Client filing status & tax jurisdiction?

[Richard1024]

Client lived in various states during 2020 as follows:  California (CA) - 7 months, South Carolina (SC) 2 months and Massachusetts (MA) - 3 months.

Income for 2020 consisted of W2 income (specific to CA), unemployment income (specific to CA), investment income (interest, dividends, capital gains, etc.) and 1099-R income (specific to MA).

The only income derived from MA source is related to 1099-R income (i.e. beneficiary distribution due to death) which equated to $5k and $500 withheld for state tax.  Based on my interpretation of the MA instructions, client would be considered a non-resident (‘non-resident if you are not a resident but received MA sourced income’). 

Further within the MA rules “A non-resident is only subject to tax on items of income derived from or effectively connected with…” the state of MA.

On the other hand – MA defines part-year resident status as someone whom moved to Massachusetts or established a permanent resident.  Due to the pandemic and change in employment status, client temporarily moved from CA to MA in July 2020 (possibly living with relatives, deriving no income or establishing residency) before finally settling on a permanent home in SC in November 2020.

My initial thoughts was that the CA return would be filed as a part-year return (based on date of departure from the state in July), the SC return filed as a non-resident return and the MA return filed as a non-resident which would only require the 1099-R income that was specific to the state of MA; however appears that MA is requiring the capital gain income to be included within its tax calculations, despite being a non-resident.

My question is – would this client be considered a non-resident or a part-year resident of either CA or MA (based on states definition/classification)? Also if considered non-resident of MA, should capital gains also be part of the calculation subject to the 12% MA tax or allocated out (as non-MA sourced income)?

[Just-Lisa-Now-]

Did SC have any income? If so, looks like 3 part year returns from here.

[Richard1024]

No income attributable to SC.  Outside of the 1099-R & unemployment income for MA & CA; all other earnings (interest, dividends, capital gains) were from various 1099-investments. 

[Just-Lisa-Now-]

So they did have investment income for the 2 months they were in SC, if SC taxes investment income, you've got some SC income...maybe not enough for a filing requirement, but Im still seeing 3 part year tax returns.

[jeffmcpa2010]

Moving temporarily doesn't necessarily establish residence.

Typically (Though probably not always) things like Drivers License, or Voter Registration changes help establish when state of residence truly changes. 

They may never have been a "resident" of MA (caution: I am not familiar with MA rules on this) if they were essentially "couch surfing" for a couple of months while trying to figure out where their next home was going to be.

It can get complicated.