California trust taxation - capital gains on S Corp full liquidation on California non resident trust

[NumberMassager]

Hi there,

First time poster/newbie.

Facts:

Taxpayer (TP) - Irrevocable Trust, Situs in Nevada, Trustee is a NV resident, Sole Beneficiary is a NV resident.

TP owns 100% interest S Corp (SC). Since inception, SC has operated exclusively in California.  Assume the trust and trustee materially participate and manage this S Corp.  SC previously was a C Corp with E&P of $1M.  S Corp conversion took place as of 1/1/2018.  SC will be fully liquidated - 100% stock redemption. Expected Cap gains ~ $1M.

The expected capital gains to the trust is accounted as "principal", so none of the gains will be distributed to the sole beneficiary.

When filing its California Non Resident trust return, Is TP liable to capital gains tax on this liquidation transaction to California, despite TP is considered a California Non-Resident?

Central question is whether california can tax S Corp stock capital gains on non resident in this particular example. 

Thank in advance for any inputs.

Any reference to any applicable california code sections, cases, examples, etc would be appreciated.

[sjrcpa]

CA can tax it since it derives from a CA business. Don't have a cite.