Brian Gordon wrote:

- quote -

First, you should have been filing CA non-resident returns
each year, although most "income" property seems to show a
tax loss -- and if that were the case, there would be no CA
tax due. Furthermore, that "income" should be reported on
your AZ return.

Yes, the sale is reported on your AZ return, as well. IIRC
the offset provisions correctly, you do the following.
After you complete your Federal return, and calculate your
AZ taxes normally (including ALL income from the Federal
return, with AZ adjustments), and fill out a CA 540NR to
calculate your CA tax due, use CA schedule S to reduce your
CA tax by (essentially) the amount of AZ tax due on the gain
from sale. You'll probably get a CA refund from the
withholding on sale.

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- quote -

Since you have Arizona residency, any taxable income you
derive is taxable in Arizona. You will report the gain on
both the Arizona resident return and the California
non-resident return - then you will calculate a credit on
the California return which will reduce your California tax.
(The credit is for income taxed by two states.) So, you may
end up with a refund from California since tax has already
been withheld. But you will have tax due on the gain on
your AZ return.

You may want to take a look at making an AZ estimated tax
payment before the end of the year if the gain is
substantial. There are numerous other factors involved in
this decision so you may want to seek the aid of a tax
professional to do the calculation.

Mary Ann Thomas, EA in AZ

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I'm a resident of AZ, and have made a profit on the sale of
an income property in CA. CA has withheld part for their
taxes, and of course the Feds will get their piece. Does
anyone know if AZ will insist on a piece too, even though
the property was elsewhere?

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