinesses.OnebusinessisconductedwhollywithinCaliforniaandtheotherbusinessisconductedwhollywithinNevada.In2001and2002,yourbusinessesproducedthefollowingresults:Taxable Year 2001: Income/Loss all Sources CA Source Income/LossNVbusiness $7,000CAbusiness (2,000) $(2,000)Total $5,000 $(2,000)

Taxable Year 2002: Total Taxable Income CA Taxable IncomeNVbusiness $9,000CAbusiness (3,000) $(3,000)Total $6,000 $(3,000)

Determination:Taxable year 2001 (prior law): YourNOLislimitedtotheamountofyourNOLfromallsources.BecauseyoudidnothaveanNOL

fromallsources,youwerenotallowedanNOLforCaliforniataxpurposes.Taxable year 2002 (present law): OnlyyourCaliforniasourcedincomeandlossesareconsideredindeterminingifyouhavea

CaliforniaNOL.For2002,youhaveaCaliforniaNOLof$3,000.Youmaycarryforward$1,800(60percentofthe$3,000NOL).


Example 32 (2008 through 2010 taxable years)AssumethesamefactsasExample31.Fortaxableyears2003through2007youhavenoincomeorlossfromyourCaliforniaorNevadabusiness.Intaxableyear2008through2010youonlyhaveincomeandlossfromeachbusinessasfollows:

Fortaxableyears2008through2011,theNOLdeductionissuspended.However,taxpayersthatmeetcertainincomeexceptionsintheseyearsarenotsubjecttothesuspension.

Taxable year 2008: Total Taxable CA Taxable Income IncomeNVbusiness $150,000CAbusiness 1,000 $1,000 Total $151,000 $1,000

Taxable year 2009: Total Taxable CA Taxable Income IncomeNVbusiness $500,000CAbusiness (200,000) $(200,000)Total $300,000 $(200,000)

Taxable year 2010: Total Taxable CA Taxable Income IncomeNVbusiness $375,000CAbusiness 100,000 $100,000Total $465,000 $100,000

Determination:

Taxable Year 2008: OnlyyourbusinessincomefromCaliforniasourcesisusedindeterminingtheexceptiontotheNOLsuspension.YourCaliforniasourceincomeof$1,000doesnotexceed$500,000ofnetbusinessincome.Therefore,youareallowedanNOLcarryoverdeduction.Yourcarryoverof$1,800fromtaxableyear2002ispartiallyabsorbedin2008againstyourCaliforniasourcebusinessincomeof$1,000.Youcancarrytheremaining$800tofutureyearsuntilitexpiresorisabsorbed.

Taxable Year 2009: Althoughyouproducednetbusinessincomefromallsources,yourCaliforniasourcebusinessincomeresultedinanetloss.Yournetlossof$200,000willbecombinedwithyourpreviouslosscarryoverof$800.Theseamountswillbecarriedtofutureyearsuntilexpiredorabsorbed.

Taxable Year 2010: Inthisexample,businessincomeisequaltomodifiedadjustedgrossincome.Sincemodifiedadjustedgrossincomeexceeds$300,000,youaresubjecttothesuspensionandarenotallowedanNOLcarryoverdeduction.Theremaining$200,800maybecarriedovertofutureyearsuntilexpiredorabsorbed.



Example 33YoubecameaCaliforniaresidentonJanuary1,2010,movingfromTexas.YoustartedabusinessinTexasin2003andopenedadifferentbusinesslocatedinCaliforniain2004.Youhadnoincomeorlossfromeitherbusinessin2004through2007.UnderCalifornialaw,theincomeandlossfromeachbusinessareasfollows:

Business Location 2003 2008 2009 2010California $250,000 $(25,000) $15,000Texas $(125,000) $300,000 $50,000 $5,000

Determination:

IfyouchangeresidencytoCaliforniaandhaveNOLcarryovers,youneedtorestateyourcarryoveramountsasifyouwerearesidentofCaliforniaforallprioryears.

Step 2: CombineyourbusinessincomefromallsourcestodetermineyourNOLcarryoverto2011.

Taxable Year 20102: Total Taxable IncomeCAsourceincome $15,000TXsourceincome 5,000Total $20,000PrioryearNOLcarryover (50,000)NOLcarryoverto2011 (30,000)

Step 1: FirstrestateyourNOLcarryoversforprioryearsasifyouwereaCaliforniaresident:

2003 Restatement: Total Taxable Income2003NOL $(125,000)AllowablePercentage x60% NOLcarryoverto2004 $(75,000)

2008 Restatement:BusinessIncome $550,000) PriorNOLcarryover $(75,000)Net business income exceeds $500,000. Your NOL carryover deduction is suspended.

2009 Restatement:BusinessIncome $25,000 PriorNOLcarryover (75,000)NOLcarryoverto2010 $(50,000)



IfyouchangeresidencefromCaliforniaandhaveNOLcarryovers,youneedtorestateyourcarryoveramountsasifyouwereanonresidentofCaliforniaforallprioryears.

Example 34AssumethesamefactsasExample33.YoubecameanonresidentofCaliforniaonJanuary1,2011.YourTexasandCaliforniabusinessesearnincomeof$3,000and$4,000respectively.

Determination:RestateyourNOLcarryoverasifyouhadbeenanonresidentofCaliforniaforallprioryearsbynettingbusinessincomeandlossesfromCaliforniasourcesonly.

2003 Restatement: Total Taxable CA Taxable Income IncomeTXsourcebusinessloss $(125,000)CANOLcarryover allowedpercentage,2003 x60%NOLcarryoverto2004 $(75,000) $0

2008 Restatement: Total Taxable CA Taxable Income IncomeTXsourcebusinessincome $300,000CAsourcebusinessloss 250,000 $250,000Total $550,000 $250,000PrioryearNOLcarryover $(75,000) $0You cannot use your NOL carryover in determining total taxable income because your net business income exceeds $500,000. You do not have a California source NOL to carryover for California taxable income.

2009 Restatement: Total Taxable CA Taxable Income IncomeTXsourcebusinessincome $50,000CAsourcebusinessincome (25,000) $(25,000)Total 25,000 $(25,000)PrioryearNOLcarryover (75,000) 0Carryoverto2010 $(50,000) $(25,000)

2010 Restatement: Total Taxable CA Taxable Income IncomeTXsourcebusinessincome $5,000CAsourcebusinessloss 15,000 $15,000Total 20,000 15,000PrioryearNOLcarryover (50,000) (25,000)Carryoverto2011 $(30,000) $10,000)



Example 35YoumovedtoCaliforniaonMay1,2010.YourtotalandCaliforniasourceincomeandlossesfromyourWashingtonandCaliforniabusinessoperationsfor2010wereasfollows:Before May 1, 2010 After May 1, 2010WAbusiness $14,000 WAbusiness $(26,000)CAbusiness (2,000) CAbusiness 10,000Total $12,000 Total $(16,000)YourNOLcarryoverfromprioryearsis$6,000asifyouwerearesidentforallprioryearsand$3,000asifyouwereanonresidentforallprioryears.

Determination:

Step 1: ComputeyourcurrentyearNOLbynettingyourtotalbusinessincomeandlossesfortheperiodofresidencyandyourCaliforniasourcebusinessincomeandlossesfortheperiodofnonresidency:

CAbusinesslosses,beforeMay1,2010 $(2,000)Totalbusinesslosses,afterMay1,2010 (16,000)Total (18,000)CurrentyearNOL,2010 $(18,000)

Step 2: ProrateyourNOLcarryoveramountsbaseduponperiodsofCaliforniaresidencyandnonresidencyduring2010.

Period of Residency Period of NonresidencyNOLcarryover,asifaCA NOLcarryover,asifa residentforallprioryears $(6,000) nonresidentforallprioryears $(3,000)CAresidentdays÷totaldays Nonresidentdays÷totaldays 245÷366 x.6712 121÷366 x.3288ProratedNOLcarryover $(4,027) ProratedNOLcarryover $(986)

Step 3: ComputeyourprioryearNOLcarryover:NOLcarryoverfromprioryears,residentperiod $(4,027)NOLcarryoverfromprioryears,nonresidentperiod (986)TotalNOLcarryoverfrom2010 $(5,013)

Ifyouchangedyourresidencyduringtheyear,computeyourNOLdeductionusingresidentrulesfortheperiodoftheyearyouwereaCaliforniaresidentandnonresidentrulesfortheperiodoftheyearyouwereanonresident.ComputeanyNOLcarryoversasifyouwereaCaliforniaresidentforallprioryearsandasifyouwereanonresidentforallprioryears.ProratebothNOLcarryoveramountsbasedupontheperiodofCaliforniaresidencyandtheperiodofnonresidencyduringtheyear.

Part-Year Resident


Example 36YouarearesidentofNevada.In2009,youinvested$10,000inapartnershipandbecamea50percentpartner.Atthecloseof2009,thepartnershipgenerateda$4,000loss.ThirtypercentofthelosshasaCaliforniasource.

Determination: Computeyouryear-endbasisinthepartnershipasfollows:

K. Basis in Pass-Through EntitiesPass-throughentitiesincludepartnerships,Scorporations,andlimitedliabilitycompaniesthatelecttobe treated as partnerships.

Yourbasisinapass-throughentityforCaliforniapurposesisequaltoyourcontributionstocapital,adjustedbyCaliforniasourceditemsonly.

Taxable year 2009: BasisContributiontocapital $10,000Partnershiploss $(4,000)CAsourcelosspercentage x30%Partnershipsourceloss $(1,200)Partner’spercentageofloss x50%Partner’sloss $(600)Partner’sbasis,December31,2009 $9,400




FortaxableyearsbeginningonorafterJanuary1,2002,yourbasisinapass-throughentityneedstoberestatedunderCalifornialawasifyouhadbeenaCaliforniaresidentforallprioryears.Basisisadjustedforyourshareofflow-throughitems,regardlessofsource,generatedduringyourperiodofnonresidency.

Example 37 AssumethesamefactsasExample35.OnJanuary1,2010,youbecomeaCaliforniaresident.Atthecloseof2010,thepartnershipgeneratesa$3,000loss.TwentypercentofthepartnershiplosshasaCaliforniasource.

Determination:

Step 1: RestateyourbasisinthepartnershipasifyouhadbeenaCaliforniaresidentforallprioryears.

2009 Restatement: BasisContributiontocapital $10,000Partnershiploss $(4,000)Partnershippercentage x50%Partner’sshareofloss $ (2,000)Partner’sbasis,December31,2009 $8,000

Step 2: Computeyouryear-endbasisinthepartnership.

Taxable Year 2010: BasisPartner’sbasis,2009 $8,000Partnershiploss $(3,000)Partnershippercentage x50%Partner’sshareofloss $(1,500)Partner’sbasis,December31,2010 $6,500



FortaxableyearsbeginningonorafterJanuary1,2002,ifyoubecomeanonresidentofCalifornia,yourbasisinapass-throughentityneedstoberestatedasifyouhadbeenanonresidentofCaliforniaforallprioryears.

Example 38Assumethesamefactsasexamples35and36.OnJanuary1,2011youbecomeanonresidentofCaliforniaagain.Atthecloseof2011,thepartnershipgeneratesa$5,000loss.FortypercentofthepartnershiplosshasaCaliforniasource.

Determination:Step 1: RestateyourbasisinthepartnershipasifyouhadbeenanonresidentofCaliforniaforall

prioryears.

2009 Restatement BasisContributiontocapital $10,000Partnershiploss $(4,000)CAsourcelosspercentage x30%Partnershipsourceloss $(1,200)Partner’spercentageofloss x50%Partner’sloss $(600)Partner’sbasis,December31,2009 $9,400

2010 Restatement BasisPartner’sbasis,December31,2009 $9,400Partnershiploss $(3,000)CAsourcelosspercentage x20%Partnershipsourceloss $(600)Partner’spercentageofloss x50%Partner’sloss $(300)Partner’sbasis,December31,2010 $9,100

Step 2: Computeyourbasisinthepartnershipfor2011.

Taxable Year 2011 BasisPartner’sbasis,December31,2010 $9,100Partnershiploss $(5,000)CAsourcelosspercentage x40%Partnershipsourceloss $(2,000)Partner’spercentageofloss x50%Partner’sloss $(1,000)Partner’sbasis,December31,2011 $8,100


L. Partnerships, S corporations, and Certain Trusts

Example 39 YouareanonresidentofCaliforniaandholdapartnershipinterestinaCaliforniapartnership.YoureceivedaScheduleK-1fromtheCaliforniapartnershipthatincludednetincomeof$10,000fromCaliforniasources.

Determination:Your$10,000distributiveshareofpartnershipnetincomehasasourceinCaliforniaandistaxablebyCalifornia.

Californiataxesyourdistributiveshareofpartnership,Scorporation,andtrustincomederivedfromCaliforniasourcesifyouareanonresidentofCalifornia.Incomefromasimpletrust(onewhichdistributesitsincomeannually)issubjecttotheserules.Incomefromothertrustsmayalsobesubjecttotheserules.

Nonresident


Example 40Youholda50percentScorporationinterestinaWashingtonScorporationthatreportsincomeandlossesonafiscalyearendingOctober31stofeachyear.OnJune10,2009,youbecameanonresidentofCalifornia.YouobtainedinterimstatementsfromtheScorporationthatincludethefollowingScorporationnetincomeamounts:November 1, 2008 - June 9, 2009 June 10, 2009 - October 31, 2009WAnetincome $5,600 WAnetincome $4,400CAnetincome 4,000 CAnetincome 2,000Totalnetincome $9,600 Totalnetincome $6,400

Determination:

Step 1: ComputeyourdistributiveshareincomebaseduponperiodsofCaliforniaresidencyandnonresidencyduringtheScorporation’staxableyear.

Period of Residency Period of NonresidencyTotalnetincome $9,600 CAnetincome $2,000percentinterestinScorporation x50% percentinterestinScorporation x50% 2009distributiveshare $4,800 2009distributiveshare $1,000

Step 2: ComputeyourdistributiveshareincometoincludeinCaliforniataxableincome.

Taxable Y ear 2009: CA Taxable IncomeDistributiveshare,periodofresidency $4,800Distributiveshare,periodofnonresidency 1,000Distributiveshareincome,2009 $5,800

Ifyouchangedyourresidencyduring2009,orduringyourpartnership’s,Scorporation’s,ortrust’staxableyearbeginningonorafterJanuary1,2002,Californiataxesyourdistributiveshareofpartnership,Scorporation,andcertaintrustincomebaseduponyourperiodofCaliforniaresidencyandyourperiodofnonresidencyduringthepartnership’s,Scorporation’s,ortrust’staxableyear.Theallocationofincomebetweentheperiodofresidencyandtheperiodofnonresidencymustbemadeinamannerthatreflectstheactualdateofrealization.Intheabsenceofinformationthatreflectstheactualdateofrealization,youmustallocateanannualamountonaproportionalbasisbetweenthetwoperiods,usingadailypro rata method.

Part-Year Resident


Example 41 Youholda60percentinterestinaWashingtonpartnershipthatreportsincomeandlossesonacalendaryearbasis.OnSeptember22,2009,youbecameanonresidentofCalifornia.Youobtainedacopyofthepartnershiptaxreturnfor2009.ThetotalnetincomefromthepartnershipconsistedofthefollowingcapitalgainsonitemssoldduringyourperiodsofCaliforniaresidencyandnonresidency:January 1, 2009 – September 21, 2009 September 22, 2009 – December 31, 2009SaleofWArealproperty $15,200 SaleofWArealproperty $4,400Saleofstock 2,000 SaleofCArealproperty 10,300Totalnetincome $17,200 Totalnetincome $14,700

Determination:Step 1: ComputeyourdistributiveshareincomebaseduponperiodsofCaliforniaresidencyand

nonresidencyduringthepartnership’staxableyear.Period of Residency Period of NonresidencyTotalnetincome $17,200 CAnetincome $10,300percentinterestinpartnershipx60% percentinterestinpartnership x60%2009distributiveshare $10,320 2009distributiveshare $6,180

Step 2: ComputeyourdistributiveshareincometoincludeinCaliforniataxableincome.Taxable Y ear 2009: CA Taxable IncomeDistributiveshare,periodofresidency $10,320Distributiveshare,periodofnonresidency 6,180Distributiveshareincome,2009 $16,500

Example 42 YouholdapartnershipinterestinaTexaspartnershipthatreportsitsincomeandlossesonacalendaryearbasis.OnApril1,2009,youbecameanonresidentofCalifornia.YoureceivedaScheduleK-1fromtheTexaspartnershipthatincludednetincomeof$10,000,comprisedof$4,000fromCaliforniasourcesand$6,000fromTexassources.

Determination:Step 1: DeterminethenumberofCaliforniaresidentdaysandnonresidentdaysduringthepartnership’s

taxableyear. CA Resident Days CA Nonresident Days January1,2009,throughMarch31,2009 April1,2009,throughDecember31,2009=90days =275daysStep 2: ProrateyourdistributiveshareincomebaseduponperiodsofCaliforniaresidencyand

nonresidencyduringthepartnership’staxableyear.Period of Residency Period of NonresidencyDistributiveshareincomefrom Distributiveshareincomefrom allsources $10,000 CAsources $4,000CAresidentdays÷totaldays Nonresidentdays÷totaldays90÷365 x.2466 275÷365 x.7534Prorated2009distributiveshare $2,466 Prorated2009distributiveshare $3,014



Example 43YouholdanScorporationinterestinaFloridaScorporationthatreportsincomeandlossesonafiscalyearendingMay31stofeachyear.OnFebruary1,2009,youbecamearesidentofCalifornia.YoureceivedaScheduleK-1fromtheFloridaScorporationforfiscalyearendingMay31,2009,thatincludednetincomeof$10,000,comprisedof$4,000fromCaliforniasourcesand$6,000fromFloridasources.

Determination:Step 1: DeterminethenumberofCaliforniaresidentdaysandnonresidentdaysduringthe

Scorporation’staxableyear. CA Resident Days CA Nonresident Days February1,2009,throughMay31,2009 June1,2008,throughJanuary31,2009=120days =245daysStep 2: ProrateyourdistributiveshareincomebaseduponperiodsofCaliforniaresidencyand

nonresidencyduringtheScorporation’staxableyear. Period of Residency Period of Nonresidency

Distributiveshareincomefrom Distributiveshareincomefrom allsources $10,000 CAsources $4,000CAresidentdays÷totaldays Nonresidentdays÷totaldays120÷365 x.3288 245÷365 x.6712Prorated2009distributiveshare $3,288 Prorated2009distributiveshare $2,685


Example 44 YouarethesolebeneficiaryofasimpletrustthatreportedyourdistributiveshareincomefortheshortperiodofJanuary1,2009,throughSeptember30,2009.OnApril1,2009,youbecamearesidentofCalifornia.YoureceivedaScheduleK-1fromthetrustthatincludesnetincomeof$10,000,comprisedof$4,000fromCaliforniasourcesand$6,000fromNevadasources.

Determination:Step 1: DeterminethenumberofCaliforniaresidentdaysandnonresidentdaysduringthetrust’s

taxableyear.CA Resident Days CA Nonresident DaysApril1,2009,throughSeptember30,2009 January1,2009,throughMarch31,2009=183days =90days

Step 2: ProrateyourdistributiveshareincomebaseduponperiodsofCaliforniaresidencyandnonresidencyduringthetrust’staxableyear.Period of Residency Period of NonresidencyDistributiveshareincomefrom Distributiveshareincomefrom allsources $10,000 CAsources $4,000CAresidentdays÷totaldays Nonresidentdays÷totaldays183÷273 x.6703 90÷273 x.3297Prorated2009distributiveshare $6,703 Prorated2009distributiveshare $1,319



M. Alternative Minimum TaxThepresentlawschangethealternativeminimumtaxcomputationfornonresidentsandpart-yearresidentstoparallelthechangesintheregulartaxcomputation.

TheCalifornia alternative minimum taxofanonresidentorpart-yearresidentistheamountbywhichtheCaliforniatentativeminimumtaxexceedstheproratedregulartax.Thecomputationisasfollows:

TheCalifornia tentative minimum taxistheCaliforniaalternativeminimumtaxableincomemultipliedbyarate.Therateistheamountoftaxontotaltentativeminimumtaxdividedbythetotalalternativeminimumtaxableincome.Thecomputationisasfollows:

TheCalifornia alternative minimum taxable income is the combined total ofthefollowing:• ThealternativeminimumtaxableincomederivedfromCaliforniasources

foranypartofthetaxableyearthetaxpayerwasanonresident.• Thealternativeminimumtaxableincomefromallsourcesforanypartof

thetaxableyearthetaxpayerwasaresident.

Fortheperiodofnonresidency,anycarryovers,deferredincome,suspendedlosses,orsuspendeddeductionsareincludedorallowableonlytotheextenttheywerederivedfromCaliforniasources.

Thetotal alternative minimum taxable incomeisthealternativeminimumtaxableincomedeterminedasifthenonresidentorpart-yearresidentwereaCaliforniaresidentinbothofthefollowing:• Currentyear.• Allprioryearsforanycarryovers,deferredincome,suspendedlosses,or

suspended deductions.

Total tentative minimum taxisthetaxonthetotalalternativeminimumtaxableincome.Thefollowingexampleshowshowthecalculationworks:

CAalternativeminimumtax=CAtentativeminimumtax – Proratedregulartax

CAtentativeminimumtax=CAalternativeminimumtaxableincome

TotaltentativeminimumtaxTotalalternativeminimumtaxableincomeX


Example 45Youandyourspouse/RDPmovedtoCaliforniaandbecameresidentsonMay1,2009.Combinedwagesfortheyeartotaled$170,000.Youreceived$100,000afteryourmovetoCalifornia.OnOctober1,2009,youexercisedanincentivestockoptionvaluedat$90,000,forwhichyoupaid$10,000(preferenceamount$80,000).Yourtotaltaxableincomefortheyearwas$150,000,with$20,000initemizeddeductions.Fivethousanddollars($5,000)oftheitemizeddeductionswererealandpersonalpropertytaxes,whicharepreferenceitems.Yourproratedregulartaxwas$6,000.

DeterminationTotal Alternative Minimum Taxable Income Realandpersonalpropertytaxpreference . . . . . . . . . . . . . . . . . . . . . . 5,000 Plus:Incentivestockoptionpreference . . . . . . . . . . . . . . . . . . . . . . . . . +80,000 Plus:Totaltaxableincome . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +150,000 Totalalternativeminimumtaxableincome . . . . . . . . . . . . . . . . . . . . . . . 235,000Total Tentative Minimum Tax Totalalternativeminimumtaxableincome . . . . . . . . . . . . . . . . . . . . . . . 235,000 Less:Exemptionamount -78,817 156,183 Alternativeminimumtaxrate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x.07 Totaltentativeminimumtax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,323California Alternative Minimum Tax Adjusted Gross Income CA(regulartax)adjustedgrossincome. . . . . . . . . . . . . . . . . . . . . . . . . 100,000 Plus:Incentivestockoptionpreferenceamount . . . . . . . . . . . . . . . . . . +80,000 CAalternativeminimumtaxadjustedgrossincome . . . . . . . . . . . . . . . . 180,000Total Alternative Minimum Tax Adjusted Gross Income Totalalternativeminimumtaxableincome . . . . . . . . . . . . . . . . . . . . . . . 235,000 Totalitemizeddeductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 Less:Realandpersonalpropertytaxpreference . . . . . . . . . . . . . . . . . -5,000 Totalalternativeminimumtaxitemizeddeductions . . . . . . . . . . . . . . . . +15,000 Totalalternativeminimumtaxadjustedgrossincome . . . . . . . . . . . . . . 250,000California Alternative Minimum Taxable Income Totalalternativeminimumtaxitemizeddeductions. . . . . . . . . . . . . . . . . 15,000 Multiplybytheratio: CAalternativeminimumtaxadjustedgrossincome 180,000 = Totalalternativeminimumtaxadjustedgrossincome 250,000 x.7200

Proratedalternativeminimumtaxitemizeddeductions . . . . . . . . . . . . . -10,800 CAalternativeminimumtaxableincome. . . . . . . . . . . . . . . . . . . . . . . . . 169,200California Alternative Minimum Tax CAalternativeminimumtaxableincome. . . . . . . . . . . . . . . . . . . . . . . . . 169,200 Multiplybytheratio: Totaltentativeminimumtax 11,323 = Totalalternativeminimumtaxableincome 235,000 x.0482 CAtentativeminimumtaxableincome. . . . . . . . . . . . . . . . . . . . . . . . . . 8,561 Less:Proratedregulartax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6,000 CAalternativeminimumtax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,561

GetCalifornia540NRScheduleP,Alternative Minimum Tax and Credit Limitations – Nonresidents and Part-Year Residents,formoreinformationregardingCaliforniaalternativeminimumtax.

ftb publication 1100 - taxation of nonresidents and individuals

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