How to exclude capital gain on nonresident state return

[cpatrina]

HI all,

I have a federal capital gain that is automatically flowing to a Pennsylvania nonresident and it shouldn't be.  Pennsylvania does not have a nonresident tax return.  Instead you have to exclude income from even flowing to the PA tax return if it is not taxable to PA.

So there should be a way on the federal input sheets to exclude a federal capital gain from auto flowing to the PA state return.  Interestingly, the interest and dividends are auto excluded (correctly so).

Thanks for any suggestions!

Best,

Trina

[Just-Lisa-Now-]

Did you use the state non resident allocation worksheet near the bottom of the federal information worksheet to allocate the correct items to PA? Sometimes it doesnt carry everything over completely and you have to make some adjustments on the state, but its a good place to start

[cpatrina]

Hi Lisa,

The state nonresident allocation worksheet near the bottom of the federal information worksheet was a good place to send me.  However, that did not fix the problem, even after entering that $0 of the capital gain was taxable to PA.  Do I have any other options besides overriding the PA Capital Gain form to generate zero capital gain taxable to PA?

Thanks!

Trina

[Just-Lisa-Now-]

Im on the west coast, I rarely see anything for PA. But I know lots of non resident states do compute tax on ALL income then use a ratio % to compute the tax on it. So if the return had 100,000 but only 25000 was state income, theyd compute the tax on 100k but then the total tax theyd discount down to 25% of the total tax.....awkward explanation, I know, but could that be whats happening?

[cpatrina]

Hi Lisa,

No unfortunately PA is truly taxing the full capital gain even though the taxpayer is full year non-resident and not subject to PA tax on this capital gain.

Sounds like I may need to do overrides since this is a ProSeries glitch and I know the correct tax result I need...

Best,

Trina

[Christopher K]

Had the same problem. Almost pulled out the little hair I have left.

In addition to entering $0 Capital gain or loss on the Federal Nonresident State Allocation Wks (PA), you must also go to the PA state return (PA-40). On the PA return, open Schedule D, Schedule of Gains and Losses, and mark the left column of checkboxes (*Not PA).  

[Bonnie]

Trina, as others have hinted, you go to the WORKSHEET in the PA 40 return (not the actual Sch D in the return) and on the far left, you click the box that says the specific capital gain is not taxable in PA. I just did it.

Bonnie

[abctax55]

@Bonnie 

Hopefully Trina figured this out 14 months ago..  😉