I ran a single-member LLC using the cash accounting method with no employees in NH from 1/1/2006 to 12/1/2006. I closed the business and moved to CA on 12/4/06 to take up fulltime employment. I received the last payment check for the business on 1/11/07.
1) Since the business is closed, can I include this check in the 2006 final federal and states tax return? 2) Am I part-year resident of both NH and CA in 2006? Thank you LC
As a cash method taxpayer, you recognize the income in the year you receive it. You received it as a California resident, so it will be subject to tax (to the extent of the gain) in 2007, not 2006. Even if you had received it in
2006 after December 4, it would have been subject to California tax. Yes, you are a part-year resident of each state for 2006.Katie in San Diego
Not sure why you would want to. As 2007 business income, you won't have to pay all the taxes on it until a year from now (although first-quarter estimated tax payment may partially negate that benefit). You could also justify the deduction of on-going business expenses, including depreciation, at least through the date of receipt of this income.
Based on what you said, yes.
-Mark Bole
CA has a much higher state income tax than NH.
Unfortunately, he can't.
Seth
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