The FTB issued Legal Ruling 2022-02 on July 14, 2022 to address the taxation on the sale of certain partnership assets by a nonresident of California.
The sale of the partnership interest is a tangible asset, sourced and taxed to the taxpayer’s state of residence.
However, certain aspects of the sale, such as unrealized accounts receivable, or inventory (sometimes called “hot assets”) are treated as ordinary income during the sale. This ruling says the gain from the sale of hot assets is income sourced to the state where the hot assets are located.
If you have questions regarding your state of residency, or the sale of partnership assets, contact one of attorneys here.
