Researched with AI (Claude) and was able to reach an answer. Note AI can make mistakes so it's important to really drill nuanced details and cite references (causes AI like Claude to be more cautious). AI is very good at explaining its logic clearly (even if wrong). This in turn can be helpful to understand how things are logically determined and what make sense. Below is my chat session, you can see I kept narrowing in on he precise question and eventually AI understood I wanted to talk about the transition year between resident and non-resident. Then it provided the worldwide income vs NY sourced income differences. After this, logic became clear quickly.
https://mega.nz/file/1a9gxKZI#QhZSyH-7g58xBup6nsHpCLhJTjceQC3FO1KX6qkJgUk
The 2 NYS tax code rules thats relevant here are
1. N.Y. Comp. Codes R. & Regs. Tit. 20 § 132.7 - Deductions with respect to capital losses, net long-term capital gains and net operating losses
https://www.law.cornell.edu/regulations/new-york/20-NYCRR-132.7
2. N.Y. Comp. Codes R. & Regs. Tit. 20 § 154.7 - Capital gain or loss and capital loss carryover
https://www.law.cornell.edu/regulations/new-york/20-NYCRR-154.7
And a clear distinction of 2 different tax policies between NYS resident vs non-resident (explained by AI)
- Resident are taxed on worldwide income
- Non-resident are taxed on NYS sourced income
Rule #1 example shows clearly security gains are not considered as non-resident since its WW income and not NYS sourced.
Rule #2 says during the transition year (part year NYS resident, part non-resident)
A. Calculate the resident part with CG gains and suspended losses from worldwide income.
B. Calculate the non-resident part with only NYS sourced CGs/losses/suspended losses.
So in my case
- During NY resident period 1/1/25 - 2/15/25, add all worldwide CGs and suspended losses. In my case, CGs were tiny while suspended losses easily exceed the $3k limit. Therefore, use -$3k for NYS/NYC CG.
- From 2/16/25 - 12/31/25, have no NYS capital gains (or suspended losses) So this is $0
- For this transition year, CGs are -$3k by combining both calculations.
If anyone has experience, please share if this is correct. Thanks.
