As a Calif resident, Calif gets to tax your world-wide income - it doesn't matter where it comes from. So the IN rental income is properly included. Indiana gets to tax that rental income as well. Prepare your Calif return first, then the nonresident TT/Indiana return so that TT/IN can get some of the information it needs to prepare the other state tax credit for some of the Calif tax on that rental income to help prevent double taxation.
