I am in a partnership located out of Iowa while I reside in a non-income tax state. I just recived a letter from Iowa Department of Revenue asking me to file 2010 Iowa state tax return due to this K-1. The partnership consist of buying and selling of stock and options only and I'm a limited partner.
Based on my research thus far, trading activity without exchanging of physical good and/or service aren't usually considered to be "sourced" in that state for non-residents.
So the question is two-fold, do I have to file and does trading activities considered to be "sourced" in that state.
state. I just recived a letter from Iowa Department of Revenue asking me to file 2010 Iowa state tax return due to this K-1. The partnership consist of buying and selling of stock and options only and I'm a limited partner.
good and/or service aren't usually considered to be "sourced" in that state for non-residents.
considered to be "sourced" in that state.
My interpreation of Iowa law and there instructions for filing a partnership rturn leads me to conclude that a nonresident would have to have $1000 of net income from property located in Iowa or from a business or trade operating in Iowa AND $9000 ($13,500 joint) of all source income. Investment income (what I call intangibles) such as interest, dividends, gains and losses on securities do not come from property located in Iowa. As a nonresident partner you should not be required to file an Iowa tax return.
See page 19 of the report called A Guide To Doing Business in Iowa (2011) by Davis, Brown, Koehn, Shors & Roberts, PC, Attorneys At Law.
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However, to the extent a non-resident limited partner received a distributive share of investment income from an Iowa partnership, the non-resident limited partner has no Iowa reporting requirements and will not be subject to Iowa tax. To the extent a limited partner received an allocation of investment income derived from real property located in Iowa, that income will be subject to Iowa reporting and tax.
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