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I read the article in the December 2016 California Taxletter entitled Self-Employed Taxpayer’s Must Apportion Income. I have a related question.
My client is a California resident, who is a 100% owner of a California S corporation. The corporation earns the majority of its income from services performed by my client through speaking engagements at out-of-state seminars. Therefore, the source of the income to the corporation should be outside California, since customers apparently derive benefit outside of California.
If my client was a nonresident of California, my understanding is that pass-through corporate income would not be apportioned to California. However, since my client is a resident of California, is there support for the position that the income stays at the corporate level (and is taxed by other states at the corporate level), and never moves down to be taxed in California at the shareholder level.