Without Any Liability Of Capital Gains Tax To California?

Q: For state income tax purposes, when one moves from California to another state, how soon can stocks be sold without any liability of capital gains tax to California? For example, if I move to Nevada on July 1st, can I then sell and realize capital gains on July 2nd, without any obligation to pay California income tax on the profit? If not July 2nd, then how long is it necessary to wait?

A: -If you are a Nevada resident on July 2, make income in Nevada then, then you do not pay the tax to California. However you will be filling out a CA-NR tax return (assuming you had California income prior to July 2) and the way that form works is that you have to include ALL income from your Federal return and calculating full California tax on that income, then pull it out, on Schedule CA, getting a % and then that percentage of the California tax to pay....if you were moving to, say, Kansas, then you would be doing a part-year return for kansas also...but the Kansas tax tables are differnet than California...so maybe California would have you paying 49% of their tax, but their total tax is $2500 and Kansas has you paying 51% but their total tax is only $1500...so you owuld, overall pay more tax between the two states that if you had only lived in Kansas for the entire year.... The California form also asks for dates of residency, so as long as you show you were in CA only until July 1 and your 1099-B form shows the stock was sold on July 2, in case of an audit, you should be fine. -If you have made a bona fide move to Nevada, you can sell the stock the next day without incurring any California tax liability. However, in most cases there is a transition period during which you may have enough ties remaining in California to allow the state to argue that your residence has not yet changed to Nevada. It's best to wait until all the steps you need to take to change your residence are complete before you sell the stock. For example, moving your household goods out of your California home or apartment, terminating your California lease or selling your California home or listing it for sale, moving into a home or apartment in Nevada, changing your driver's license and auto registration, changing your voter registration, closing California bank accounts and opening new accounts in Nevada, etc. If the gain is very large, it is wise to delay the sale until the tax year after the year you move, if that is practical. This is particularly effective if you have no California source income after the move. If that is the case, you will have no California filing requirement in the subsequent year and will not even have to report the sale to California.

Discuss It!

Most Popular Articles

More

Marketplace

Related Articles

More

Related Categories

More

Recently Added

More

You Recently Visited

Other Great Sites