CA Home Sale Exclusion for a non-resident at the time of sale

Forum|Forum|6 years ago
December 7, 2019
13 replies
55 views

TP is single with 2 kids. She sold a home in CA ( 2016) while being domiciled in North Carolina. She qualified for Fed Home Sale Exclusion $250K but CA is after her for 540NR Form and for $25K prob for Cap Gain on the sale. Does she have to pay CA Tax for the home sale?

01/11/2013 Home Purchased in CA

04/01/2015 Put Home into Rental, TP moved to NC (lived in home 26 months)

04/30/2016 Took Back home to get ready to sell (did not live in home)

05/25/2016 Sold Home (owned home 40 months)

She qualified for the Fed Home Sale Exclusion $250K and had to pay tax on less than $10K extra Cap Gain in Fed.

There was no CA FTB withholding in HUD-1 shown, which I thought was odd.

Questions:

(1) If she were to be a resident of CA, she would have qualified for CA Home Sale Exclusion other than over $250K gain due to CA conformity?

(2) Since she is a resident of NC, she does not have the privilege to enjoy the CA Conformity of Home Sale Exclusion, therefore, owe tax on the home sale?

(3) If taxable in CA, she would have to pay tax on the entire Cap Gain and not only the depreciation recapture?

Thank you. Could not find a situation during research on Non-resident + Home Sale Exclusion Conformity in CA.

ProSeries Basic

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Best answer by George4Tacks

No withholding for CA was probably the result of the invoking IRC 121 on the FTB 593 form.

A piece of CA real estate was sold, so a 540NR should have been filed. Failure to do so tends to make CA rather upset and file what the "think" the taxpayer owes in the form of a Notice of Proposed Assessment (NPA.) It is seldom a correct figure and as the name implies it is a "proposed" figure. FILE THE 540NR

1) IRC 121 only (assuming qualified)

2) Residency of NC has nothing to do with it. The real estate was CA. The depreciation was CA. CA wants a tax return. Any capital gain is CA capital gain. Any depreciation recapture is CA depreciation recapture.

3) 540NR is a really neat tool to figure out what percentage of the income is CA source and how to allocate the tax based upon that. Do the 540NR and see what happens.

George4TacksAnswer

Level 15

No withholding for CA was probably the result of the invoking IRC 121 on the FTB 593 form.

A piece of CA real estate was sold, so a 540NR should have been filed. Failure to do so tends to make CA rather upset and file what the "think" the taxpayer owes in the form of a Notice of Proposed Assessment (NPA.) It is seldom a correct figure and as the name implies it is a "proposed" figure. FILE THE 540NR

1) IRC 121 only (assuming qualified)

2) Residency of NC has nothing to do with it. The real estate was CA. The depreciation was CA. CA wants a tax return. Any capital gain is CA capital gain. Any depreciation recapture is CA depreciation recapture.

3) 540NR is a really neat tool to figure out what percentage of the income is CA source and how to allocate the tax based upon that. Do the 540NR and see what happens.

Answers are easy. Questions are hard!

George4Tacks

Level 15

See page 10 https://www.ftb.ca.gov/forms/2017/17_1001.pdf
CA conforms to federal, so given your facts - YES

Answers are easy. Questions are hard!

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