Properly avoiding CA tax
Ron
years ago. Since we live in California I understand that in addition
to the IRS 15% capital gains tax we must pay a 10% state tax on any
sales profit.
We are considering establishing our residency in Nevada which has no
state tax and then selling our stock. The big question is, if we do
not like Nevada living and return to CA at a later date, can CA bill
us for the lost 10% tax.
PeterL
Then they may have reason to believe that you moved your residency
solely to avoid paying CA state tax.
Katie
You will be nonresidents of California if you (a) abandon your
California home -- move out of it, sell up, etc.; (b) move to and
reside in Nevada -- buy or rent a home, settle down, live there; and
(c) most importantly, intend to remain in Nevada permanently or
indefinitely. If you sell your stocks as Nevada residents, you will
not owe any California income tax on the gain.
It's that third requirement that could upset your applecart. Actions
speak louder than words. Whatever you claim your intent to have been,
if you move back to California in a year or two, you could be held to
have been absent for a temporary purpose and to have remained
California residents during your absence.
The safe approach is to remain outside California at least until the 4-
year statute of limitations has expired on the year in which you sold
the stock.
As of now, California's highest marginal tax rate (which applies to
both ordinary income and capital gains) is 9.3%, not 10%.
Katie in San Diego
Mark Bole
You asked the same question a month ago in misc.taxes.moderated, and got
the same answers.
Do you think the subject line of your post, "avoiding CA tax", doesn't
somehow give a clue to your true intentions?
To be really sure (since you apparently don't like the answers you get
here), why not take your "big question" straight to the California FTB,
the phone number is (800) 852-5711. This is one of the many services
you, as a California resident, pay taxes for, so you might as well get
your money's worth. Be sure to ask them about your use tax requirements
while you're at it...
-Mark Bole