nonresident in reverse credit state sells interest in California llc - Spidell

nonresident in reverse credit state sells interest in California llc

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Message Board nonresident in reverse credit state sells interest in California llc

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    • #287029
      Larry Feldman
      Participant

      Client (an individual) established residence in California in 2011 and became employed by a California based  llc  in 2011 and client held 7% ownership  interest.

      Client moved family from California and established residence in Virginia 7/1/2019. Client continues employment with the California entity remotely from Virginia . Virginia and California are reverse credit states.  Virginia the resident state claims income and credit is taken on the California return.

      December 2020 large entity with locations in multiple states and listed on the NYSE buys all of the interest in the  California employer llc. Client’s share of buyout includes 82% cash and 18% stock in the buying company.

      Client continues employment with the buying company, through the California acquired branch.

      The sale of an intangible is allocated to the state of residence. Does the Client’s continued employment with the buying entity through the California Branch and the acquisition of the stock affect the allocation of total gain to Virginia?

    • #287118
      Diane White
      Participant

      The proceeds from the buyout do not affect the total gain to Virginia unless part of the stock he acquired was in exchange for compensation then only that compensation component is taxable to CA.

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