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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29965
Experience:  Taxes, Immigration, Labor Relations
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I am invested in a privately held company registered in ...

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I am invested in a privately held company registered in Delaware but based in California. I currently live in California but am considering moving to Nevada at the first of the year. If my investment pays off next year while I am living in Nevada, will I be required to pay California state income taxes on it? How about if my move happens after the first of the year?

There two main issues that trigger tax obligation - source of income and residency.

As a resident of a specific state - you would pay state income taxes regardless of source of the income.

If the income is from California sources - "California-based source income" - you would pay California taxes on that income regardless of your residency. The question is which income is considered from California sources?

As a non-resident partner of the partnership with California-source income - the income/loss distributed to you would be considered from California sources and will be taxable for you. The same is true for shareholders of an S-corporation and LLC.

For instance - a Delaware general partnership owns a California property which generates income - such income distributed of deemed distributed to the partners living in Nevada would be taxable California-source income.

Intangible property are generally sourced at the owner's residency - if you are a non-resident investor who purchased stock/bonds - considered intangible assets - of a California corporation or through a California broker - dividends would not be taxable.

A California resident is an individual who is in California for other than temporary reasons - who is working, living, retiring or staying in California for a long period - you are presumed a resident if you stay in California for more than nine months. For more information - see FTB Publication 1031, Guidelines for Determining Resident Status -

Customer: replied 9 years ago.
The one issue that is still not clear is if moving from California, where I lived when I purchased the stock and held it, to Nevada where I hope to reside when I sell it, will trigger tax consequences in California.
The answer would depend on the type of stock you own. If you own the share of the partnership, S-corporation or LLC - that would be "California-based source income" - if however you sell shares of C-corporation - as non-resident - you will not pay taxes on the gain.
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