Tax
Aug. 16, 2022
Interests beware: Franchise Tax Board conflates Federal Gain Recharacterization Rules for hot assets with State Sourcing Rules
Sellers of a business with California connections need to be ever more vigilant in the reporting, negotiation and structuring of their transactions if they seek to minimize state taxation on a sale.
Nonresidents of California generally are not taxed by California on gain resulting from the sale of partnership interests. Under new guidance issued by the California Franchise Tax Board ("FTB"), nonresidents can now expect to be subject to California tax on a portion of such gain with respect to any partnership that has been filing a tax return with California.
In Legal Ruling 2022-02 issued by the FTB's Legal Division FTB, the FTB assert...
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