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Subject Author Date
Part year resident state taxes and real property capital gains Mark Freeland 03-18-2008
Posted by Mark Freeland on March 18, 2008, 11:56 am
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 May real property gains (e.g. from sale of residency above exclusion amount)
be subject to double taxation (taxed by two states)? Or can one avoid this
problem?

Several states seem to tax income based on income received while a resident,
plus capital gains from "sources within" the state while a nonresident (CA's
phraseology), or from "[state] sources" (NY's phraseology). NY is even
clearer in saying that this includes income you received while you were a
non-resident that came from "property located in New York State".

So it looks like you can get double taxed on gain from sale of real property
if you move from one state to another, and the sale is completed after one
changes residency. This, because the old state (where the property sits)
will tax the gain independent of current residency, and the new state will
tax the gain if it is realized when you are a new resident.
The only obvious way I see to avoid double taxation of the gain is to
complete the sale before residency changes.

Have I missed something here? Thanks.

Mark Freeland
BnetOnewsX@sbcglobal.net

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Posted by Phil Marti on March 18, 2008, 12:50 pm
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 "Mark Freeland" wrote:

> May real property gains (e.g. from sale of residency above exclusion
> amount) be subject to double taxation (taxed by two states)? Or can one
> avoid this problem?
>
> Several states seem to tax income based on income received while a
> resident, plus capital gains from "sources within" the state while a
> nonresident (CA's phraseology), or from "[state] sources" (NY's
> phraseology). NY is even clearer in saying that this includes income you
> received while you were a non-resident that came from "property located in
> New York State".
>
> So it looks like you can get double taxed on gain from sale of real
> property if you move from one state to another, and the sale is completed
> after one changes residency. This, because the old state (where the
> property sits) will tax the gain independent of current residency, and the
> new state will tax the gain if it is realized when you are a new resident.
> The only obvious way I see to avoid double taxation of the gain is to
> complete the sale before residency changes.
>
> Have I missed something here?

The only thing you missed that I can think of is that usually the state
taxing the income based on your residency will give you a credit for the tax
paid to the state taxing it based on the property location. The same
usually holds true whenever two states are taxing the same income, for
example, a Kansan working in Missouri.

--
Phil Marti
Clarksburg, MD

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Paul Thomas, CPA on March 18, 2008, 1:15 pm
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> May real property gains (e.g. from sale of residency above exclusion
> amount) be subject to double taxation (taxed by two states)? Or can one
> avoid this problem?
>
> Several states seem to tax income based on income received while a
> resident, plus capital gains from "sources within" the state while a
> nonresident (CA's phraseology), or from "[state] sources" (NY's
> phraseology). NY is even clearer in saying that this includes income you
> received while you were a non-resident that came from "property located in
> New York State".
>
> So it looks like you can get double taxed on gain from sale of real
> property if you move from one state to another, and the sale is completed
> after one changes residency. This, because the old state (where the
> property sits) will tax the gain independent of current residency, and the
> new state will tax the gain if it is realized when you are a new resident.
> The only obvious way I see to avoid double taxation of the gain is to
> complete the sale before residency changes.
>
> Have I missed something here?




Yeah.




Generally the state of residency will give you a credit for taxes paid to
the other state. While it most often is limited to the lower of the amount
of tax paid _or_ the amount of tax that your resident state would have
imposed on that amount of income, it may not seem like it eliminates the
double taxation, it does do just that.

Check with the resident state to see how you compute the "other state(s) tax
credit".





--
Paul A. Thomas, CPA
Athens, Georgia

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

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