Question
Capital Gain tax (flow through 1065) from sale of property located in different state
Hello
My client is resident of Indiana and has 50% interest in multimember LLC registered in MI.
The LLC sold one of the rental properties located in MI and reported capital and 1251 gain on K-1 1065.
Which state the capital gain be taxable Michigan or Indiana? (previous years material and active participation box was checked.
Can this be treated as investment income and be taxed only in IN? If not, and if taxes are required to paid in MI, can that income be excluded in Indiana? (Michigan allows to exclude capital gain from property sold in other state but not sure of vice-a versa)
Other state tax credit in Indian is much smaller than taxes to be paid in MI if it is considered MI income.
