W is a resident and domiciled in CA, H is a resident and domiciled in NV, and W retired in CA and has a State defined benefit pension payable monthly. All of the pension is community property. Is the pension payment (1) "California sourced", like wages, in which case all of the pension is taxed in CA (50% to W and 50% to H as CA sourced income on 540-NR), or (2) is the 50% allocated to H in NV subject to 4 U.S. Code § 114 and not subject to CA tax? No authority addresses the issue. Conversely, if H takes a community property pension distribution in NV, does CA allocate 50% of the community property pension to the CA resident W spouse (as community property income) who pays tax on it? There is no authority for this either. I suspect CA wants it both ways; (i) tax NV spouse on CA spouse pension as "CA sourced" (i.e., 100% taxed), and (ii) tax CA spouse on 50% of NV spouse pension distribution as community property income (here, 50% taxed in CA). Thoughts?
