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Posted by Katie on April 16, 2008, 2:30 pm
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> > Is it possible to get a double benefit from a source "loss" from a
> > non-resident state?
>
> > For income, it's clear that if you are a resident of state A and have
> > source income from state B as a non-resident, you will be taxed by both
> > states on the same income, usually with a credit of some kind from one
> > of the states to offset the double taxation.
>
> > But suppose taxpayer is resident of state A for first part of year, with
> > wage income. Upon moving to state B, the house in state A is converted
> > to a rental and incurs a loss during the rest of the year (non-resident
> > of state A).
>
> > For state A, can the source loss during the non-resident period be used
> > to offset the income from the resident period on the part-year return
> > for state A? For state B, it's clear the loss (and income) from any
> > source while a resident is included on the part-year return for the
> > period while a resident.
>
> > In other words, while there is a mechanism to eliminate double taxation
> > of income, is there a similar mechanism to prevent double deduction of a
> > loss?
>
> > In case it matters, A = New York and B = California.
>
> > -Mark Bole
>
> Short answer: Yes.
>
> On a part-year resident NY return, NY taxable income includes (a) all
> income, from all sources, during the period of residence, plus (b)
> income from NY sources during the period of nonresidence. "Income" in
> this sense means net -- it includes losses. So yes, the loss incurred
> on the NY rental property during the nonresident part of the year is
> from a NY source and is allowed (all else, e.g. passive limitations,
> being equal) to offset NY income.
>
> The same is generally true in all states that impose comprehensive
> individual income taxes.
>
> Katie in San Diego
>
P.S. NJ may be an exception--I think NJ still requires two returns of
a part-year resident, a resident return for the resident part of the
year and a nonresident return for the nonresident part. If that is
still true (I'm not sure, I didn't look it up), the loss during the NR
period would not offset the income from the resident period. NY used
to be that way but changed to a single part-year resident return a few
years ago. There may be one or two other states that still have the
two-return system for a part-year resident.
Katie in San Diego
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