Need to file Arizona 140NR for sale of second home at a loss?

[x9redhill]

I'm a Colorado resident and had a second home in Arizona.  The home was sold at a loss (which is realize is not deductible) so while I have Arizona income, it's not taxable nor will I be due any type of refund or credit.  So do I still need to file an Arizona 140NR return?  

[ErnieS0 · Accepted solution]

You do not have to file an Arizona income tax return. Arizona nonresidents are required to file a return if your prorated AZ gross income (AZ ÷ federal AGI) is more than the resident or part-year resident threshold. Since your AZ income is $0, $0 ÷ federal AGI = $0, which is below the filing threshold.

You may wish to file a return to carry back your net operating loss to earlier years by filing amended returns. See ITP 13-1.

[x9redhill]

Thank you!

[Gregse]

What if the sale generates a 1099-S? Won't the state of AZ be looking for a tax return? Or perhaps send a letter because the sale wasn't reported on a tax return? Would you want to file just to avoid those issues even if no tax due?

[AmyC]

Yes, the state will see income and want to know what happened. Filling a return to avoid later questions is one option. Otherwise, you can send proof later - when you get a letter from them,  that it was sold at  a loss. Either way, all paperwork needs to be carefully kept because AZ will be asking questions eventually.