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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
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Experience:  Extensive Experience with Tax, Financial & Estate Issues
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I am a California resident with a New York State K-1; do I

Resolved Question:

I am a California resident with a New York State K-1; do I need to file a New York State return? Or can I just report the K-1 proceeds (guaranteed payments) to CA and ignore NY State filing?
Submitted: 9 months ago.
Category: Tax
Expert:  Stephen G. replied 9 months ago.

Stephen G. :

Hello, my name isXXXXX & I'll be helping you today. My goal is to give you a complete & accurate answer that you can understand.

Stephen G. :

I presume you have received a NY State K-1 indicating NY State earnings?

Customer:

Yes.

Stephen G. :

If so, you would be required to file a NY State Non-Resident return and if any tax is due you will be able to receive a credit against your CA Resident State Tax on your CA Res State Tax Return for any tax paid to NY State.

Stephen G. :

If you were to ignore the NY State Non-Resident return and file in CA only, the problem is that by the time NY catches up with you, you'll owe the NY tax but the statute of limitations may have run on the CA return & you will wind up paying both states.

Customer:

The majority of what is on the return is a guaranteed payment reflective of vesting into restricted "stock" (unit) equity in an LLC. When the LLC is sold, will NY State or CA receive tax on my gain?

Stephen G. :

Actually, it depends upon how the transaction is structured. Is the LLC reporting as an S-Corp or a Patnership?

Customer:

Parternship.

Customer:

Partnership.

Stephen G. :

Well, in any case, you will only pay tax to one state. If the transaction is structured as if the sale is a sale of partnership interests (ie. an intangible similar to the sale of stock), then non-residents of NY State would not be subject to tax in NY State; however, if the LLC were to sell it's assets, then it is likely that the LLC (partnership) would pass the gain through to it's partners and non-residents would also pay tax to NY State and receive a credit for the NY State tax paid against the tax in their resident state.

Stephen G. :

Is that clear?

Customer:

Yup.

Stephen G. :

I'll leave my contact information here in case you have future questions that you may have & want to contact me.

Customer:

Thank you.

Stephen G. :

If you need to contact me again with any tax or financial questions, you can just ask for "Steve G" at the beginning of your question. Thanks again for using us for your tax and financial questions. You may get a short survey from the site; if it isn't too much trouble I would appreciate it if you would answer it; the survey results are used to rate our performance;

Stephen G. :

Please remember to rate my response, it is the only way we get credit for our work.

Stephen G. :

Thanks again for using JustAnswer.com

Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4018
Experience: Extensive Experience with Tax, Financial & Estate Issues
Stephen G. and other Tax Specialists are ready to help you

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