The short answer to your question is that you will pay
taxes the capital gain from this mineral rights sale to both Arizona and Oklahoma. The long answer to your
question will take some time and space to explain; we will do so below.
To
begin, it is a fact that as an Arizona resident you are taxed on all
of
your income, worldwide, no matter what the source, by the state of Arizona. It is also a fact that the sale of property rights in Oklahoma is
considered "Oklahoma-source" income; and so that requires paying taxes
also to Oklahoma. The reverse is also true, where the taxpayer is
instead an Oklahoma resident and incurred a capital gain on Arizona property as a
nonresident.
Normally,
where a taxpayer has to pay taxes to two states on the same item of
income (which often happens when a taxpayer lives in one state and has a
wage-earning job in another state), they are then allowed to take a tax
credit on their home state return for taxes paid to the other state.
Similarly, the same principles typically apply to non-wage taxation by
more than one state -- which is also true as well for sales of land and mineral rights.
Of course, your capital gains income is still reportable (and taxable) by the federal IRS as well.
While the full details underlying the state tax credit claim for Arizona residents paying taxes to Oklahoma on the same item of income are not important at the moment, please know that the tax
credit for any taxes paid to Oklahoma on the mineral rights sale will be claimed on
your Arizona tax return.
While TurboTax can certainly
compute this tax situation correctly, it
can be tricky. The "ordering" sequence of state tax preparation is
crucial here. In order to take the state tax credit correctly, for the
double-taxed income, you would want to complete your federal return
first, your Oklahoma nonresident return second, and then your Arizona resident return third.
The following webpage may also be useful to you, in understanding the general principles behind paying taxes to two different states, and then claiming a tax credit for that:
Finally, you may benefit by reading the following TurboTax
webpage, which contains additional details on mutually-taxed income:
https://turbotax.intuit.com/tax-tools/tax-tips/Tax-Planning-and-Checklists/Multiple-States---Figurin...
Thank you for asking this important question.
