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Im a passive partner in a LLC that is based in Indiana. During

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I'm a passive partner in...
I'm a passive partner in a LLC that is based in Indiana. During the year I worked 9 months in Indiana and 3 moths in California. Do I have to pay state taxes from the profits of the LLC in both states or just in Indiana (I haven't worked for the LLC, just received profits).
Thank you
Submitted: 5 years ago.Category: Tax
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Answered in 1 minute by:
1/1/2012
Tax Professional: Jax Tax, Tax Attorney replied 5 years ago
Jax Tax
Jax Tax, Tax Attorney
Category: Tax
Satisfied Customers: 1,408
Experience: JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
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Jax Tax : That is a very good question that comes with a complicated answer. I will do my best to explain..
Jax Tax : First, lets talk about your other income not involving the LLC. When one earns income, they are required to report it in the state in which they earned it and their state of residence at the time they earned it. These places are typically the same place but sometimes very.
Jax Tax : Now, the profit of an LLC has nothing to do with you in regards XXXXX XXXXX taxes. It has to do with the LLC. You must file the LLC income on in the state where the LLC earned the money. So, if the LLC operated in South Carolina for 3 months and made 20% of its income there, then you would have to file a SC return reporting that percentage of your income from the LLC.
Jax Tax : So, the same principles applies. Where the money is earned is where it must be deported. In addition all income is always included on the return of the state in which you reside.
Jax Tax : There are tax credits that apply between states to prevent double taxation.
Jax Tax : The state where the funds where earned gets first crack at taxes then your resident state but with credit given for.the state.taxes of the other state.
Customer:

So if I understand it correctly, if 100% income was done in Indiana, I have to pay the tax from everything in Indiana. In California I'll just have to report it in state tax return. Right?

Jax Tax : That is correct. File an IN return with the income then a CA return with the income and credit for taxes paid in IN.
Jax Tax : Keep in mind, this applies only to the K1. If by any chance your distributions are taxed because your basis hits zero and distributions continue, they are taxed only where you reside.
Customer:

ok thank you

Jax Tax
Jax Tax, Tax Attorney
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