My understanding is that California does not follow the federal rules re taxation of 529 conversions to Roths and treats them as a non-qualified withdrawal and imposes a 2.5% penalty. If I am the 529 owner and a CA taxpayer, but the Roth owner is a NY resident (and assuming we meet all the 529 rollover to Roth requirements), am I subject to the CA tax and penalty? Or am I not because the beneficiary is out of state? IOW, who is the party potentially subject to the tax - the account owner or the beneficiary?
