Unfortunately yes. You will need to report the capital gain from the sale of inherited IL farm property on both an IL nonresident state income tax return and your AZ resident state income tax return. You will get a credit on your AZ resident state income tax return for IL taxes pay on IL-source income that is taxed in both states.
If you are a permanent resident of AZ but you have a capital gain from IL property then you will need to file an IL nonresident state income tax
return (for your IL-source capital gain only). You will also need to
file an AZ resident state tax return (for all income from all sources including
IL sourced capital gains). You will get a state income tax credit in AZ for any IL state income
taxes that you paid on your nonresident IL state income tax return.
You
will want to work on your nonresident IL state income tax return first. You
will then take a tax credit from your nonresident IL state income taxes on your
resident AZ state income tax return. (Please note that you will only get a tax
credit for your IL state income taxes up to the amount of AZ state income taxes
that would have been paid if the income was earned in AZ). The credit for
taxes paid to another state section will be at the end of your residence
state's interview process.
Just
follow the TurboTax guide when working on your states (remembering to do your
nonresident state return first) and TurboTax will do all the calculations and
credits to your resident states return
Here
is additional information about filing in multiple states (select "see
more answer" to view the entire attachment)
https://ttlc.intuit.com/replies/3300797
