Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Basic Filing Requirements . . . . . . . . . . . . . . . . . . . . . . . 2
Which Form to File . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Filing Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
FTB Publication 1031 Who Are Residents and Nonresidents . . . . . . . . . . . . . 3

Guidelines for
Significance of Residency . . . . . . . . . . . . . . . . . . . . . . . 4
Guidelines for Determining Residency . . . . . . . . . . . . . 4

Determining
Temporary or Transitory Purposes . . . . . . . . . . . . . . . . . 4
Income Taxable by California . . . . . . . . . . . . . . . . . . . . . 5

Resident
Specific Professions . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Residents of or Individuals in Foreign Countries . . . . . . 9
Meaning of Domicile . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Status Married/RDP Filing Separate Returns . . . . . . . . . . . . . .

How to Split Income on Long Form 540NR . . . . . . . . . . 12
9

Avoid Common Mistakes on Long Form 540NR . . . . . . 13

Double Taxed Income . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Internet and Telephone Assistance . . . . . . . . . . . . . . . . 13

A Introduction
It is important for California income tax purposes that you
make an accurate determination of your residency status.
Residency is primarily a question of fact determined
by examining all the circumstances of your particular
situation. This publication provides information to help you
determine the following:
• Whether you are a resident of California.
• Whether your income is taxable by California.
• Which form to file if you have a California
filing requirement.
The Franchise Tax Board (FTB) issues written advice
on whether a particular activity or transaction is subject
to tax under California income tax law. The FTB will not
issue written opinions on whether you are a California
resident for a particular period of time because
residency is a question of fact, not law. The information
included in this publication is provided to help you with
this determination.
In general, California nonresidents or part-year residents
ONLINE SERVICES determine their California tax by multiplying their
California taxable income by an effective tax rate. The
effective tax rate is the California tax on all income as
Go to ftb.ca.gov for: if you were a California resident for the current tax year
• MyFTB Account – view payments, balance due, and (and for all prior taxable years for any carryover items,
withholding information. deferred income, suspended losses, or suspended
• Web Pay to pay income taxes. Choose your payment date up to deductions,) divided by that income.
one year in advance.
• CalFile – e-file your personal income tax return. This method ensures that nonresidents pay the correct
• Refund Status – find out when we authorized your refund. tax on their California sourced income and does not tax
• Installment Agreement – request to make monthly payments. non-California sourced income.
• Subscription Services – sign up to receive emails on a variety For more information, get FTB Pub. 1100, Taxation of
of tax topics. Nonresidents and Individuals Who Change Residency.
• Tax forms and publications.
• FTB legal notices, rulings, and regulations.
• FTB’s analysis of pending legislation.
• Internal procedure manuals to learn how we administer law.
Registered Domestic Partners (RDP) For purposes of California income tax, references to a
spouse, husband, or wife also refer to a California RDP,
Under California law, RDPs must file their California income unless otherwise specified. When we use the initials RDP
tax returns using either the married/RDP filing jointly or they refer to both a California registered domestic “partner”
married/RDP filing separately filing status. RDPs have the and a California registered domestic “partnership,”
same legal benefits, protections, and responsibilities as as applicable. For more information on RDPs, get
married couples unless otherwise specified. FTB Pub. 737, Tax Information for Registered Domestic
If you entered into a same sex legal union in another Partners.
state, other than a marriage, and that union has been
determined to be substantially equivalent to a California Military Personnel and Spouses
registered domestic partnership, you are required to file a In addition to this publication, military personnel and
California income tax return using either the married/RDP spouses should use FTB Pub. 1032, Tax Information for
filing jointly or married/RDP filing separately filing status. Military Personnel.

B Basic Filing Requirements

Residents – File a California tax return if either your gross income (which consists of all income you received from all sources in the form of money,
goods, property, and services, that is not exempt from tax) or your adjusted gross income (which consists of your federal adjusted gross income from all
sources, reduced or increased by all California income adjustments) is more than the amounts shown on the chart below for your filing status, age, and
number of dependents.
Nonresidents and Part-Year Residents – File a California tax return if you have any income from California sources and your gross income (which
consists of all income you received from all sources in the form of money, goods, property, and services, that is not exempt from tax) or adjusted gross
income (which consists of your federal adjusted gross income from all sources, reduced or increased by all California income adjustments) is more than
the amounts shown on the chart below for your filing status, age, and number of dependents.
Note: If your gross income or adjusted gross income is less than the amounts listed on the chart, you may still have a filing requirement. For more
information, get California Form 540 Personal Income Tax Booklet or California Form 540NR Nonresident or Part-Year Resident Income Tax Booklet.

On 12/31/16, and on 12/31/16, California Gross Income California Adjusted Gross Income
my filing status was: my age was: Dependents Dependents
(If your 65th birthday is on
January 1, 2017, you are considered to be 2 2
age 65 on December 31, 2016) 0 1 or more 0 1 or more
Single or Under 65 16,597 28,064 36,664 13,278 24,745 33,345
Head of Household 65 or older 22,147 30,747 37,627 18,828 27,428 34,308
Married/RDP filing jointly Under 65 (both spouses/RDPs) 33,197 44,664 53,264 26,558 38,025 45,625
Married/RDP filing separately 65 or older (one spouse/RDP) 38,747 47,347 54,227 32,108 40,708 47,588
(The income of both spouses/RDPs must
be combined; both spouses/RDPs may be 65 or older (both spouses/RDPs) 44,297 52,897 59,777 37,658 46,258 53,138
required to file a tax return even if only one
spouse/RDP had income over the amounts
listed.)

Qualifying widow(er) Under 65 28,064 36,664 24,745 33,345

65 or older 30,747 37,627 27,428 34,308
Dependent of another person Any age More than your standard deduction (Use the California Standard Deduction
Any filing status Worksheet for Dependents, in the instructions for your tax return, to figure your
standard deduction.)
Even if you do not meet the basic filing requirements, you should still file a tax return in order to get a refund if any of the following apply:
• California state income tax was withheld from your pay, California real estate sale, or income from an S corporation, partnership, or LLC.
• You made California estimated tax payments.

C Which Form to File D Filing Status

Residents – If you were a full-year resident of California Use the same filing status for California that you used for
in 2016 and you meet the basic filing requirements your federal income tax return, unless you are an RDP. If
outlined in Section B, file either Form 540, or you are an RDP and file single for federal, you must file
Form 540 2EZ, California Resident Income Tax Return. married/RDP filing jointly or married/RDP filing separately
However, if you file a joint return and either spouse/RDP for California. If you are an RDP and file head of household
was a nonresident or a part-year resident in 2016, file a for federal purposes, you may file head of household for
Long or Short Form 540NR, California Nonresident or California purposes only if you meet the requirements to
Part-Year Resident Income Tax Return. be considered unmarried or considered not in a domestic
partnership. If you did not file a federal return because you
Nonresidents and Part‑Year Residents – If you were a did not have a federal filing requirement, you may use any
full-year nonresident of California in 2016 and you meet filing status on your California return that you were entitled
the basic filing requirements outlined in Section B, or if to use on your federal return had you been required to file
you were a California resident for part of the year, file a federal return.
Long or Short Form 540NR.

Page 2 FTB Pub. 1031 2016

Exception: If you file a joint return for federal purposes, to this state to attend a ­California school automatically
you may file separately for California if either spouse was become ­residents. In these situations, individuals must
one of the following: determine their residency status based on their facts and
• An active member of the United States armed forces circumstances (as described in Section G, Guidelines
or any auxiliary military branch during 2016. for Determining Residency, and Section H, Temporary or
• A nonresident for the entire year and had no income Transitory Purposes).
from California sources during 2016. Example 1 – You are a California resident. You agreed
Regardless of your residency status, if you file separate to work overseas for one year. You returned to California
California returns, enter the amount you would have after the employment contract expired and stayed for
reported if you had filed a married filing separate return three months. Then, you signed another contract with
when the instructions for the California return say to enter the same employer to work overseas for another year.
an amount from your federal return. Attach an explanation You cannot be considered a nonresident under the safe
to your California return showing how you split the harbor rule because your absence from California for
income from your joint federal return between you and employment reasons was not for an uninterrupted period
your spouse. If you are required to attach a copy of your of at least 546 consecutive days. You cannot combine the
federal return to your California return, attach a copy of days you were overseas from the two separate contracts.
your joint federal return. Example 2 – You are a California resident. You
For RDP filing status information, get FTB Pub. 737. transferred to your employer’s Germany office for a two-
year work assignment. You visited California for a three-
E Who Are Residents and week vacation. Under the safe harbor rule, you were a
nonresident of California for the two years you were in
Nonresidents Germany. Your three-week visit to California is considered
temporary.
A resident is any individual who meets any of the Example 3 – You and your spouse are California
following: residents. You agreed to work overseas for 20 months
• Present in California for other than a temporary or under an employment contract. Your family remained in
transitory purpose. San Diego, CA. During those 20 months you visited your
• Domiciled in ­California, but outside ­California for a family in San Diego for a month. You can be considered a
temporary or transitory purpose. (See Section L, nonresident during your absence under the safe-harbor
Meaning of Domicile, on page 9). rule. Your month-long visit to California is considered
temporary. During the year, you earned $80,000 on your
A nonresident is any individual who is not a resident. overseas assignment and your spouse earned $30,000 as
A part-year resident is any individual who is a ­California a teacher in San Diego. You did not have any other income.
resident for part of the year and a nonresident for part of The tables below show how to report income if you filed a
the year. joint income tax return or separate income tax returns.

Safe Harbor Joint Return

Safe harbor is available for certain individuals leaving Return for You and Your Spouse
­California under employment-related contracts. The safe Form 540NR
harbor provides that an individual domiciled in ­California Total AGI CA AGI
who is outside ­California under an employment-related Income
contract for an uninterrupted period of at least 546 Sch CA (540NR)
consecutive days will be considered a nonresident unless Col. E
any of the following is met:
Your Wages $80,000 $80,000 $40,000*
• The individual has intangible income exceeding
$200,000 in any taxable year during which the Spouse’s Wages $30,000 $30,000 $30,000
­employment-related contract is in effect.
• The principal purpose of the absence from ­California is Total Wages $110,000 $110,000 $70,000
to avoid personal income tax.
The spouse/RDP of the individual covered by this safe Separate Returns
harbor rule will also be considered a nonresident while Your Return Your Spouse’s Return
­accompanying the individual outside California for at least
546 consecutive days. Form 540NR Form 540
Total AGI CA AGI Total AGI
Return visits to ­California that do not exceed a total Income
of 45 days during any taxable year covered by the Sch CA Sch CA (540)
employment contract are considered temporary. (540NR) no adjustments
Individuals not covered by the safe harbor determine their Col. E
residency status based on facts and circumstances. The Your Wages $40,000 $0 $40,000*
determination of residency status cannot be solely based
on an individual’s occupation, business, or vocation. Spouse’s Wages $15,000 $15,000 $15,000
Instead, consider all activities to determine residency
status. For instance, students who are residents of Total Wages $55,000 $15,000 $55,000
­California leaving this state to attend an out-of-state *Half of your wages are taxable to California because
school do not ­automatically become nonresidents, nor California is a community property state and your
do students who are nonresidents of ­California coming spouse/RDP is a resident of California.

FTB Pub. 1031 2016 Page 3

F Significance of Residency When you are in ­California for other than a temporary
or transitory purpose, you are a ­California resident. For
Residency is significant because it determines what ­instance, if your employer assigns you to an office in
income is taxed by California. For more information, see ­California for a long or indefinite period, if you retire and
Section I, Income Taxable by California. come to ­California with no specific plans to leave, or if you
are ill and are in ­California for an indefinite recuperation
G Guidelines for Determining period, your stay is other than temporary or transitory. As
a resident, you are taxed on income from all sources.
Residency You will be presumed to be a ­California resident for any
The underlying theory of residency is that you are a taxable year in which you spend more than nine months
resident of the place where you have the closest in this state.
connections. Although you may have connections with another state,
The following list shows some of the factors you can if your stay in ­California is for other than a temporary
use to help determine your residency status. Since your or transitory purpose, you are a ­California resident.
residence is usually the place where you have the closest As a resident, your income from all sources is taxable
ties, you should compare your ties to ­California with your by California.
ties elsewhere. In using these factors, it is the strength Example 1 – You are a business executive and reside in
of your ties, not just the number of ties, that determines New York with your family. Several times each year you
your residency. This is only a partial list of the factors to travel to other states for business purposes. Your average
consider. No one factor is determinative. Consider all stay is one or two weeks and the entire time spent in
the facts of your particular situation to determine your ­California for any taxable year does not exceed six
residency status. weeks. Your family usually remains in New York when you
Factors to consider are as follows: are traveling for business purposes.
• Amount of time you spend in ­California versus amount Determination: Under these circumstances, you are not
of time you spend outside ­California. a ­California resident because your stays in ­California are
• Location of your spouse/RDP and children. temporary or transitory in nature. As a nonresident, you
• Location of your principal residence. are taxed only on your income from California sources,
• State that issued your driver’s license. including your income for services performed in California.
• State where your vehicles are registered. Example 2 – In December 2015, you moved to ­California
• State where you maintain your professional licenses. on an indefinite job assignment. You rented an apartment
• State where you are registered to vote. in ­California and continued to live in the apartment.
• Location of the banks where you maintain accounts. You retained your home and bank account in Illinois
• The origination point of your financial transactions. until April 2016, at which time you sold your home and
• Location of your medical professionals and other transferred your bank account to ­California.
healthcare providers (doctors, dentists etc.), Determination: Your assignment in ­California was for an
accountants, and attorneys. indefinite period; therefore, your stay in ­California was
• Location of your social ties, such as your place of not of a temporary or transitory nature. Although you kept
worship, ­professional associations, or social and ties in Illinois until April 2016, you became a ­California
country clubs of which you are a member. resident upon entering the state in December 2015. As a
• Location of your real property and investments. resident, you are taxed on your income from all sources.
• Permanence of your work assignments in ­California.
Leaving ­California
H Temporary or Transitory Any individual who is a resident of ­California continues to
Purposes be a resident when absent from the state for a temporary
or transitory purpose.
Generally, your state of residence is where you have your An absence from California under an employment-related
closest connections. If you leave your state of residence, contract for a period of at least 546 consecutive days may
it is important to determine if your presence in a different be considered an absence for other than a temporary or
location is for a temporary or transitory purpose. You transitory purpose. See “Safe Harbor” on page 3 for more
should consider the purpose and length of your stay information.
when determining your residency. Military personnel and
spouses, get FTB Pub. 1032. Example 3 – Until September 2016, you were a resident
of ­California. At that time, you declared yourself to be a
resident of Nevada, where you have a summer home. You
Coming into ­California continue to spend six or seven months each year at your
When you are present in California for temporary or home in ­California, which you have retained. You spend
transitory purposes, you are a nonresident of ­California. only three to four months in Nevada and the rest of the
For instance, if you come to ­California for a vacation, or time traveling in other states or countries. You transferred
to complete a transaction, or are simply passing through, your bank accounts to Nevada. However, you continue
your purpose is temporary or transitory. As a nonresident, to maintain your social club and business connections in
you are taxed only on your income from ­California sources. California.

Page 4 FTB Pub. 1031 2016

Determination: Your declaration of residency in another
state does not establish residency in that state. Your I Income Taxable by
closest connections are to California and your absence
from ­California is for temporary or transitory purposes. ­California
You are, therefore, a resident of ­California and are taxed Residents of ­California are taxed on ALL income,
on your income from all sources. ­including income from sources outside ­California.
Example 4 – You and your spouse/RDP are ­California Nonresidents of ­California are taxed only on income
­residents. You accept a contract to work in South America from ­California sources. Nonresidents of ­California are
for 16 months. You lease an apartment near the job site. not taxed on pensions received after December 31, 1995.
Your contract states that your employer will arrange your For more information, get FTB Pub. 1005, Pension and
return back to ­California when your contract expires. Your Annuity Guidelines.
spouse/RDP and your children will remain in ­California Part-year residents of ­California are taxed on all income
­residing in the home you own. received while a resident and only on income from
Determination: You maintain strong ties with ­California ­California sources while a nonresident.
because your spouse/RDP and children remain in your If you use Long Form 540NR, figure your taxable
­California home during your absence. Your intent is to income as if you were a ­California resident for
return to ­California, and your absence is temporary and the entire year. Complete Schedule CA (540NR),
transitory. You remain a ­California resident during your ­California Adjustments — Nonresidents or Part-Year
absence. You are taxed on income from all sources, Residents, column A through column D, to figure total
including income earned in South America. adjusted gross income (AGI). Figure ­California AGI
Example 5 – You receive and accept a permanent job ­applicable to a nonresident or part-year resident on
offer in Spain. You and your spouse/RDP sell your home Schedule CA (540NR), column E.
in ­California, pack all of your possessions and move to If you use Short Form 540NR, complete Short
Spain on May 5, 2016, with your children. You lease an Form 540NR, line 17 to figure total AGI. Figure California
apartment and enroll your children in school in Spain. You AGI applicable to a nonresident or part-year resident on
obtain a driver’s license from Spain and make numerous Short Form 540NR, line 32.
social connections in your new home. You have no Treat specific types of income as explained below.
intention of returning to ­California.
Determination: You are a part-year resident. Through Wages and Salaries
May 4, 2016, you were a California resident. On
May 5, 2016, you became a nonresident. All your income Wages and salaries have a source where the services
while you were a resident is taxable by ­California. While are performed. Neither the location of the employer,
you are a nonresident, only income from ­California where the payment is issued, nor your location when
sources is taxable by ­California. you receive payment affect the source of this income.
Part-year residents include on Schedule CA (540NR),
Example 6 – You are a resident of ­California. You accept column E or Short Form 540NR, line 32 all wages and
a 15-month assignment in Saudi Arabia. You put your salaries earned while a resident, regardless of where
personal belongings, including your automobile, in the services were performed. Nonresidents include the
storage in ­California. You have a ­California driver’s license income for services performed in ­California.
and are registered to vote in ­California. You maintain
bank accounts in ­California. In Saudi Arabia, you stay Example 1 – You are a resident of New York working
in a compound provided for you by your ­employer, and temporarily in California for a New York corporation.
the only ties you establish there are connected to your Determination: Your income earned for services
employment. Upon completion of your assignment, you ­performed in ­California has a ­California source. As a
will return to ­California. nonresident, include this ­California source income on
Determination: You have maintained greater Schedule CA (540NR), column E or Short Form 540NR,
connections with ­California than you have established line 32.
in Saudi Arabia. Your absence is for a temporary or Example 2 – You are a ­California resident. As a
transitory purpose. Therefore, you remain a ­California ­representative for your employer, you spent two weeks
resident. As a California resident, your income from all in Georgia to give training. You were paid by a Georgia
sources is taxable by ­California, including the income that corporation while you were in Georgia.
you earned from your assignment in Saudi Arabia. Determination: Because you are a ­California resident,
Example 7 – You are a resident of California and a you are taxed on all income, regardless of source. The
single taxpayer. You accept a three-year assignment income is taxable by ­California, even though it has a
in Japan. Your assignment in Japan covers the period source in Georgia.
January 1, 2015, through December 31, 2017. You rented
out your residence and put your truck and belongings in Interest and Dividends
storage in California. You maintained your California bank Interest and dividends generally have a source where you
accounts, driver’s license, and voter registration. You have are a resident. However, see Exception below.
less than $200,000 of intangible income during each year.
Upon completion of your assignment, you intend to return Example 3 – You are a resident of Texas and have
to California. You returned to California to visit family no interest from a ­California bank account.
longer than a total of 45 days during 2015 or 2016. Determination: Because you are a resident of Texas, the
Determination: You meet the safe harbor rule. You are a interest has a source in Texas. The interest is not taxable
nonresident during your absence from the state. by ­California.

FTB Pub. 1031 2016 Page 5

Example 4 – You are a resident of ­California and have
interest from a savings account in Oregon.
Pensions and Keoghs
Residents: Distributions from employer-sponsored
Determination: Because you are a ­California resident, and self-employment (Keogh) pension, profit-sharing,
you are taxed on all income, regardless of source. The stock bonus plans, or other deferred compensation
interest is taxable by ­California. arrangements are taxable by ­California regardless of
Example 5 – You are a resident of Montana and have where the services were performed.
dividends from a California corporation. Nonresidents: Distributions are not taxable by ­California
Determination: Because you are a Montana resident, if received after December 31, 1995. Get FTB Pub. 1005
the dividends have a source in Montana. The dividends for more information.
are not taxable by ­California. Example 6 – You were a resident of ­California when you
Exception: Interest and dividends have a source in earned your pension. You retired during 2016 and moved
­California if the account or security is used in a trade or permanently to New Mexico. After becoming a resident of
business or pledged as security for a loan, the proceeds New Mexico, you begin drawing your pension.
of which are used in a trade or business in ­California. For Determination: Since you are a nonresident, the
special rules regarding qualifying investment securities, ­distribution is not taxable by ­California because you
refer to California Revenue and Taxation Code (R&TC) received it after December 31, 1995.
­Section 17955.
Example 7 – You lived and worked in Ohio. You retired
Business Income (or Loss) in Ohio and received your first pension check on
January 1, 2016. You moved permanently to California on
A nonresident’s income from California sources includes July 1, 2016.
income from a business, trade, or profession carried
on in California. If the nonresident’s business, trade, or Determination: You became a California resident on
profession is carried on both within and outside California, July 1, 2016. Your pension income received beginning
the income sourced to California may be based only July 1, 2016, is taxable by California because California
on the business conducted within California, or may residents are taxed on all income, regardless of source.
be determined by using the apportionment formula for
corporations engaged in multistate businesses. Lump-Sum Distributions
California uses a mandatory market assignment method Residents: Lump-sum distributions are taxable by
and single-sales factor apportionment to apportion ­California. Residents of ­California are taxed on all
business income to California. A nonresident may have ­income, regardless of source. Therefore, the distribution
California sourced income or apportionable business is taxable even if it is attributable to services performed
income if receiving income from sales or services outside of ­California and accrued prior to your becoming
sourced to California. Such income includes: a ­California resident.
1. Sales of services to the extent that the purchaser of the Nonresidents: Lump-sum distributions from a qualified
service receives the benefit of the service in California. plan or annuity after December 31, 1995, are not taxable
by ­California. However, lump-sum distributions, derived
2. Sales of intangible property to the extent that the from a California source, received from most nonqualified
intangible property is used in California. For marketable plans after December 31, 1995, continue to be taxable by
securities, the sales are in California if the customer is ­California. For more information, get FTB Pub. 1005.
in California.
Example 8 – You lived and worked in New York. You
3. Sales from the sale, lease, rental, or licensing of real retired and moved to California and became a resident.
property if the real property is located in California. Prior to relocating, you elected to receive a lump-sum
4. Sales from the rental, lease, or licensing of tangible distribution from your qualified pension plan. You received
personal property if the property is located in California. the distribution after you became a ­California resident.
Refer to Cal.Code Regs., tit.18 section 17951‑4 to Determination: The distribution is taxable by ­California
determine when income from business, trade or profession because California residents are taxed on all income,
should be sourced according to apportionment rules. Also regardless of source (Appeal of Ralph G. and Martha
see R&TC Section 25136 and Cal. Code Regs., tit. 18 E. McQuoid, ­California State Board of Equalization,
section 25136-2 or California Schedule R, Apportionment May 11, 1989).
and Allocation of Income, for more information. Example 9 – You were a ­California resident and worked
Withholding may be required on a nonresident’s business for a corporation in California. You moved to Ohio during
income if an exemption, waiver, or reduction is not 2016 and elected to take a lump-sum distribution from
certified or approved. your qualified pension plan. You received the distribution
after you became a resident of Ohio.
Determination: Since you are a nonresident, the
distribution is not taxable by ­California because you
received it after December 31, 1995.

Page 6 FTB Pub. 1031 2016

Individual Retirement Account (IRA), funds made in the normal course of business are exempt
from backup withholding. For additional information on
Roth IRA, SIMPLE IRA, Simplified California backup withholding, go to ftb.ca.gov and
Employee Pension (SEP), and Keogh search for backup withholding.
For more information regarding California withholding
Distributions requirements, get FTB Pub 1016 and Pub 1017, Resident
IRA, Roth IRA, SIMPLE IRA, SEP, and Keogh distributions and Nonresident Withholding Guidelines.
received after becoming a nonresident are not taxable by Write to:
­California if received after December 31, 1995.
WITHHOLDING SERVICES AND COMPLIANCE
Distributions from a SEP from contributions made after FRANCHISE TAX BOARD
1986 are taxed by California in the same manner as PO BOX 942867
pension and Keogh distributions. Distributions from SACRAMENTO CA 94267-0651
­contributions made before 1987 are taxed by ­California
in the same manner as IRA distributions. For more Telephone: 888.792.4900 from within the United States
information, get FTB Pub. 1005. 916.845.4900 from outside the United States
FAX: 916.845.9512
Sale of Real Estate
The gain or loss from the sale of real estate has a source
Partnership, S Corporation, Limited
where the property is located. If you sell your ­California Liability Company (LLC), and Trust
real estate and move out of state, the gain is taxable by Income (Loss)
­California. The gain is taxable by ­California even if the
real estate is sold when you are a nonresident. When a partner is a part-year resident during any part of
the partner’s or the partnership’s taxable year, the part‑year
Example 10 – You are a resident of Idaho. You sold resident must divide his or her taxable year into two distinct
undeveloped real estate located in ­California at a gain. periods. For the period during which the part‑year resident
Determination: Because the property is in ­California, was a resident of this state, all items of income and
the gain is California source income. As a nonresident, deductions are to be included in the partner’s California
include this California source income on Schedule CA taxable income. For the period during which the part-year
(540NR), column E. resident was a nonresident of this state, only gross income
Example 11 – You are a resident of ­California. You sold and deductions realized from sources within this state
real estate located in England at a gain. are included in the partner’s California taxable income.
Determination: Because you are a ­California resident, Therefore, all California-sourced items of income and loss
you are taxed on all income, regardless of source. The realized by the partnership during the partnership’s taxable
gain on the sale is taxable by California. year when the partner was a nonresident of this state are
included in California taxable income. This also applies
Example 12 – You are a resident of Nevada. You own to shareholders of an S corporation, partners of an LLC
residential rental property located in ­California. Your classified as a partnership, and beneficiaries of a trust.
property has always shown a loss. You sold the property See FTB Legal Ruling 2003-1, FTB Pub. 1017, and FTB
for a gain. Pub. 1100 for more information.
Determination: Because the property is located in Example 13 – Kim, a nonresident calendar year
­California, the gain on the sale is taxable by ­California. individual taxpayer, has a 50% interest in partnership (P).
Since rental real property is classified as a passive P has a December 31 year-end. P conducts business
activity, the sale “triggers” the release of suspended within and outside California. For the fiscal year ended
losses incurred in taxable years beginning on or after December 31, Kim’s Schedule K-1 (565) from P shows
January 1, 1987. The suspended losses may be used to that Kim has $10,000 of taxable income from all
offset any gain from the sale or income from other passive sources, $5,000 of which is sourced to California. On
activities. For more information, get form FTB 3801, September 15, Kim became a resident of California.
Passive Activity Loss Limitations, and instructions or
FTB Pub. 1016, Real Estate Withholding Guidelines. Determination: Kim was a nonresident for 257 days
of P’s fiscal year and a resident for 108 days. Kim will
include in California taxable income for the year, $6,480
Withholding Services and Compliance of income from P, computed as follows:
Withholding may be required on income with a California • For the portion of the year Kim was a nonresident:
source. This includes, sales of ­California real estate, 257/365 X $ 5,000 = $3,521
income allocations or distributions from S corporations • For the portion of the year Kim was a resident:
and partnerships, and other payments of ­California 108/365 X $10,000 = $2,959
source income paid to nonresidents. Note: Withholding is
not always required. An exemption, reduction, or waiver Example 14 – Hope, a calendar year individual resident
can be filed. of California, owns a 50% share of the S corporation
(Buddy Corp.). Buddy Corp. has an October 31 year-
For taxable years beginning on or after January 1, 2010, end. Buddy Corp. conducts business within and
with certain limited exceptions, payers that are required outside California. For the October 31 year‑end, Hope’s
to withhold and remit backup withholding to the Internal Schedule K-1 (100S) from Buddy Corp. shows that Hope
Revenue Service (IRS) are also required to withhold and has $8,000 of taxable income from all sources, $3,000 of
remit to the FTB. The California backup withholding rate which is sourced to California. On June 10, Hope became
is 7% of the payment. For California purposes, dividends, a nonresident ­taxpayer.
interests, and any financial institution’s release of loan

FTB Pub. 1031 2016 Page 7

Determination: Hope was a nonresident for 144 days of
Buddy Corp.’s fiscal year-end and a resident for 221 days. J Specific Professions
Hope will include in California taxable income for the year,
$6,028 of income from Buddy Corp., computed as follows: Military and Spouses
• For the portion of the year Hope was a nonresident: Military personnel and spouses should get FTB Pub. 1032.
144/365 X $3,000 = $1,184
• For the portion of the year Hope was a resident: Civilians Working for the Military
221/365 X $8,000 = $4,844 The rules for military personnel do not apply to civilians
working for the military. Determine your residency status
Sale of Stocks and Bonds and the source of your income based on the guidelines
The gain or loss from the sale of stocks or bonds has a previously explained in Sections E through I.
source where you are a resident at the time of the sale.
If buying and selling stocks and bonds is your trade or Career Appointees in the U.S. Foreign
business, see “Business Income (or Loss)” on page 6 for
more information. Service
Example 15 – You are a resident of Oregon and sell stock The rules for military personnel and spouses do not
of a ­California corporation at a gain. apply to career appointees in the U.S. Foreign Service.
Determine your residency status and the source of your
Determination: Because you are an Oregon resident, income based on the guidelines previously explained in
the gain has an Oregon source. The gain is not taxable by Sections E through I.
­California.
Example 16 – You are a resident of ­California and sell Airline Employees
stock of a Kansas corporation at a gain. The wages of nonresident flight personnel (e.g. pilot,
Determination: Because you are a ­California resident, copilot, flight attendant) are not taxable by California
you are taxed on all income, regardless of source. The unless more than 50% of the individual’s scheduled flight
gain is taxable by ­California. time is in California. If more than 50% of the scheduled
flight time is in California, wages are apportioned to
Installment Sales California based on the ratio of time spent in California to
California taxes installment gains received by a the total scheduled flight time.
nonresident from the sale of tangible property on a source Flight personnel who are California residents are taxed
basis. Real property is sourced and taxed based upon on all wages received regardless of where the flight time
where the property is located. California taxes residents is spent.
on all income regardless of source. The chart below
indicates the tax treatment for installment payments Interstate Rail and Motor Carrier
received by residents, nonresidents, and individuals who
changed residency: Employees
The wages of nonresident railroad employees or truck
Residency Sold California Out-of-State drivers whose regularly assigned duties are performed in
Status Property Property Property two or more states may only be taxed by the individual’s
Always a state of residence.
Anytime Taxable Nontaxable
Nonresident
Railroad employees or truck drivers who are California
Always a Anytime Taxable Taxable
residents are taxed on all wages received regardless of
Resident where the duties are performed.
2001 and prior -
Former Prior to
Taxable
Taxable Merchant Seamen
Resident moving out 2002 and after - A merchant seaman who is in ­California only because
Nontaxable this state is a port-of-call and who maintains no other
2001 and prior - contact or connections with this state, is a nonresident.
Former Prior to Nontaxable However, a seaman who maintains close connections
Taxable with ­California remains a ­California resident while at sea.
Nonresident moving in 2002 and after -
Taxable Under such circumstances, the seaman’s absence is for a
temporary or transitory purpose.
For the treatment of interest earned on an installment Example 1 – You are a merchant seaman and spend six
sale, see “Interest and Dividends” on page 5. to ten months a year aboard a ship outside ­California. You
For more information regarding the taxation of installment spend your off-duty time in ­California. You own a home in
sales, get FTB Pub. 1100. ­California where your spouse/RDP resides. You vote and
bank in California. You have a ­California driver’s license
Reimbursement of Moving Expenses and your automobile is registered in ­California.
The source of reimbursed moving expenses is the state to Determination: You are a resident of ­California. Your time
which you move, regardless of your residency at the time at sea is temporary and transitory. As a resident, all your
the reimbursement is made. income is taxable by California, including your income
earned while at sea (Appeal of James H. and Leila P. Pike,
­California State Board of Equalization, ­February 1, 1983).

Page 8 FTB Pub. 1031 2016

Example 2 – You are a merchant seaman and spend
eight to ten months a year aboard a ship outside
Income Tax Clearance
­California. You are single and have no dependents. You A federal income tax clearance does not affect your
spend 50% of your off-duty time or 10% of your total California tax liability. The FTB does not issue tax
time in ­California. You return to ­California only when your clearance certificates for individuals in this situation.
employment brings you here. When visiting ­California,
you stay in hotels. You have a California bank account Foreign Tax Credit or Foreign Earned
in joint tenancy with your father. You have a California Income Exclusion
driver’s license, but no car. You do not own real property
in California. California does not allow a foreign tax credit or a foreign
earned income exclusion. If you claimed the foreign
Determination: You are a nonresident of ­California. earned income exclusion on your federal return, include
Your ties to California are not substantial and your the amount of your foreign earned income exclusion on
time in ­California is temporary or transitory (Appeal of Schedule CA (540NR), line 21f, column C.
Richard W. Vohs, ­California State Board of Equalization,
­September 17, 1973).
L Meaning of Domicile
K Residents of or Individuals The term “domicile” has a special legal definition that is
not the same as residence. While many states consider
in Foreign Countries domicile and residence to be the same, ­California makes
If you are a resident of a foreign country and perform a distinction and views them as two separate concepts,
services in California and/or receive income from even though they may often overlap. For instance, you
­California sources, you may have a California income may be domiciled in ­California but not be a ­California
tax filing requirement even if you do not have a federal resident or you may be domiciled in another state but be
filing requirement. a ­California resident for income tax purposes.
Domicile is defined for tax purposes as the place
Tax Treaty where you voluntarily establish yourself and family,
A tax treaty between the U.S. Government and a foreign not merely for a special or limited purpose, but with a
country may exempt some types of income from federal present intention of making it your true, fixed, permanent
taxation. Generally, unless the treaty specifically excludes home and principal establishment. It is the place
the income from taxation by California, the income where, whenever you are absent, you intend to return.
is taxable. The maintenance of a marital abode in California is a
significant factor in establishing domicile in California.
Example 1 – You are a resident of China doing research
at a university in California and received wages of
$15,000 for teaching and doing research. For federal
Change of Domicile
income tax purposes, the wages are excludable due to You can have only one domicile at a time. Once you
the tax treaty between the United States and China. acquire a domicile, you retain that domicile until you
acquire another.
(Amounts received for teaching, research, or other
services performed by a student are not excludable as A change of domicile requires all of the following:
a qualified scholarship or fellowship, even if the services • Abandonment of your prior domicile.
are required as a condition of receiving the scholarship • Physically moving to and residing in the new locality.
or fellowship.) • Intent to remain in the new locality permanently or
Determination: Although the wages may be exempt indefinitely as demonstrated by your actions.
from income for federal income tax purposes, the wages
will be taxable by California. The tax treaty specifically
states that the taxes covered by the tax treaty are
M Married/RDP Filing
federal income taxes imposed by the Internal Revenue Separate Returns
Code. Tax treaties between the United States and other
countries which expressly limit their application to federal
income taxes do not apply to California. Nonresidents
Division of Income
are taxed by California on wages for services performed California is a community property state. The domicile
in ­California. Since you received wages for services of the spouse/RDP earning the income determines
­performed in California, the wages are taxable by the division of income between spouses/RDPs when
­California. Include the wages of $15,000 on Schedule CA separate returns are filed. Each spouse/RDP must follow
(540NR), Part II, line 7, column C or Short Form 540NR, the laws in his or her state of domicile to determine
line 12. whether income is separate or community. When
separate returns are filed, you and your spouse/RDP
must each report half of the community income plus all
of your separate income on your return. See Section L,
Meaning of Domicile

FTB Pub. 1031 2016 Page 9

Community Property Expenses that are not attributable to any specific income,
such as medical expenses, are deductible by the spouse/
Community property is all of the property that is not separate RDP who pays them. If these expenses are paid from
property acquired by a husband/RDP or wife/RDP or both community funds, the deduction is divided equally between
while domiciled in a community property state, U.S. territory, you and your spouse/RDP.
or country.
If one spouse/RDP itemizes deductions, both
Each spouse/RDP owns one-half of all community spouses/RDPs must itemize deductions, even if the
property. If property cannot be specifically identified as itemized deductions of one spouse/RDP are less than the
separate property, it is considered community property. standard deduction.
The following are community property states and U.S.
territories (countries not listed): Exemption Credits
Arizona New Mexico When you file separate returns, you and your spouse/RDP
California Wisconsin must each claim your own personal exemption credit.
Idaho Texas When you have more than one dependent supported by
Louisiana Washington community funds, you and your spouse/RDP may divide
Nevada Puerto Rico the number of dependents between you in any manner
Guam Northern Mariana Islands you choose. However, you may not split the credit for any
one dependent.
Community Income
Income generated from community property is community Division of Income, Residents of
income. Community income also includes compensation
for services if the spouse/RDP earning the compensation California – Examples
is domiciled in a community property state. Example 1 – You and your spouse/RDP are residents of
Divide the community income equally between you and California. You earned $15,000 in wages. Your spouse/
your spouse/RDP when separate returns are filed. RDP earned $30,000. In addition to wages, you have stock
that you inherited. The stock is in your name only, and you
Separate Property keep the stock and the dividend income separate from
community funds. You received $5,000 in dividends. You
Separate property includes the following: have decided to file separate returns.
• Property owned separately by each spouse/RDP before Determination: You and your spouse/RDP each have
marriage or registering as a domestic partnership. $22,500 in community income: ($15,000 + $30,000 =
• Property received separately as gifts or inheritances. $45,000 ÷ 2). In addition to your $22,500 in community
• Property purchased with separate property funds. income to be reported, include the $5,000 of separate
• Money earned while domiciled in a separate property income from dividends, making your total income $27,500.
state.
• All property declared separate property in a valid Example 2 – You and your spouse/RDP are residents of
agreement. ­California. For the first six months of the year, you earned
wages of $30,000. Your spouse/RDP did not earn any
Maintain separate property separately. If the property income. On June 30, you and your spouse/RDP physically
or the income from the property is used for community separated with no intention of reconciliation. During the
purposes, or commingled, it could lose its separate last six months, you earned wages of $30,000 and your
property character, overriding any agreements. spouse/RDP earned wages of $10,000. You have decided
to file separate returns.
Separate Income Determination: For the first six months of the year, your
Generally, income from separate property is income of the earnings were community income. You and your
spouse/RDP who owns the property. When filing, you and spouse/RDP must each report on your individual returns
your spouse/RDP report your income(s) separately on your one half of the income earned during this period. When
separate returns. you and your spouse/RDP physically separated with no
intention of ­reconciliation, your community income status
Deductions ended. Therefore, from July 1 through December 31,
Expenses incurred to earn or produce community business the income earned by you and your spouse/RDP was
or investment income are generally divided equally between separate income.
you and your spouse/RDP. Each spouse/RDP is entitled to You Your Spouse/RDP
deduct half of the expenses of the business or investment Community
expenses on his or her separate return. Jan.–June $15,000 $15,000
Expenses incurred to earn or produce separate business Separate
or investment income are deductible by the spouse/RDP July–Dec.  30,000  10,000
who owns the investment generating the income, provided Total $45,000 $25,000
that spouse/RDP pays the expenses from his or her
separate funds.

Page 10 FTB Pub. 1031 2016

Example 3:
John and Jackie are full-year nonresidents of California. Jackie earned $30,000 in wages for services performed in her
state of residence. Jackie also sold property in California that was her separate property. She had a $100,000** gain. John
received a pension distribution of $10,000 in 2016 based on services performed in California. For California ­purposes,
John’s taxable pension distribution for the year is 0.* John has a rental house in California that is his separate property.
His net rental income was $1,000.** John and Jackie filed separate federal returns, therefore, they file separate California
returns. The following situations show how their income should be divided based on domicile.

1. John and Jackie are both John Jackie

domiciled in community
property states. Schedule CA (540NR), Schedule CA (540NR), Schedule CA (540NR), Schedule CA (540NR),
column D column E column D column E
TOTAL
WAGES $ 30,000 $ 15,000 $    0 $ 15,000 $      0
GAIN 100,000 0 0 100,000 100,000
PENSION 10,000 5,000 0 5,000 0
RENTAL INCOME 1,000 1,000 1,000 0 0

John would complete his Schedule CA (540NR) as shown in the partial view that follows.
Part II Income Adjustment Schedule A B C D E
Federal Amounts
Subtractions Additions Total Amounts CA Amounts
Section A — Income (taxable amounts
See instructions See instructions Using CA Law As (income earned or
(difference from your federal
(difference If You Were A received as a CA
return)
between CA and between CA and CA Resident resident and income
federal law) federal law) (subtract column B earned or received
from column A; from CA sources as
add column C to a nonresident)
the result)
7 Wages, salaries, tips, etc. See instructions
before making an entry in column B or C . . . . . . . 7 $15,000 $15,000

16 Pensions and annuities. See instructions.

(a) ___$10,000___ . . . . . . . . . . . . . . . . . . (b) 5,000 5,000
17 Rental real estate, royalties, partnerships,
S corporations, trusts, etc. . . . . . . . . . . . . . . . . . . 17 1,000 1,000 1,000

*Nonresidents are not taxed on pension income.

**This income is from separate property; therefore, it is not divided even when domiciled in a community property state.

2. John and Jackie are John Jackie

domiciled in separate
property states. Schedule CA (540NR), Schedule CA (540NR), Schedule CA (540NR), Schedule CA (540NR),
column D column E column D column E
TOTAL
WAGES $ 30,000 $      0 $    0 $ 30,000 $      0
GAIN 100,000 0 0 100,000 100,000
PENSION 10,000 10,000 0 0 0
RENTAL INCOME 1,000 1,000 1,000 0 0
3. John is domiciled in a John Jackie
community property state
Schedule CA (540NR), Schedule CA (540NR), Schedule CA (540NR), Schedule CA (540NR),
and Jackie in a separate
column D column E column D column E
property state.
TOTAL
WAGES $ 30,000 $      0 $    0 $ 30,000 $      0
GAIN 100,000 0 0 100,000 100,000
PENSION 10,000 5,000 0 5,000 0
RENTAL INCOME 1,000 1,000 1,000 0 0
4. John is domiciled in a John Jackie
separate property state
and Jackie in a community Schedule CA (540NR), Schedule CA (540NR), Schedule CA (540NR), Schedule CA (540NR),
property state. column D column E column D column E
TOTAL
WAGES $ 30,000 $15,000 $    0 $ 15,000 $      0
GAIN 100,000 0 0 100,000 100,000
PENSION 10,000 10,000 0 0 0
RENTAL INCOME 1,000 1,000 1,000 0 0

FTB Pub. 1031 2016 Page 11

How To Split Income on Long Form 540NR
Use this chart as a guide to split community income with your spouse/RDP based on domicile if you are married/RDP and
file Long Form 540NR.
If you are eligible to use the Short Form 540NR, total income will be included on Short Form 540NR, line 17; California
income will be included on Short Form 540NR, line 32. Schedule CA (540NR) will not be used.
Reminder: Include all of your separate income in addition to your half of the community income when filing. See “Division
of Income” on pages 9, 10, and 11.
TYPE YOUR YOUR Long Form 540NR, Long Form 540NR, Long Form 540NR,
DOMICILE SPOUSE’S/RDP’s Married/RDP Filing Jointly Married/RDP Filing Separately Married/RDP Filing Separately
DOMICILE (you) (your spouse’s/RDP’s)

Schedule CA (540NR), Schedule CA (540NR), Schedule CA (540NR),

column A through column D: column A through column D: column A through column D:
All income Half of all income Half of all income

1
All deductions Half of all deductions Half of all deductions
Community Community
Property Property
State State Schedule CA (540NR), Schedule CA (540NR), Schedule CA (540NR),
column E: column E: column E:
All income taxable Half of all income Half of all income
by California taxable by California taxable by California

Schedule CA (540NR), Schedule CA (540NR), Schedule CA (540NR),

column A through column D: column A through column D: column A through column D:
All income All your income All your spouse’s/RDP’s income

2
Separate Separate All deductions All your deductions All your spouse’s/RDP’s
Property Property deductions
State State Schedule CA (540NR), Schedule CA (540NR), Schedule CA (540NR),
column E: column E: column E:
All income taxable All your income taxable by All your spouse’s/RDP’s income
by California California taxable by California

Schedule CA (540NR), Schedule CA (540NR), Schedule CA (540NR),

column A through column D: column A through column D: column A through column D:
All income Half of your income All your spouse’s/RDP’s income
All deductions Half of your deductions plus half of your income
All your spouse’s/RDP’s

3
Community Separate deductions plus half of your
Property Property deductions
State State Schedule CA (540NR), Schedule CA (540NR), Schedule CA (540NR),
column E: column E: column E:
All income taxable Half of your income taxable by All your spouse’s/RDP’s income
by California California taxable by California plus
half of your income taxable by
California

Schedule CA (540NR), Schedule CA (540NR), Schedule CA (540NR),

column A through column D: column A through column D: column A through column D:
All income All your income plus half of your Half of your spouse’s/RDP’s
All deductions spouse’s/RDP’s income income

4
All your deductions plus half of Half of your spouse’s/RDP’s
Separate Community your spouse’s/RDP’s deductions deductions
Property Property
State State Schedule CA (540NR), Schedule CA (540NR), Schedule CA (540NR),
column E: column E: column E:
All income taxable All your income taxable by Half of your spouse’s/RDP’s
by California California plus half income taxable by California
of your spouse’s/RDP’s income
taxable by California
For information on income taxable by California, see Section I on page 5.

Page 12 FTB Pub. 1031 2016

N Avoid Common Mistakes P Internet and Telephone
on Long Form 540NR Assistance
Avoid making time-consuming and costly mistakes by Telephone assistance is available year-round from
reporting your AGI from all sources as if you were a 7 a.m. until 5 p.m. Monday through Friday, except holidays.
resident of ­California for the entire year. Hours subject to change.
California tax returns start with federal AGI. However, Website: ftb.ca.gov
there are differences between ­California and federal tax Telephone: 800.852.5711 from within the United States
law. Use Schedule CA (540NR) to convert your federal 916.845.6500 from outside the United States
AGI (column A) to your total AGI from all sources under IRS: 800.829.1040 for federal tax questions, call
­California law (column D) as follows: the IRS
• Copy your federal income, adjustments, and ­deductions TTY/TDD: 800.822.6268 for persons with hearing or
to the applicable lines on Schedule CA (540NR), speech impairments
column A. Asistencia Por Internet y Teléfono
• Subtract income that is taxable under federal law but Asistencia telefónica está disponible durante todo el año
not under ­California law (such as ­California Lottery desde las 7 a.m. hasta las 5 p.m. de lunes a viernes,
winnings and social security benefits) by entering it on excepto días feriados. Las horas están sujetas a cambios.
Schedule CA (540NR), column B.
• Add income excluded on the federal return (such as Sitio web: ftb.ca.gov
foreign income or income from non-California ­municipal Teléfono: 800.852.5711 dentro de los Estados Unidos
bonds), unless the income is specifically excludable 916.845.6500 fuera de los Estados Unidos
under ­California law, by entering it on Schedule CA IRS: 800.829.1040 para preguntas sobre
(540NR), column C. impuestos federales, llame al IRS
• Do not subtract non-California source income to TTY/TDD: 800.822.6268 para personas con
determine your total AGI from all sources under discapacidades auditivas o del habla
­California law.
When you figure your ­California AGI on Schedule CA
(540NR), column E, be sure to include the following:
• All income from every source while you were a ­resident
of ­California.
• Income from ­California sources while you were a
nonresident.
For more information, get the instructions to Schedule CA
(540NR).

O Double-Taxed Income
If you paid taxes to ­California and to another state on the
same income, you may qualify for a tax credit for taxes
paid to another state. Get California Schedule S, Other
State Tax Credit.

FTB Pub. 1031 2016 Page 13