S-Corp income from another state for California resident

Of course Ohio can tax the gain. If you have income from an Ohio source, Ohio can and will tax it. If you owe tax to Ohio, and California taxes the same income, California will give you credit for the Ohio tax. For California purposes, if you were a full-year resident in

2006, you recalculate carryforward items as if you had been a California resident for all relevant years. So you can use the suspended losses, but you must recompute the amounts to account for any differences between California and federal law -- just as the current year income must be adjusted. If you were a nonresident for any part of 2006, the rules get pretty complicated. The FTB has an excellent publication on this, Pub. 1100 It includesexamples relating to partnerships, though not S corps; theresult should be about the same. Basically, for purposes ofCol. D of the Schedule CA-540NR (total income from allsources as if California resident for all relevant periods),you would include the S corporation income and the suspendedlosses, both recomputed by California's rules. In Col. E,you would include only the S corporation income that aroseduring the part of the year when you were a resident (eitherprorate by the days or months, or actual cutoff), and coulduse the suspended losses only to that extent. It isn'tclear to me how this would affect the remaining loss, ifany, that could be carried to subsequent years forCalifornia purposes. As for Ohio, it seems logical that the losses could be used to offset the Ohio-source gains. However, Ohio law is complicated (like California, Ohio computes taxable income by its own rules, rather than starting with federal taxable income or AGI and specifying certain adjustments), and I haven't looked into it. You may need two advisers for this one -- one in Ohio and one in California. Katie in San Diego