Hi Everyone, 

I have been getting conflicting answers, so I thought I would pose the question to all of my colleagues here:

I have a client who is a non-resident partner in a CA-based partnership.  The CA-based company does not have any customers within CA, so the partner's CA K-1 does not show any CA source income (and, my assumption is that the CA partnership has not paid CA tax for the income, since they do not have any CA-based customers).  However, the K-1 income and distribution is coming to the non-resident partner from the CA-based company. Should the K-1 income to the non-resident partner from the CA-based company be considered CA-source income, creating the need to file a CA non-resident return, or does the CA company not having customers within CA eliminate the need for the non-resident partner to file a CA non-resident return?

Based upon the excerpt below from the CA FTB web site, receiving income from the partnership should require a return:

-----

As a nonresident, you pay tax on your taxable income from California sources.
Sourced income includes, but is not limited to:
1. Services performed in California
2. Rent from real property located in California
3. The sale or transfer of real California property
4. Income from a California business, trade or profession

-----

Thank you in advance.

Sincerely,
Kim Dole