Contents

Franchise Tax Board

State of California

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 BasicFilingRequirements . . . . . . . . . . . . . . . . . . . . . . 2 WhichFormtoFile . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 FilingStatus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 WhoAreResidentsandNonresidents . . . . . . . . . . . . . 3 SignificanceofResidency . . . . . . . . . . . . . . . . . . . . . . 4 GuidelinesforDeterminingResidency . . . . . . . . . . . . . 4 TemporaryorTransitoryPurposes . . . . . . . . . . . . . . . . 4 IncomeTaxablebyCalifornia . . . . . . . . . . . . . . . . . . . . 5 SpecificProfessions . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ResidentsoforIndividualsinForeignCountries . . . . . 9 Married/RDPFilingSeparateReturns . . . . . . . . . . . . . 9 HowtoSplitIncomeonLongForm540NR . . . . . . . . . 12 AvoidCommonMistakesonLongForm540NR . . . . . 13 DoubleTaxedIncome . . . . . . . . . . . . . . . . . . . . . . . . . . 13 InternetandTelephoneAssistance . . . . . . . . . . . . . . . 13

FTB Publication 1031

Guidelines for Determining Resident Status 2010

A Introduction
ItisimportantforCaliforniaincometaxpurposesthatyou makeanaccuratedeterminationofyourresidencystatus . Residencyisprimarilyaquestionoffactdetermined byexaminingallthecircumstancesofyourparticular situation .Thispublicationprovidesinformationtohelpyou determinethefollowing: WhetheryouarearesidentofCalifornia . WhetheryourincomeistaxablebyCalifornia . WhichformtofileifyouhaveaCaliforniafiling requirement . TheFranchiseTaxBoard(FTB)issueswrittenadvice onwhetheraparticularactivityortransactionissubject totaxunderCaliforniaincometaxlaw .TheFTBwillnot issuewrittenopinionsonwhetheryouareaCalifornia residentforaparticularperiodoftimebecauseresidency isaquestionoffact,notlaw .Theinformationincluded inthispublicationisprovidedtohelpyouwiththis determination . Ingeneral,Californianonresidentsorpart-yearresidents determinetheirCaliforniataxbymultiplyingtheir Californiataxableincomebyaneffectivetaxrate .The effectivetaxrateistheCaliforniataxon allincomeas ifyouwereaCaliforniaresidentforthecurrenttaxyear (andforallpriortaxableyearsforanycarryoveritems, deferredincome,suspendedlosses,orsuspended deductions,)dividedbythatincome . Thismethodensuresthatnonresidentspaythecorrect taxontheirCaliforniasourcedincomeanddoesnottax non-Californiasourcedincome . Formoreinformation,getFTBPub .1100,Taxationof NonresidentsandIndividualsWhoChangeResidency .

INTERNET ASSISTANCE
ftb.ca.gov Ourwebsiteprovidestheinformationyouneedtocompleteyour taxreturn . Viewyourpayments,balancedue,wageandwithholding information,andFTB-issuedForms1099on MyFTBAccount . PayyourpersonalincometaxesonlineusingWebPay .You choosethepaymentdate,uptooneyearinadvance . Downloadtaxformsandpublications . e-fileyourpersonalincometaxreturnusingCalFile . Checkthestatusofyourrefund . ApplytomakemonthlytaxpaymentsusingInstallment AgreementRequest . AccessFTBlegalnotices,rulings,andregulations . ReviewFTBsanalysisofpendinglegislation . Signuptoreceiveemailsonavarietyoftaxtopicsthroughour SubscriptionServices . Viewinternalproceduremanualstolearnhowweadminister thelaw .

Registered Domestic Partners (RDP)

UnderCalifornialaw,RDPsmustfiletheirCalifornia incometaxreturnsusingeitherthemarried/RDPfiling jointlyormarried/RDPfilingseparatelyfilingstatus . RDPshavethesamelegalbenefits,protections,and responsibilitiesasmarriedcouplesunlessotherwise specified . Ifyouenteredintoinasamesexlegalunioninanother state,otherthanamarriage,andthatunionhasbeen determinedtobesubstantiallyequivalenttoaCalifornia registereddomesticpartnership,youarerequiredtofilea Californiaincometaxreturnusingeitherthemarried/RDP filingjointlyormarried/RDPfilingseparatelyfilingstatus . ForpurposesofCaliforniaincometax,referencestoa spouse,husband,orwifealsorefertoaCaliforniaRDP, unlessotherwisespecified .WhenweusetheinitialsRDP theyrefertobothaCaliforniaregistereddomesticpartner andaCaliforniaregistereddomesticpartnership, asapplicable .FormoreinformationonRDPs,get FTBPub .737,TaxInformationforRegisteredDomestic Partners .

Military Personnel and Spouses

Inadditiontothispublication,militarypersonneland spousesshoulduseFTBPub .1032,TaxInformationfor MilitaryPersonnel .

C Which Form to File

Residents Ifyouwereafull-yearresidentofCalifornia in2010andyoumeetthebasicfilingrequirements outlinedinSectionB,fileeitherForm540;Form540A, CaliforniaResidentIncomeTaxReturn;orForm5402EZ, CaliforniaResidentIncomeTaxReturn . However,ifyoufileajointreturnandeitherspouse/RDP wasanonresidentorapart-yearresidentin2010,filea LongorShortForm540NR,CaliforniaNonresidentor Part-YearResidentIncomeTaxReturn . Nonresidents and Part-YearResidents Ifyouwerea full-yearnonresidentofCaliforniain2010andyoumeet thebasicfilingrequirementsoutlinedinSectionB,orif youwereaCaliforniaresidentforpartoftheyear,file LongorShortForm540NR .

Same-Sex Married Couples

Same-sexmarriagesperformedinCaliforniaafter 5:00pmonMondayJune16,2008,andbefore November5,2008,arevalidmarriagesforCalifornia purposes .Formoreinformation,gotoftb.ca.govand searchforsame sex married couplesorgetFTB Pub .776,TaxInformationforSame-SexMarriedCouples .

D Filing Status
UsethesamefilingstatusforCaliforniathatyouused foryourfederalincometaxreturn,unlessyouareina same-sexmarriageoranRDP .Ifyouareasame-sex marriedindividualoranRDPandfilesingleforfederal, youmustfilemarried/RDPfilingjointlyormarried/RDP

B Basic Filing Requirements

Residents FileaCaliforniataxreturnifeitheryourgrossincome(whichconsistsofallincomeyoureceivedfromallsourcesintheformofmoney, goods,property,andservices,thatisnotexemptfromtax)oryouradjustedgrossincome(whichconsistsofyourfederaladjustedgrossincomefromall sources,reducedorincreasedbyallCaliforniaincomeadjustments)ismorethantheamountsshownonthechartbelowforyourfilingstatus,ageand numberofdependents . Nonresidents and Part-Year Residents FileaCaliforniataxreturnifyouhaveanyincomefromCaliforniasourcesandyourgrossincome(which consistsofallincomeyoureceivedfromallsourcesintheformofmoney,goods,property,andservices,thatisnotexemptfromtax)oradjustedgross income(whichconsistsofyourfederaladjustedgrossincomefromallsources,reducedorincreasedbyallCaliforniaincomeadjustments)ismorethan theamountsshownonthechartbelowforyourfilingstatus,ageandnumberofdependents . Note:Ifyourgrossincomeoradjustedgrossincomeislessthantheamountslistedonthechart,youmaystillhaveafilingrequirement .Formore information,getCaliforniaForm540/540APersonalIncomeTaxBookletorCaliforniaForm540NRNonresidentorPart-YearResidentIncomeTax Booklet . On 1/31/10, my filing status was: and on 1/31/10, my age was: California Gross Income Dependents  0 1 or more 14,754 19,704 29,508 34,458 39,408 18,054 22,179 32,808 36,933 41,833 20,529 24,159 35,283 38,913 43,863 California Adjusted Gross Income Dependents  0 1 or more 11,803 16,753 23,607 28,557 33,507 15,103 19,228 26,907 31,302 35,982 17,578 21,208 29,382 33,012 37,962

(If your 65th birthday is on January 1, 011, you are considered to be age 65 on December 31, 010)

Singleor HeadofHousehold Married/RDPfilingjointly Married/RDPfilingseparately

Under65 65orolder Under65(bothspouses/RDPs) 65orolder(onespouse/RDP) 65orolder(bothspouses/RDPs)

(Theincomeofbothspouses/RDPsmust becombined;bothspouses/RDPsmaybe requiredtofileataxreturnevenifonlyone spouse/RDPhadincomeovertheamounts listed .)

Qualifyingwidow(er) Dependent of another person Anyfilingstatus

Under65 65orolder Anyage

18,054 22,179

20,529 24,159

15,103 19,228

17,578 21,208

Morethanyourstandarddeduction(UsetheCaliforniaStandardDeduction WorksheetforDependents,intheinstructionsforyourtaxreturn,tofigureyour standarddeduction .)

Evenifyoudonothavetofileareturn,youshouldfileoneinordertogetarefundifCaliforniastateincometaxwaswithheldfromyourpay,California realestatesale,incomefromanScorporation,partnershiporLLC,orifyoumadeCaliforniaestimatedtaxpayments .

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filingseparatelyforCalifornia .Ifyouareasame-sex marriedindividualoranRDPandfileheadofhousehold forfederalpurposes,youmayfileheadofhouseholdfor Californiapurposesonlyifyoumeettherequirementsto beconsideredunmarriedorconsiderednotinadomestic partnership .Ifyoudidnotfileafederalreturnbecause youdidnothaveafederalfilingrequirement,youmay useanyfilingstatusonyourCaliforniareturnthatyou wereentitledtouseonyourfederalreturnhadyoubeen requiredtofileafederalreturn . Exception:Ifyoufileajointreturnforfederalpurposes, youmayfileseparatelyforCaliforniaifeitherspousewas oneofthefollowing: AnactivememberoftheUnitedStatesarmedforces oranyauxiliarymilitarybranchduring2010 . Anonresidentfortheentireyearandhadnoincome fromCaliforniasourcesduring2010 . Regardlessofyourresidencystatus,ifyoufileseparate Californiareturns,entertheamountyouwouldhave reportedifyouhadfiledamarriedfilingseparatereturn whentheinstructionsfortheCaliforniareturnsaytoenter anamountfromyourfederalreturn .Attachanexplanation toyourCaliforniareturnshowinghowyousplitthe incomefromyourjointfederalreturnbetweenyouand yourspouse .Ifyouarerequiredtoattachacopyofyour federalreturntoyourCaliforniareturn,attachacopyof yourjointfederalreturn . ForRDPfilingstatusinformationgetFTBPub .737 .For same-sexmarriedindividuals,getFTBPub .776 .

E Who Are Residents and Nonresidents

Aresident isanyindividualwhomeetsanyofthe following: PresentinCaliforniaforotherthanatemporaryor transitorypurpose . DomiciledinCalifornia,butoutsideCaliforniafora temporaryortransitorypurpose .(SeeMeaningof Domicileonpage9) . Anonresident isanyindividualwhoisnotaresident . Apart-year resident isanyindividualwhoisaCalifornia residentforpartoftheyearandanonresidentforpartof theyear . Nonresidents and Part-Year Residents Ifyouwerea full-yearnonresidentofCaliforniain2010andyoumeet thebasicfilingrequirementsoutlinedinSectionB,orif youwereaCaliforniaresidentforpartoftheyear,file LongorShortForm540NR .

Safe Harbor
Safeharborisavailableforcertainindividualsleaving C aliforniaunderemployment-relatedcontracts .Thesafe harborprovidesthatanindividualdomiciledinCalifornia whoisoutsideCaliforniaunderanemployment-related contractforanuninterruptedperiodofatleast546 consecutivedayswillbeconsideredanonresidentunless anyofthefollowingismet:

Theindividualhasintangibleincomeexceeding $200,000inanytaxableyearduringwhichthe e mployment-relatedcontractisineffect . TheprincipalpurposeoftheabsencefromCaliforniais toavoidpersonalincometax . Thespouse/RDPoftheindividualcoveredbythissafe harborrulewillalsobeconsideredanonresidentwhile a ccompanyingtheindividualoutsideCaliforniaforatleast 546consecutivedays . ReturnvisitstoCaliforniathatdonotexceedatotal of45daysduringanytaxableyearcoveredbythe employmentcontractareconsideredtemporary . Individualsnotcoveredbythesafeharbordeterminetheir residencystatusbasedonfactsandcircumstances .The determinationofresidencystatuscannotbesolelybased onanindividualsoccupation,business,orvocation . Instead,considerallactivitiestodetermineresidency status .Forinstance,studentswhoareresidentsof C alifornialeavingthisstatetoattendanout-of-state schooldonotautomaticallybecomenonresidents,nor dostudentswhoarenonresidentsofCaliforniacoming tothisstatetoattendaCaliforniaschoolautomatically becomeresidents .Inthesesituations,individualsmust determinetheirresidencystatusbasedontheirfactsand circumstances(asdescribedinSectionG,Guidelines forDeterminingResidency,andSectionH,Temporaryor TransitoryPurposes) . Example 1 YouareaCaliforniaresident .Youagreed toworkoverseasforoneyear .YoureturnedtoCalifornia aftertheemploymentcontractexpiredandstayedfor threemonths .Then,yousignedanothercontractwith thesameemployertoworkoverseasforanotheryear . Youcannotbeconsideredanonresidentunderthesafe harborrulebecauseyourabsencefromCaliforniafor employmentreasonswasnotforanuninterruptedperiod ofatleast546consecutivedays .Youcannotcombinethe daysyouwereoverseasfromthetwoseparatecontracts . Example  YouareaCaliforniaresident .You transferredtoyouremployersGermanyofficeforatwoyearworkassignment .YouvisitedCaliforniaforathreeweekvacation .Underthesafeharborrule,youwerea nonresidentofCaliforniaforthetwoyearsyouwerein Germany .Yourthree-weekvisittoCaliforniaisconsidered temporary . Example 3 YouandyourspouseareCalifornia residents .Youagreedtoworkoverseasfor20months underanemploymentcontract .Yourfamilyremainedin SanDiego,CA .Duringthose20monthsyouvisitedyour familyinSanDiegoforamonth .Youcanbeconsidereda nonresidentduringyourabsenceunderthesafe-harbor rule .Yourmonth-longvisittoCaliforniaisconsidered temporary .Duringtheyear,youearned$80,000onyour overseasassignmentandyourspouseearned$30,000 asateacherinSanDiego .Youdidnothaveanyother income .Thetablesonthenextpageshowhowtoreport incomeifyoufiledajointincometaxreturnorseparate incometaxreturns .

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Joint Return ReturnforYouandYourSpouse Form540NR TotalAGI CAAGI SchCA(540NR) Col .E $80,000 $30,000 $110,000 $80,000 $30,000 $110,000 $40,000* $30,000 $70,000

Income

YourWages SpousesWages Total Wages

Locationofyoursocialties,suchasyourplaceof worship,professionalassociations,orsocialand countryclubsofwhichyouareamember . Locationofyourrealpropertyandinvestments . PermanenceofyourworkassignmentsinCalifornia . Thisisonlyapartiallistofthefactorstoconsider .Consider all thefactsofyourparticularsituationtodetermineyour residencystatus .

H Temporary or Transitory Purposes

Generally,yourstateofresidenceiswhereyouhaveyour closestconnections .Ifyouleaveyourstateofresidence, itisimportanttodetermineifyourpresenceinadifferent locationisforatemporaryortransitorypurpose .You shouldconsiderthepurposeandlengthofyourstay whendeterminingyourresidency .Militarypersonneland spouses,getFTBPub .1032 .

Separate Returns YourReturn Form540NR TotalAGI CAAGI SchCA (540NR) Col .E YourWages SpousesWages Total Wages $40,000 $15,000 $55,000 $0 $15,000 $15,000 YourSpousesReturn Form540 TotalAGI SchCA(540) noadjustments $40,000* $15,000 $55,000

Income

Coming into California

WhenyouarepresentinCaliforniafortemporaryor transitorypurposes,youareanonresidentofCalifornia . Forinstance,ifyoucometoCaliforniaforavacation,or tocompleteatransaction,oraresimplypassingthrough, yourpurposeistemporaryortransitory .Asanonresident, youaretaxedonlyonyourincomefromCaliforniasources . WhenyouareinCaliforniaforotherthanatemporary ortransitorypurpose,youareaCaliforniaresident .For i nstance,ifyouremployerassignsyoutoanofficein C aliforniaforalongorindefiniteperiod,ifyouretireand cometoCaliforniawithnospecificplanstoleave,orifyou areillandareinCaliforniaforanindefiniterecuperation period,yourstayisotherthantemporaryortransitory .As aresident,youaretaxedonincomefromallsources . YouwillbepresumedtobeaCaliforniaresidentforany taxableyearinwhichyouspendmorethanninemonths inthisstate . Althoughyoumayhaveconnectionswithanotherstate, ifyourstayinCaliforniaisforotherthanatemporary ortransitorypurpose,youareaCaliforniaresident .As aresident,yourincomefromallsourcesistaxableby C alifornia . Example 1 Youareabusinessexecutiveandresidein NewYorkwithyourfamily .Severaltimeseachyearyou traveltootherstatesforbusinesspurposes .Youraverage stayisoneortwoweeksandtheentiretimespentin C aliforniaforanytaxableyeardoesnotexceedsix weeks .YourfamilyusuallyremainsinNewYorkwhenyou aretravelingforbusinesspurposes . Determination: Underthesecircumstances,youarenot aCaliforniaresidentbecauseyourstaysinCaliforniaare temporaryortransitoryinnature .Asanonresident,you aretaxedonlyonyourincomefromCaliforniasources, includingyourincomeforservicesperformedinCalifornia . Example  InDecember2009,youmovedtoCalifornia onanindefinitejobassignment .Yourentedanapartment inCaliforniaandcontinuedtoliveintheapartment .You retainedyourhomeandbankaccountinIllinoisuntilApril 2010,atwhichtimeyousoldyourhomeandtransferred yourbankaccounttoCalifornia .

*HalfofyourwagesaretaxabletoCaliforniabecause Californiaisacommunitypropertystateandyour spouse/RDPisaresidentofCalifornia .

F Significance of Residency
Residencyissignificantbecauseitdetermineshow incomeistaxedbyCalifornia .Formoreinformation,see SectionI,IncomeTaxablebyCalifornia .

G Guidelines for Determining Residency

Theunderlyingtheoryofresidencyisthatyouare aresidentoftheplacewhereyouhavetheclosest c onnections . Thefollowinglistshowssomeofthefactorsyoucan usetohelpdetermineyourresidencystatus .Sinceyour residenceisusuallytheplacewhereyouhavetheclosest ties,youshouldcompareyourtiestoCaliforniawithyour tieselsewhere .Inusingthesefactors,itisthestrengthof yourties,notjustthenumberofties,thatdeterminesyour residency . Factorstoconsiderareasfollows: AmountoftimeyouspendinCaliforniaversusamount oftimeyouspendoutsideCalifornia . Locationofyourspouse/RDPandchildren . Locationofyourprincipalresidence . Statethatissuedyourdriverslicense . Statewhereyourvehiclesareregistered . Stateinwhichyoumaintainyourprofessionallicenses . Stateinwhichyouareregisteredtovote . Locationofthebankswhereyoumaintainaccounts . Theoriginationpointofyourfinancialtransactions . Locationofyourmedicalprofessionalsandother healthcareproviders(doctors,dentistsetc .), accountants,andattorneys .
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Determination: YourassignmentinCaliforniawasforan indefiniteperiod;therefore,yourstayinCaliforniawas notofatemporaryortransitorynature .Althoughyoukept tiesinIllinoisuntilApril2010,youbecameaCalifornia residentuponenteringthestateinDecember2009 .Asa resident,youaretaxedonyourincomefromallsources .

Leaving California
AnyindividualwhoisaresidentofCaliforniacontinuesto bearesidentwhenabsentfromthestateforatemporary ortransitorypurpose . AnabsencefromCaliforniaunderanemployment-related contractforaperiodofatleast546consecutivedaysmay beconsideredanabsenceforotherthanatemporaryor transitorypurpose .SeeSafeHarborunderSectionEfor moreinformation . Example 3 UntilSeptember2010,youwerearesident ofCalifornia .Atthattime,youdeclaredyourselftobea residentofNevada,whereyouhaveasummerhome .You continuetospendsixorsevenmonthseachyearatyour homeinCalifornia,whichyouhaveretained .Youspend onlythreetofourmonthsinNevadaandtherestofthe timetravelinginotherstatesorcountries .Youtransferred yourbankaccountstoNevada .However,youcontinue tomaintainyoursocialclubandbusinessconnectionsin California . Determination: Yourdeclarationofresidencyinanother statedoesnotestablishresidencyinthatstate .Your closestconnectionsaretoCaliforniaandyourabsence fromCaliforniaisfortemporaryortransitorypurposes . Youare,therefore,aresidentofCaliforniaandaretaxed onyourincomefromallsources . Example  Youandyourspouse/RDPareCalifornia r esidents .YouacceptacontracttoworkinSouthAmerica for16months .Youleaseanapartmentnearthejobsite . Yourcontractstatesthatyouremployerwillarrangeyour returnbacktoCaliforniawhenyourcontractexpires .Your spouse/RDPandyourchildrenwillremaininCalifornia r esidinginthehomeyouown . Determination: YoumaintainstrongtieswithCalifornia becauseyourspouse/RDPandchildrenremaininyour C aliforniahomeduringyourabsence .Yourintentisto returntoCalifornia,andyourabsenceistemporaryand transitory .YouremainaCaliforniaresidentduringyour absence .Youaretaxedonincomefromallsources, includingincomeearnedinSouthAmerica . Example 5 Youreceiveandacceptapermanentjob offerinSpain .Youandyourspouse/RDPsellyourhome inCalifornia,packallofyourpossessionsandmoveto SpainonMay5,2010,withyourchildren .Youleasean apartmentandenrollyourchildreninschoolinSpain .You obtainadriverslicensefromSpainandmakenumerous socialconnectionsinyournewhome .Youhaveno intentionofreturningtoCalifornia . Determination: Youareapart-yearresident .Through May4,2010,youwereaCaliforniaresident .On May5,2010,youbecameanonresident .Allyourincome whileyouwerearesidentistaxablebyCalifornia .While youareanonresident,onlyincomefromCalifornia sourcesistaxablebyCalifornia .

Example 6 YouarearesidentofCalifornia .Youaccept a15-monthassignmentinSaudiArabia .Youputyour personalbelongings,includingyourautomobile,in storageinCalifornia .YouhaveaCaliforniadriverslicense andareregisteredtovoteinCalifornia .Youmaintain bankaccountsinCalifornia .InSaudiArabia,youstay inacompoundprovidedforyoubyyouremployer,and theonlytiesyouestablishthereareconnectedtoyour employment .Uponcompletionofyourassignment,you willreturntoCalifornia . Determination: Youhavemaintainedgreater connectionswithCaliforniathanyouhaveestablished inSaudiArabia .Yourabsenceisforatemporaryor transitorypurpose .Therefore,youremainaCalifornia resident .AsaCaliforniaresident,yourincomefromall sourcesistaxablebyCalifornia,includingtheincomethat youearnedfromyourassignmentinSaudiArabia . Example 7 YouarearesidentofCaliforniaanda singletaxpayer .Youacceptathree-yearassignment inJapan .YourassignmentinJapancoverstheperiod January1,2009,throughDecember31,2011 .Yourented outyourresidenceandputyourtruckandbelongingsin storageinCalifornia .YoumaintainedyourCaliforniabank accounts,driverslicense,andvoterregistration .Youhave lessthan$200,000ofintangibleincomeduringeachyear . Uponcompletionofyourassignment,youintendtoreturn toCalifornia .YoureturnedtoCaliforniatovisitfamilyno longerthanatotalof45daysduring2009or2010 . Determination:Youmeetthesafeharborrule .Youarea nonresidentduringyourabsencefromthestate .

Income Taxable by California

Residents ofCaliforniaaretaxedonALLincome, i ncludingincomefromsourcesoutsideCalifornia . Nonresidents ofCaliforniaaretaxedonlyonincome fromCaliforniasources .NonresidentsofCaliforniaare nottaxedonpensionsreceivedafterDecember31,1995 . GetFTBPub .1005,PensionandAnnuityGuidelines,for moreinformation . Part-year residents ofCaliforniaaretaxedonallincome receivedwhilearesidentandonlyonincomefrom C aliforniasourceswhileanonresident . IfyouuseLongForm540NR,figureyourtaxableincome asifyouwereaCaliforniaresidentfortheentireyear . CompleteScheduleCA(540NR),CaliforniaAdjustments NonresidentsorPart-YearResidents,columnA throughcolumnD,tofiguretotaladjustedgrossincome (AGI) .FigureCaliforniaAGIapplicabletoanonresident orpart-yearresidentonScheduleCA(540NR),columnE . IfyouuseShortForm540NR,completeShort Form540NR,line17tofiguretotalAGI .FigureCalifornia AGIapplicabletoanonresidentorpart-yearresidenton ShortForm540NR,line32 . Treatspecifictypesofincomeasexplainedbelow .

Wages and Salaries

Wagesandsalarieshaveasourcewheretheservices areperformed .Neitherthelocationoftheemployer,
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wherethepaymentisissued,noryourlocationwhen youreceivepaymentaffectthesourceofthisincome . ResidentsincludeonScheduleCA(540NR),columnEor ShortForm540NR,line32allwagesandsalariesearned whilearesident,regardlessofwheretheserviceswere performed .Nonresidentsincludetheincomeforservices performedinCalifornia . Example 1 YouarearesidentofNewYorkworking temporarilyinCaliforniaforaNewYorkcorporation . Determination: Yourincomeearnedforservices p erformedinCaliforniahasaCaliforniasource .Asa nonresident,includethisCaliforniasourceincomeon ScheduleCA(540NR),columnEorShortForm540NR, line32 . Example  YouareaCaliforniaresident .Asa r epresentativeforyouremployer,youspenttwoweeks inGeorgiatogivetraining .YouwerepaidbyaGeorgia corporationwhileyouwereinGeorgia . Determination: BecauseyouareaCaliforniaresident, youaretaxedonallincome,regardlessofsource .The incomeistaxablebyCalifornia,eventhoughithasa sourceinGeorgia .

partswithinandoutsideCalifornia(flowofgoods,etc .), theportionofincome(orloss)taxablebyCaliforniais normallydeterminedbyusingtheapportionmentformula forcorporationsengagedinmultistatebusinesses .Refer toCal .CodeRegs .,tit .18section17951-4andCalifornia ScheduleR,ApportionmentandAllocationofIncome,for moreinformation . Withholdingmayberequiredonanonresidentsbusiness incomeifanexemption,waiver,orreductionisnot certifiedorapproved .

Pensions and Keoghs

Residents: Distributionsfromemployer-sponsored andself-employment(Keogh)pension,profit-sharing, stockbonusplans,orotherdeferredcompensation arrangementsaretaxablebyCaliforniaregardlessof wheretheserviceswereperformed . Nonresidents:DistributionsarenottaxablebyCalifornia ifreceivedafterDecember31,1995 .GetFTBPub .1005 formoreinformation . Example 6 YouwerearesidentofCaliforniawhenyou earnedyourpension .Youretiredduring2010andmoved permanentlytoNewMexico .Afterbecomingaresidentof NewMexico,youbegindrawingyourpension . Determination: Sinceyouareanonresident,the d istributionisnottaxablebyCaliforniabecauseyou receiveditafterDecember31,1995 . Example 7 YoulivedandworkedinOhio .Youretired inOhioandreceivedyourfirstpensioncheckon January1,2010 .YoumovedpermanentlytoCaliforniaon July1,2010 . Determination:YoubecameaCaliforniaresidenton July1,2010 .Yourpensionincomereceivedbeginning July1,2010,istaxablebyCaliforniabecauseCalifornia residentsaretaxedonallincome,regardlessofsource .

Interest and Dividends

Interestanddividendsgenerallyhaveasourcewhereyou arearesident .However,seeExceptionbelow . Example 3 YouarearesidentofTexasandhave interestfromaCaliforniabankaccount . Determination: BecauseyouarearesidentofTexas,the interesthasasourceinTexas .Theinterestisnottaxable byCalifornia . Example  YouarearesidentofCaliforniaandhave interestfromasavingsaccountinOregon . Determination: BecauseyouareaCaliforniaresident, youaretaxedonallincome,regardlessofsource .The interestistaxablebyCalifornia . Example 5 YouarearesidentofMontanaandhave dividendsfromaCaliforniacorporation . Determination: BecauseyouareaMontanaresident, thedividendshaveasourceinMontana .Thedividends arenottaxablebyCalifornia . Exception: Interestanddividendshaveasourcein C aliforniaiftheaccountorsecurityisusedinatradeor businessorpledgedassecurityforaloan,theproceeds ofwhichareusedinatradeorbusinessinCalifornia .For specialrulesregardingqualifyinginvestmentsecurities, refertoCaliforniaRevenueandTaxationCode(R&TC) S ection17955 .

Lump-Sum Distributions
Residents:Lump-sumdistributionsaretaxableby C alifornia .ResidentsofCaliforniaaretaxedonall i ncome,regardlessofsource .Therefore,thedistribution istaxableevenifitisattributabletoservicesperformed outsideofCaliforniaandaccruedpriortoyourbecoming aCaliforniaresident . Nonresidents:Lump-sumdistributionsfromaqualified planorannuityafterDecember31,1995,arenottaxable byCalifornia .However,lump-sumdistributions,derived fromaCaliforniasource,receivedfrommostnonqualified plansafterDecember31,1995,continuetobetaxableby C alifornia .GetFTBPub .1005formoreinformation . Example 8 YoulivedandworkedinNewYork .You retiredandmovedtoCaliforniaandbecamearesident . Priortorelocating,youelectedtoreceivealump-sum distributionfromyourqualifiedpensionplan .Youreceived thedistributionafteryoubecameaCaliforniaresident . Determination: ThedistributionistaxablebyCalifornia becauseCaliforniaresidentsaretaxedonallincome, regardlessofsource(AppealofRalphG .andMartha E .McQuoid, CaliforniaStateBoardofEqualization, May11,1989) .

Business Income (or Loss)

AnonresidentsincomefromCaliforniasourcesincludes incomefromabusiness,trade,orprofessioncarried oninCalifornia .Ifthenonresidentsbusiness,trade,or professioniscarriedonbothwithinandoutsideCalifornia andthepartoutsideCaliforniaisseparateanddistinct fromthepartwithinCalifornia,onlyincomefromthepart conductedwithinCaliforniaisCaliforniasourceincome .If, however,thereisanybusinessrelationshipbetweenthe

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Example 9 YouwereaCaliforniaresidentandworked foracorporationinCalifornia .YoumovedtoOhioduring 2010andelectedtotakealump-sumdistributionfrom yourqualifiedpensionplan .Youreceivedthedistribution afteryoubecamearesidentofOhio . Determination:Sinceyouareanonresident,the distributionisnottaxablebyCaliforniabecauseyou receiveditafterDecember31,1995 .

Individual Retirement Account (IRA), Roth IRA, SIMPLE IRA, Simplified Employee Pension (SEP), and Keogh Distributions
IRA,RothIRA,SIMPLEIRA,SEP,andKeoghdistributions receivedafterbecominganonresidentarenottaxableby C aliforniaifreceivedafterDecember31,1995 . DistributionsfromaSEPfromcontributionsmade after1986aretaxedbyCaliforniainthesamemanner aspensionandKeoghdistributions .Distributions fromcontributionsmadebefore1987aretaxedby C aliforniainthesamemannerasIRAdistributions .Get FTBPub .1005formoreinformation .

andpartnerships,andotherpaymentsofCalifornia sourceincomepaidtononresidents .Note: Withholdingis notalwaysrequired .Anexemption,reduction,orwaiver canbefiled . FormoreinformationregardingCaliforniawithholding requirements,getFTBPub1016andPub1017,Resident andNonresidentWithholdingGuidelines . Writeto: WITHHOLDINGSERVICESANDCOMPLIANCE FRANCHISETAXBOARD POBOX942867 SACRAMENTOCA94267-0651 Telephone: 888 .792 .4900fromwithintheUnitedStates 916 .845 .4900fromoutsidetheUnitedStates FAX: 916 .845 .9512

Partnership, S Corporation, Limited Liability Company (LLC), and Trust Income (Loss)
Whenapartnerisapart-yearresidentduringanypart ofitsownorthepartnershipstaxableyear,thepart-year residentmustdividehisorhertaxableyearintotwodistinct periods .Fortheperiodduringwhichthepart-yearresident wasaresidentofthisstate,allitemsofincomeand deductionsaretobeincludedinthepartnersCalifornia taxableincome .Fortheperiodduringwhichthepart-year residentwasanonresidentofthisstate,onlygrossincome anddeductionsrealizedfromsourceswithinthisstate areincludedinthepartnersCaliforniataxableincome . Therefore,allCalifornia-sourceditemsofincomeandloss realizedbythepartnershipduringthepartnershipstaxable yearwhenthepartnerwasanonresidentofthisstateare includedinCaliforniataxableincome .Thisalsoapplies toshareholdersofanScorporation,partnersofanLLC classifiedasapartnership,andbeneficiariesofatrust . SeeFTBLegalRuling2003-1,FTBPub .1017,andFTB Pub .1100formoreinformation . Example 13Kim,anonresidentcalendaryear individualtaxpayer,hasa50%interestinpartnership(P) . PhasaDecember31year-end .Pconductsbusiness withinandoutsideCalifornia .Forthefiscalyearended December31,KimsScheduleK-1(565)fromPshows thatKimhas$10,000oftaxableincomefromall sources,$5,000ofwhichissourcedtoCalifornia .On September15,KimbecamearesidentofCalifornia . Determination:Kimwasanonresidentfor257days ofPsfiscalyearandaresidentfor108days .Kimwill includeinCaliforniataxableincomefortheyear,$6,480 ofincomefromP,computedasfollows: FortheportionoftheyearKimwasanonresident: 257/365X$5,000=$3,521 FortheportionoftheyearKimwasaresident: 108/365X$10,000=$2,959 Example 1 Hope,acalendaryearindividualresident ofCalifornia,ownsa50%shareoftheScorporation (BuddyCorp .) .BuddyCorp .hasanOctober31yearend .BuddyCorp .conductsbusinesswithinand outsideCalifornia .FortheOctober31year-end,Hopes ScheduleK-1(100S)fromBuddyCorp .showsthatHope
FTBPub .1031 2010 Page 7

Sale of Real Estate

Thegainorlossfromthesaleofrealestatehasasource wherethepropertyislocated .IfyousellyourCalifornia realestateandmoveoutofstate,thegainistaxableby C alifornia .ThegainistaxablebyCaliforniaevenifthe realestateissoldwhenyouareanonresident . Example 10 YouarearesidentofIdaho .Yousold undevelopedrealestatelocatedinCaliforniaatagain . Determination: BecausethepropertyisinCalifornia, thegainisCaliforniasourceincome .Asanonresident, includethisCaliforniasourceincomeonScheduleCA (540NR),columnE . Example 11 YouarearesidentofCalifornia .Yousold realestatelocatedinEnglandatagain . Determination: BecauseyouareaCaliforniaresident, youaretaxedonallincome,regardlessofsource .The gainonthesaleistaxablebyCalifornia . Example 1 YouarearesidentofNevada .Youown residentialrentalpropertylocatedinCalifornia .Your propertyhasalwaysshownaloss .Yousoldtheproperty foragain . Determination: Becausethepropertyislocatedin C alifornia,thegainonthesaleistaxablebyCalifornia . Sincerentalrealpropertyisclassifiedasapassive activity,thesaletriggersthereleaseofsuspended lossesincurredintaxableyearsbeginningonorafter January1,1987 .Thesuspendedlossesmaybeused tooffsetanygainfromthesaleorincomefromother passiveactivities .GetformFTB3801,PassiveActivity LossLimitations,andinstructionsorFTBPub .1016,Real EstateWithholdingGuidelines,formoreinformation .

Withholding Services and Compliance

WithholdingmayberequiredonincomewithaCalifornia source .Thisincludes,salesofCaliforniarealestate, incomeallocationsordistributionsfromScorporations

has$8,000oftaxableincomefromallsources,$3,000of whichissourcedtoCalifornia .OnJune10,Hopebecame anonresidenttaxpayer . Determination:Hopewasanonresidentfor144daysof BuddyCorp .sfiscalyear-endandaresidentfor221days . HopewillincludeinCaliforniataxableincomefortheyear, $6,028ofincomefromBuddyCorp .,computedasfollows: FortheportionoftheyearHopewasanonresident: 144/365X$3,000=$1,184 FortheportionoftheyearHopewasaresident: 221/365X$8,000=$4,844

Reimbursement of Moving Expenses

Thesourceofreimbursedmovingexpensesisthestateto whichyoumove,regardlessofyourresidencyatthetime thereimbursementismade .

J Specific Professions
Military and Spouses
MilitarypersonnelandspousesshouldgetFTBPub .1032 .

Sale of Stocks and Bonds

Thegainorlossfromthesaleofstocksorbondshasa sourcewhereyouarearesidentatthetimeofthesale . Ifbuyingandsellingstocksandbondsisyourtradeor business,seeBusinessIncome(orLoss)onpage6for moreinformation . Example 15 YouarearesidentofOregonandsellstock ofaCaliforniacorporationatagain . Determination: BecauseyouareanOregonresident, thegainhasanOregonsource .Thegainisnottaxableby C alifornia . Example 16 YouarearesidentofCaliforniaandsell stockofaKansascorporationatagain . Determination: BecauseyouareaCaliforniaresident, youaretaxedonallincome,regardlessofsource .The gainistaxablebyCalifornia .

Civilians Working for the Military

Therulesformilitarypersonneldonotapplytocivilians workingforthemilitary .Determineyourresidencystatus andthesourceofyourincomebasedontheguidelines previouslyexplainedinSectionsEthroughI .

Career Appointees in the U.S. Foreign Service

Therulesformilitarypersonnelandspousesdonot applytocareerappointeesintheU .S .ForeignService . Determineyourresidencystatusandthesourceofyour incomebasedontheguidelinespreviouslyexplainedin SectionsEthroughI .

Airline Employees
Thewagesofnonresidentflightpersonnel(e .g .pilot, copilot,flightattendant)arenottaxablebyCalifornia unlessmorethan50%oftheindividualsscheduledflight timeisinCalifornia .Ifmorethan50%ofthescheduled flighttimeisinCalifornia,wagesareapportionedto CaliforniabasedontheratiooftimespentinCaliforniato thetotalscheduledflighttime . FlightpersonnelwhoareCaliforniaresidentsaretaxedon allwagesreceivedregardlessofwheretheflighttimeis spent .

Installment Sales
Fortaxableyearsbeginning2002,Californiataxes installmentgainsreceivedbyanonresidentfromthesale oftangiblepropertyonasourcebasis .Realproperty issourcedandtaxedbaseduponwheretheproperty islocated .Californiataxesresidentsonallincome regardlessofsource .Thechartbelowindicatesthetax treatmentforinstallmentpaymentsreceivedbyresidents, nonresidents,andindividualswhochangedresidency:
Residency Status Alwaysa Nonresident Alwaysa Resident Former Resident Sold Property Anytime Anytime Priorto movingout California Property Taxable Taxable Out-of-State Property Nontaxable Taxable 2001andprior- Taxable 2002andafter- Nontaxable 2001andprior- Nontaxable 2002andafter- Taxable

Interstate Rail and Motor Carrier Employees

Thewagesofnonresidentrailroademployeesortruck driverswhoseregularlyassigneddutiesareperformedin twoormorestatesmayonlybetaxedbytheindividuals stateofresidence . RailroademployeesortruckdriverswhoareCalifornia residentsaretaxedonallwagesreceivedregardlessof wherethedutiesareperformed .

Taxable

Merchant Seamen
AmerchantseamanwhoisinCaliforniaonlybecause thisstateisaport-of-callandwhomaintainsnoother contactorconnectionswiththisstate,isanonresident . However,aseamanwhomaintainscloseconnections withCaliforniaremainsaCaliforniaresidentwhileatsea . Undersuchcircumstances,theseamansabsenceisfora temporaryortransitorypurpose . Example 1 Youareamerchantseamanandspendsix totenmonthsayearaboardashipoutsideCalifornia .You spendyouroff-dutytimeinCalifornia .Youownahomein C aliforniawhereyourspouse/RDPresides .Youvoteand

Former Nonresident

Priorto movingout

Taxable

Forthetreatmentofinterestearnedonaninstallment sale,seeInterestandDividendsonpage6 . GetFTBPub .1100,formoreinformationregardingthe taxationofinstallmentsales .

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bankinCalifornia .YouhaveaCaliforniadriverslicense andyourautomobileisregisteredinCalifornia . Determination: YouarearesidentofCalifornia .Your timeatseaistemporaryandtransitory .Asaresident, allyourincomeistaxablebyCalifornia,includingyour incomeearnedwhileatsea(AppealofJamesH .and LeilaP .Pike,CaliforniaStateBoardofEqualization, F ebruary1,1983) . Example  Youareamerchantseamanandspend eighttotenmonthsayearaboardashipoutside C alifornia .Youaresingleandhavenodependents .You spend50%ofyouroff-dutytimeor10%ofyourtotal timeinCalifornia .YoureturntoCaliforniaonlywhenyour employmentbringsyouhere .WhenvisitingCalifornia, youstayinhotels .YouhaveaCaliforniabankaccount injointtenancywithyourfather .YouhaveaCalifornia driverslicense,butnocar .Youdonotownrealproperty inCalifornia . Determination: YouareanonresidentofCalifornia . YourtiestoCaliforniaarenotsubstantialandyour timeinCaliforniaistemporaryortransitory(Appealof RichardW .Vohs,CaliforniaStateBoardofEqualization, S eptember17,1973) .

p erformedinCalifornia,thewagesaretaxableby C alifornia .Includethewagesof$15,000onScheduleCA (540NR),PartII,line7,columnCorShortForm540NR, line12 .

Income Tax Clearance

Afederalincometaxclearancedoesnotaffectyour Californiataxliability .TheFTBdoesnotissuetax clearancecertificatesforindividualsinthissituation .

Foreign Tax Credit or Foreign Earned Income Exclusion

Californiadoesnotallowaforeigntaxcreditoraforeign earnedincomeexclusion .Ifyouclaimedtheforeign earnedincomeexclusiononyourfederalreturn,include theamountofyourforeignearnedincomeexclusionon ScheduleCA(540NR),line21f,columnC .

L Married/RDP Filing Separate Returns

Division of Income
Californiaisacommunitypropertystate .Thedomicile ofthespouse/RDPearningtheincomedetermines thedivisionofincomebetweenspouses/RDPswhen separatereturnsarefiled .Eachspouse/RDPmustfollow thelawsinhisorherstateofdomiciletodetermine whetherincomeisseparateorcommunity .When separatereturnsarefiled,youandyourspouse/RDP musteachreporthalfofthecommunityincomeplusallof yourseparateincomeonyourreturn .

K Residents of or Individuals in Foreign Countries

Ifyouarearesidentofaforeigncountryandperform servicesinCaliforniaand/orreceiveincomefrom C aliforniasources,youmayhaveaCaliforniaincometax filingrequirementevenifyoudonothaveafederalfiling requirement .

Tax Treaty
AtaxtreatybetweentheU .S .Governmentandaforeign countrymayexemptsometypesofincomefromfederal taxation .Generally,unlessthetreatyspecificallyexcludes theincomefromtaxationbyCalifornia,theincomeis taxable . Example 1 YouarearesidentofChinadoingresearch atauniversityinCaliforniaandreceivedwagesof $15,000forteachinganddoingresearch .Forfederal incometaxpurposes,thewagesareexcludabledueto thetaxtreatybetweentheUnitedStatesandChina . (Amountsreceivedforteaching,research,orother servicesperformedbyastudentarenotexcludableas aqualifiedscholarshiporfellowship,eveniftheservices arerequiredasaconditionofreceivingthescholarshipor fellowship .) Determination: Althoughthewagesmaybeexempt fromincomeforfederalincometaxpurposes,thewages willbetaxablebyCalifornia .Thetaxtreatyspecifically statesthatthetaxescoveredbythetaxtreatyare federalincometaxesimposedbytheInternalRevenue Code .TaxtreatiesbetweentheUnitedStatesandother countrieswhichexpresslylimittheirapplicationtofederal incometaxesdonotapplytoCalifornia .Nonresidents aretaxedbyCaliforniaonwagesforservicesperformed inCalifornia .Sinceyoureceivedwagesforservices

Meaning of Domicile
Thetermdomicilehasaspeciallegaldefinitionthatis notthesameasresidence .Whilemanystatesconsider domicileandresidencetobethesame,Californiamakes adistinctionandviewsthemastwoseparateconcepts, eventhoughtheymayoftenoverlap .Forinstance,you maybedomiciledinCaliforniabutnotbeaCalifornia residentoryoumaybedomiciledinanotherstatebutbe aCaliforniaresidentforincometaxpurposes . Domicileisdefinedfortaxpurposesastheplace whereyouvoluntarilyestablishyourselfandfamily, notmerelyforaspecialorlimitedpurpose,butwitha presentintentionofmakingityourtrue,fixed,permanent homeandprincipalestablishment .Itistheplacewhere, wheneveryouareabsent,youintendtoreturn .

Change of Domicile
Youcanhaveonlyonedomicileatatime .Onceyou acquireadomicile,youretainthatdomicileuntilyou acquireanother . Achangeofdomicilerequiresallofthefollowing: Abandonmentofyourpriordomicile . Physicallymovingtoandresidinginthenewlocality . Intenttoremaininthenewlocalitypermanentlyor indefinitelyasdemonstratedbyyouractions .

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Community Property
Communitypropertyisallofthepropertythatisnotseparate propertyacquiredbyahusband/RDPorwife/RDPorboth whiledomiciledinacommunitypropertystate . Eachspouse/RDPownsone-halfofallcommunity property .Ifpropertycannotbespecificallyidentifiedas separateproperty,itisconsideredcommunityproperty . Thefollowingarecommunitypropertystates(andU .S . territories): Arizona NewMexico California Wisconsin Idaho Texas Louisiana Washington Nevada PuertoRico Guam NorthernMarianaIslands

Expensesthatarenotattributabletoanyspecificincome, suchasmedicalexpenses,aredeductiblebythespouse/ RDPwhopaysthem .Iftheseexpensesarepaidfrom communityfunds,thedeductionisdividedequallybetween youandyourspouse/RDP . Ifonespouse/RDPitemizesdeductions,both spouses/RDPsmustitemizedeductions,evenifthe itemizeddeductionsofonespouse/RDParelessthanthe standarddeduction .

Exemption Credits
Whenyoufileseparatereturns,youandyourspouse/RDP musteachclaimyourownpersonalexemptioncredit . Whenyouhavemorethanonedependentsupportedby communityfunds,youandyourspouse/RDPmaydivide thenumberofdependentsbetweenyouinanymanneryou choose .However,youmaynotsplitthecreditforanyone dependent .

Community Income
Incomegeneratedfromcommunitypropertyiscommunity income .Communityincomealsoincludescompensation forservicesifthespouse/RDPearningthecompensation isdomiciledinacommunitypropertystate . Dividethecommunityincomeequallybetweenyouand yourspouse/RDPwhenseparatereturnsarefiled .

Division of Income, Residents of California Examples

Example 1 Youandyourspouse/RDPareresidentsof California .Youearned$15,000inwages .Yourspouse/RDP earned$30,000 .Inadditiontowages,youhavestockthat youinherited .Thestockisinyournameonly,andyou keepthestockandthedividendincomeseparatefrom communityfunds .Youreceived$5,000individends .You havedecidedtofileseparatereturns . Determination: Youandyourspouse/RDPeachhave $22,500incommunityincome:($15,000+$30,000= $45,0002) .Inadditiontoyour$22,500incommunity incometobereported,includethe$5,000ofseparate incomefromdividends,makingyourtotalincome$27,500 . Example  Youandyourspouse/RDPareresidentsof C alifornia .Forthefirstsixmonthsoftheyear,youearned wagesof$30,000 .Yourspouse/RDPdidnotearnany income .OnJune30,youandyourspouse/RDPphysically separatedwithnointentionofreconciliation .Duringthe lastsixmonths,youearnedwagesof$30,000andyour spouse/RDPearnedwagesof$10,000 .Youhavedecided tofileseparatereturns . Determination: Forthefirstsixmonthsoftheyear,your earningswerecommunityincome .Youandyour spouse/RDPmusteachreportonyourindividualreturns onehalfoftheincomeearnedduringthisperiod .When youandyourspouse/RDPphysicallyseparatedwithno intentionofreconciliation,yourcommunityincomestatus ended .Therefore,fromJuly1throughDecember31,the incomeearnedbyyouandyourspouse/RDPwasseparate income . You Your Spouse/RDP Community Jan .June $15,000 $15,000 Separate JulyDec . 30,000 10,000 Total $45,000 $25,000

Separate Property
Separatepropertyincludesthefollowing: Propertyownedseparatelybyeachspouse/RDPbefore marriageorregisteringasadomesticpartnership . Propertyreceivedseparatelyasgiftsorinheritances . Propertypurchasedwithseparatepropertyfunds . Moneyearnedwhiledomiciledinaseparateproperty state . Allpropertydeclaredseparatepropertyinavalid agreement . Maintainseparatepropertyseparately .Iftheproperty ortheincomefromthepropertyisusedforcommunity purposes,orcommingled,itcouldloseitsseparate propertycharacter,overridinganyagreements .

Separate Income
Generally,incomefromseparatepropertyisincomeofthe spouse/RDPwhoownstheproperty .Whenfiling,youand yourspouse/RDPreportyourincome(s)separatelyonyour separatereturns .

Deductions
Expensesincurredtoearnorproducecommunitybusiness orinvestmentincomearegenerallydividedequallybetween youandyourspouse/RDP .Eachspouse/RDPisentitledto deducthalfoftheexpensesofthebusinessorinvestment expensesonhisorherseparatereturn . Expensesincurredtoearnorproduceseparatebusinessor investmentincomearedeductiblebythespouse/RDPwho ownstheinvestmentgeneratingtheincome,providedthat spouse/RDPpaystheexpensesfromhisorherseparate funds .

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Example 3: JohnandJackiearefull-yearnonresidentsofCalifornia .Jackieearned$30,000inwagesforservicesperformedinher stateofresidence .JackiealsosoldpropertyinCaliforniathatwasherseparateproperty .Shehada$100,000**gain .John receivedapensiondistributionof$10,000in2010basedonservicesperformedinCalifornia .ForCaliforniapurposes, Johnstaxablepensiondistributionfortheyearis0 .*JohnhasarentalhouseinCaliforniathatishisseparateproperty . Hisnetrentalincomewas$1,000 .**JohnandJackiefiledseparatefederalreturns,therefore,theyfileseparateCalifornia returns .Thefollowingsituationsshowhowtheirincomeshouldbedividedbasedondomicile .
1 . JohnandJackieareboth domiciledincommunity propertystates . John Jackie

TOTAL WAGES $ 30,000 GAIN 100,000 PENSION 10,000 RENTALINCOME 1,000

ScheduleCA(540NR), ScheduleCA(540NR), ScheduleCA(540NR), ScheduleCA(540NR), columnD columnE columnD columnE $ 15,000 0 5,000 1,000 $ 0 0 0 1,000 $ 15,000 100,000 5,000 0 $ 0 100,000 0 0

John would complete his Schedule CA (50NR) as shown in the partial view that follows.
Part II Income Adjustment Schedule

Section A Income

Federal Amounts (taxable amounts from your federal return)

Subtractions See instructions (difference between CA and federal law)

Additions See instructions (difference between CA and federal law)

7 Wages, salaries, tips, etc. See instructions before making an entry in column B or C . . . . . . 7

Total Amounts Using CA Law As If You Were A CA Resident (subtract column B from column A; add column C to the result) $15,000

CA Amounts (income earned or received as a CA resident and income earned or received from CA sources as a nonresident)

$15,000

16 Pensions and annuities. See instructions. (a) ___$10,000___ . . . . . . . . . . . . . . . . . b) ( 17 Rental real estate, royalties, partnerships, S corporations, trusts, etc. . . . . . . . . . . . . . . . . . 17

5,000 1,000

5,000 1,000 1,000

*Nonresidentsarenot taxedonpensionincome . **Thisincomeisfromseparateproperty;therefore,itisnotdividedevenwhendomiciledinacommunitypropertystate .

2 . JohnandJackieare domiciledinseparate propertystates . John Jackie

TOTAL WAGES $ 30,000 GAIN 100,000 PENSION 10,000 RENTALINCOME 1,000 3 . Johnisdomiciledina communitypropertystate andJackieinaseparate propertystate . TOTAL WAGES $ 30,000 GAIN 100,000 PENSION 10,000 RENTALINCOME 1,000 4 . Johnisdomiciledina separatepropertystate andJackieinacommunity propertystate . TOTAL WAGES $ 30,000 GAIN 100,000 PENSION 10,000 RENTALINCOME 1,000

ScheduleCA(540NR), ScheduleCA(540NR), ScheduleCA(540NR), ScheduleCA(540NR), columnD columnE columnD columnE $ 0 0 10,000 1,000 John $ 0 0 0 1,000 $ 30,000 100,000 0 0 Jackie $ 0 100,000 0 0

ScheduleCA(540NR), ScheduleCA(540NR), ScheduleCA(540NR), ScheduleCA(540NR), columnD columnE columnD columnE $ 0 0 5,000 1,000 John $ 0 0 0 1,000 $ 30,000 100,000 5,000 0 Jackie $ 0 100,000 0 0

ScheduleCA(540NR), ScheduleCA(540NR), ScheduleCA(540NR), ScheduleCA(540NR), columnD columnE columnD columnE $15,000 0 10,000 1,000 $ 0 0 0 1,000 $ 15,000 100,000 0 0 $ 0 100,000 0 0 FTBPub .1031 2010 Page 11

How To Split Income on Long Form 50NR

Usethischartasaguidetosplitcommunityincomewithyourspouse/RDPbasedondomicileifyouaremarried/RDPand fileLongForm540NR . IfyouareeligibletousetheShortForm540NR,totalincomewillbeincludedonShortForm540NR,line17;California incomewillbeincludedonShortForm540NR,line32 .ScheduleCA(540NR)willnotbeused . Reminder:Includeallofyourseparateincomeinadditiontoyourhalfofthecommunityincomewhenfiling .SeeDivision ofIncomeonpages10and11 .
TYPE YOUR DOMICILE YOUR SPOUSES/RDPs DOMICILE Long Form 540NR, Married/RDP Filing Jointly Schedule CA (540NR), column A through column D: All income All deductions Schedule CA (540NR), column E: All income taxable by California Schedule CA (540NR), column A through column D: All income All deductions Schedule CA (540NR), column E: All income taxable by California Schedule CA (540NR), column A through column D: All income All deductions Long Form 540NR, Married/RDP Filing Separately (you) Schedule CA (540NR), column A through column D: Half of all income Half of all deductions Schedule CA (540NR), column E: Half of all income taxable by California Schedule CA (540NR), column A through column D: All your income All your deductions Schedule CA (540NR), column E: All your income taxable by California Schedule CA (540NR), column A through column D: Half of your income Half of your deductions Long Form 540NR, Married/RDP Filing Separately (your spouses/RDPs) Schedule CA (540NR), column A through column D: Half of all income Half of all deductions Schedule CA (540NR), column E: Half of all income taxable by California Schedule CA (540NR), column A through column D: All your spouses/RDPs income All your spouses/RDPs deductions Schedule CA (540NR), column E: All your spouses/RDPs income taxable by California Schedule CA (540NR), column A through column D: All your spouses/RDPs income plus half of your income All your spouses/RDPs deductions plus half of your deductions Schedule CA (540NR), column E: All your spouses/RDPs income taxable by California plus half of your income taxable by California Schedule CA (540NR), column A through column D: Half of your spouses/RDPs income Half of your spouses/RDPs deductions Schedule CA (540NR), column E: Half of your spouses/RDPs income taxable by California

1 2 3 4

Community Property State

Community Property State

Separate Property State

Separate Property State

Community Property State

Separate Property State

Schedule CA (540NR), column E: All income taxable by California

Schedule CA (540NR), column E: Half of your income taxable by California

Schedule CA (540NR), column A through column D: All income All deductions Separate Property State Community Property State Schedule CA (540NR), column E: All income taxable by California

Schedule CA (540NR), column A through column D: All your income plus half of your spouses/RDPs income All your deductions plus half of your spouses/RDPs deductions Schedule CA (540NR), column E: All your income taxable by California plus half of your spouses/RDPs income taxable by California

ForinformationonincometaxablebyCalifornia,seeSectionIonpage5 .

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M Avoid Common Mistakes on Long Form 50NR

Avoidmakingtime-consumingandcostlymistakesby reportingyourAGIfromallsourcesasifyouwerea residentofCaliforniafortheentireyear . CaliforniataxreturnsstartwithfederalAGI .However, therearedifferencesbetweenCaliforniaandfederaltax law .UseScheduleCA(540NR)toconvertyourfederal AGI(columnA)toyourtotalAGIfromallsourcesunder C alifornialaw(columnD)asfollows: Copyyourfederalincome,adjustments,anddeductions totheapplicablelinesonScheduleCA(540NR), columnA . Subtractincomethatistaxableunderfederallawbut notunderCalifornialaw(suchasCaliforniaLottery winningsandsocialsecuritybenefits)byenteringiton ScheduleCA(540NR),columnB . Addincomeexcludedonthefederalreturn(suchas foreignincomeorincomefromnon-Californiamunicipal bonds),unlesstheincomeisspecificallyexcludable underCalifornialaw,byenteringitonScheduleCA (540NR),columnC . Do not subtractnon-Californiasourceincometodetermine yourtotalAGIfromallsourcesunderCalifornialaw . WhenyoufigureyourCaliforniaAGIonScheduleCA (540NR),columnE,besuretoincludethefollowing: Allincomefromeverysourcewhileyouwerearesident ofCalifornia . IncomefromCaliforniasourceswhileyouwerea nonresident . GettheinstructionstoScheduleCA(540NR)formore information .

O Internet and Telephone Assistance

Telephoneassistanceisavailableyear-roundfrom 7a .m .until5p .m .MondaythroughFriday,exceptholidays . Hourssubjecttochange . Website: ftb.ca.gov Telephone: 800 .852 .5711fromwithintheUnitedStates 916 .845 .6500fromoutsidetheUnitedStates TTY/TDD: 800 .822 .6268forpersonswithhearingor speechimpairments IRS: 800 .829 .1040calltheIRSforfederaltax question Asistencia Por Internet y Telfono Asistenciatelefnicaestdisponibletodoelaodurante las7a .m .ylas5p .m .lunesaviernes,exceptodas festivos .Lashorasestnsujetasacambios . Sitioweb: ftb.ca.gov Telfono: 800 .852 .5711dentrodelosEstadosUnidos 916 .845 .6500fueradelosEstadosUnidos TTY/TDD: 800 .822 .6268personascondiscapacidades auditivasydelhabla IRS: 800 .829 .4933llamealIRSparapreguntas sobreimpuestosfederales

N Double-Taxed Income
IfyoupaidtaxestoCaliforniaandtoanotherstateonthe sameincome,youmayqualifyforataxcreditfortaxes paidtoanotherstate .GetCaliforniaScheduleS,Other StateTaxCredit,formoreinformation .

FTBPub .1031 2010 Page 13