Topic 8: California State Tax / California Tax, Part I Quiz
As a resident of Texas, an individual exchanged a condominium located in California for like-kind property located in Texas. They realized a gain of $15,000 on the exchange that was properly deferred under IRC section 1031. They then sold the Texas property in a non-deferred transaction and recognized a gain of $20,000. What is the California gain and is tax due to California?
a. Because Texas does not have a state income tax, the $15,000 deferred gain is not taxed by California
b. The $15,000 deferred gain has a source in California and is therefore taxable in California, regardless of where the property owner now lives
c. Not enough information is given to make a determination
d. The California gain is $15,000 and is taxed by California but only if and when the property owner moves back to California