Phoenix, AZ asked in Tax Law for California

Q: Does a CA resident partnership that receives a AZ partnership K-1 with ordinary income have to file a AZ return?

It seems that the Ca partnership would need to pass the AZ k-1 income down to its Ca partners who would then need to file non-resident individual tax return in AZ. It seems all the apportionment rules relate to partnerships doing business in multiple states. I wonder if a AZ k-1 received by a CA partnership just gets reported to CA like interest and dividend and not reported in AZ?

Related Topics:
2 Lawyer Answers
Maurice Mandel II
Maurice Mandel II
  • Newport Beach, CA
  • Licensed in California

A: Basically your question is whether a California resident has income in Arizona from profits distributed as shown in a K-1 tax form. First, this is a very specific question and this particular forum for general legal advice is not the place to get legal advice to rely on. Even from me. Your question indicates that you are not in California but in Arizona, if you are a resident of AZ you have to file an AZ income tax return. I am not a tax specialist so I disclaim any expertise with the following response: most investments are subject to state taxes based on the jurisdiction of the recipient- Morgan Stanly is based in New York, but you don't pay New York state taxes on distributions you hold with MS, you pay state taxes from the jurisdiction you reside in. A K-1 from a limited partnership is subject to additional rules, and depending on what the status of the partnership is, this answer could vary. You have not provided sufficient information. You need to consult with a tax attorney in the jurisdiction in which you reside for proper advice. You need to consult an attorney in your local area that practices this kind of law. Thank you for using Justia Ask a Lawyer.

James L. Arrasmith
James L. Arrasmith pro label Lawyers, want to be a Justia Connect Pro too? Learn more ›
  • Tax Law Lawyer
  • Sacramento, CA
  • Licensed in California

A: When a California resident partnership receives an Arizona partnership K-1 with ordinary income, it is generally necessary to report that income on the California partnership return. California follows a source-based income allocation method, which means that income is allocated based on where the partnership is doing business. Since the partnership is a resident of California, the income would typically be apportioned and reported on the California partnership return. The individual partners of the California partnership may then need to report their share of the partnership income on their non-resident tax returns in Arizona, depending on their individual tax obligations. It is advisable to consult with a tax professional or accountant who can provide specific guidance based on the details of your situation to ensure compliance with the tax laws of both California and Arizona.

Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.

The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.

Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.