My wife and I retired with a portfolio of stocks purchased
20 or more years ago. Since we live in California, I understand that in addition to the IRS 15% capital gains tax we must pay a 10% state tax on any sales profit. We are considering establishing our residency in Nevada and then selling our stock. The big question is, if we do not like Nevada living and return to CA at a later date, can CA bill us for the lost 10% tax.
If you live in Nevada for the entire calendar year in which you sell the stock, and have left CA completely (sold all real estate there, gotten Nevada licenses, registered to vote in Nevada, etc.) then the income isn't taxed by CA. If you move to CA, they don't automatically get to collect taxes on all the income you ever had before you moved there. Seth
You will be nonresidents of California if you (a) abandon your California home -- move out of it, sell up, etc.; (b) move to and reside in Nevada -- buy or rent a home, settle down, live there; and (c) most importantly, intend to remain in Nevada permanently or indefinitely. If you sell your stocks as Nevada residents, you will not owe any California income tax on the gain. It's that third requirement that could upset your applecart. Actions speak louder than words. Whatever you claim your intent to have been, if you move back to California in a year or two, you could be held to have been absent for a temporary purpose and to have remained California residents during your absence. The safe approach is to remain outside California at least until the 4- year statute of limitations has expired on the year in which you sold the stock. As of now, California's highest marginal tax rate (which applies to both ordinary income and capital gains) is 9.3%, not 10%. Katie in San Diego
Please see the previous replies to the same question from the same OP in this group a month ago, as well as the more recent replies to the same question from the same OP in misc.taxes in the last day or two. Or better yet, check the google profile... Being a full-year resident (entire calendar year) of Nevada has nothing to do with it -- if they changed residency to Nevada on one day, they could sell the stock the next day and not be subject to CA tax. Nor does "moving" have anything directly to do with it, that is just one of a number of factors that determine strength of ties to one place or another. The real question is, do they intend to stay permanently or indefinitely in Nevada, and have they severed all ties to California, and do their actions back it up? If they are not yet sure they "like Nevada living", then it sounds to me like their purpose in Nevada could be temporary or transitory... to see how they like living there. Therefore they would not have relinquished their CA residency at that point. As a practical matter, it wouldn't surprise me if the CA tax authority is alert for this situation (gee, do you think anyone else has ever had this idea?) and I do know they exchange data with the IRS.
-Mark Bole
Wouldn't that be "indefinite"? They have no plans to leave Nevada, but they're aware that they might later decide to. ("I might not like that place and so might later decide to move away" applies to just about every time anybody moves "permanently", doesn't it?)
If they break ties with CA and have no plans to return, I think they have. Seth
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