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One of my clients 1031 exchanged on property from California to Arizona in 2018. He plans to sell the property in 2022. I know there is a "claw-back" rule for California property that 1031 exchanged to another state. I just want to know after the client paid deferred capital gain in California, can he receive some tax credits to offset the Arizona state capital gain?
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Look at CA Schedule S Instructions:
D. California Nonresidents
California nonresident individuals, estates, or trusts that are residents of one of the following states or U.S. possessions and paid a net income tax to that state or U.S. possession on income that is also taxed by California may claim the other state tax credit:
Arizona (AZ), Guam (GU), Oregon (OR), and Virginia (VA).
California nonresidents who are residents of any state or U.S. possession not listed may not claim this credit. This credit is not allowed on a California group nonresident tax return.
Answers are easy. Questions are hard!
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Thank you George. Do you happen to know if AZ residents have credits for taxes paid for California?
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Read George's answer again.
EDIT: Of which state is your client a resident?
The more I know the more I don’t know.
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He is a AZ resident, so he has to pay capital gain taxes in AZ as well. Do you know if he can receive tax credits in AZ for the capital gain taxes paid in CA?
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NO. Per George's post, he gets a credit on the CA nonresident return for tax paid to Arizona.
The more I know the more I don’t know.
