Do I need to report capital gains on sale of a company as CA income as a nonresident?

[greg7snyder]

I have been a resident of Texas for 6 years, but a 50% partner in a CA-based LLC. Midway through the year, I sold my share in the company to my partner on an installment basis. It is a service-based company with no real estate. I need to file a CA non-resident return for my business income (K1) for the portion of the year that I still owned the company. But do I need to add the capital gains on the sale in column E of Schedule CA (540NR)? Some sources on the internet suggest that the sale of an intangible property is considered income tied to the residence of the seller. Others suggest CA considers anything they could possibly tax as CA-sourced income. I'm unsure on what options to tick in Turbotax.

[MonikaK1]

If the installment sale only includes intangibles, and you were a Texas resident at the time of the sale, then you may consider the gains sourced to your state of residence. See below and FTB Publication 1100 for more information and examples.

According to the California Franchise Tax Board:

As a nonresident, you pay tax on your taxable income from California sources.

Sourced income includes, but is not limited to:

• Services performed in California
• Rent from real property located in California
• The sale or transfer of real California property
• Income from a California business, trade or profession

FTB Publication 1100, Taxation of Nonresidents and Individuals Who Change Residency, further clarifies:

For taxable years beginning on or after January 1, 2002, California taxes installment gains received by a nonresident from the sale of tangible property and intangible property that is sourced to California. 

California taxes real property based upon where the property is located. 

Installment gains from the sale of intangible property are generally sourced to the recipient’s state of residence at the time of the sale. California taxes residents on all income regardless of source.