NY State non-resident - sale of land by non-resident - question

[myttquestions]

Non-resident of NY.  Sold NY land at a loss.  At closing, the I completed forms IT2663 and TP584 showing the loss from the sale and zero gains/zero estimated taxes due.  I received the 1099-S showing the sale proceeds. Do I have to file a 2021 NY non-resident tax return to show that the 1099-S sale proceeds were a loss?  If so, what non-resident NY forms need to be filed?  Thank you for your help!

[MaryK4]

Yes you would have to file a nonresident New York tax return to report the sale of the New York real estate.  In TurboTax, you will be able to allocate the loss- follow the interview and please post if you have any questions.

You must file Form IT‑203 (Part Year Resident return) if you have income from a New York source* and your New York AGI (Federal amount column) is more than your New York State standard deduction.

*For nonresidents New York source income is the sum (with adjustments for special accruals) of income, gain, loss, and deduction from real or tangible personal property located in New York State.

[myttquestions]

Thank you!

[myttquestions]

Hi. I need some more guidance on this issue as I cannot figure out from the TT interview how to correctly input the sale and loss information on the NY 203 non-resident form for sale of NYS land by a non-resident. For sake of example, hypothetical land purchase in NYS 10 years ago by non-resident at 100k sold in 2021 for 60k (40k long term loss).  The 40k loss is reported on 2021 federal return and the 3k/year carryover loss on 2021 federal return includes a $100 long term 2020 carryover loss from another investment.   NY interview questions ask about NY W-2 and business income for non-residents (which is zero) and then shows federal capital gains -3000 asking for NY portion.  Is NY portion $2900?  Where do you put in the 1099s sale information and purchase price, etc.?  Please advise.  Thank you. 

[PatriciaV]

You don't need to re-enter the sales information in the State section of TurboTax. Your Federal capital loss is limited to <$3,000>.  The same amount would be included on your New York state return.

[myttquestions]

Ok thank you.  Now it seems there may be a glitch in TT NYS 203 for non-resident - interview question asks for business income allocation - the business that it pulled from the federal return is not a NY business.  There are three boxes to choose from - (1) All NY Income (100%), (2) Allocate a Portion and (3) No NY income.  No matter what I do it seems to go back and select #1 and generate NY Tax forms indicating the business income is from NY.  I tried choosing #3 and press done, but when I go back to it, #1 is checked.  Then I tried choosing #2 to allocate and entered zero for NY.  When I go back to it, #1 is checked.  Tried several times with no luck.  TT is generating a NY tax form indicating that the business income is NY source. 

[RobertB4444]

New York uses your federal income in order to calculate how much tax you pay in New York.  It all carries over to the New York return but it doesn't mean that you are paying tax on all of it.  

The federal columns on the IT-203 are used to calculate the tax rate even for non-residents.  

[HH125]

Related question - what if the other state (that you sold property in) withheld taxes at settlement?  Do you still have to file something with them?  And do you also report that withholding in your primary state?

[NCperson]

@HH125 

you will have to file a tax return in BOTH the non-resident state and the resident state.  

the withholding will be reported on the non-resident state tax return only as that is the state the withholdings were sent to.  

you won't be taxed on the same profit twice across the two tax returns....

[TomD8]

@HH125 --

Here's how it works:

Assuming both states have an income tax, the capital gain from sale of property located in a non-resident state is taxable by both the non-resident and the resident state (the latter can tax all your income regardless of source).

So at year's end you'll file both a non-resident state tax return (reporting your capital gain) and your normal resident state tax return (reporting ALL your income, including the capital gain).  You'll enter the withheld taxes as an estimated payment to the non-resident state.  And you'll claim a credit on your resident state return for the taxes paid to the non-resident state, so you won't be double-taxed.

In TurboTax, be sure to complete the non-resident return first, before the home state return, so that the program can calculate and apply the credit correctly.

[HH125]

@TomD8

Thanks!  So just to clarify, if the non-resident state listed the withholding on the closing form (which was due and paid from me at closing) I still need to file with them?  

Also, where do I put these withheld taxes on my own state's return?

Thanks again!

[TomD8]

Yes, you need to file a tax return with the non- resident state.  3 Reasons:

1.  The non-resident state's tax system will be "looking" for a tax return from you.

2.  The tax you actually owe may be greater or lesser than the amount of the estimate you paid.

3.  Your resident state will not grant you an "other state credit" without seeing a copy of the non-resident state return.

You only enter the estimated tax payment on the non-resident state return.  The TurboTax program will carry over the actual non-resident taxes paid to your home state return, for purposes of the credit.

[NCperson]

@HH125 - if you use Turbo Tax it will easily handle this transaction. It will require you purchasing the two states to do this correctly.

On the 'withholding', think through what that really means: your attorney sent that money to the non-resident state.  So comes next April, you'll need to settle up with that state.  Either you'll owe more or that state will send back a refund of some of the money that was withheld.  The point is THAT STATE has the money.

On the otherhand, your resident state does NOT have that money.  So why would you want to reflect on the resident tax return this withholding? 

Now, whatever your tax liability is to the non-resident state (and that is NOT the withholding), becomes a credit on the resident state so that you are not paying taxes on the same dollar twice.  

the 'withholding' and the 'credit' are two different things.  Don't confuse them! 

note: 

income times tax rate = tax liability

tax liability less withholding =  a refund or additional tax due. 

[dkellams]

The first item in this article says AND NY AGI exceeds your Standard Deduction requires filing.  If all you have is a loss on inherited R/E, there is no source income and a loss is lower than any Standard Deduction.  Following is what I found at the NY DOR that I think supports my position.  Your thoughts are always appreciated.   :

Filing information for New York State nonresidents

If you are a New York State nonresident you must file Form IT-203, Nonresident and Part-Year Resident Income Tax Return, if you meet any of the following conditions:

• You are a nonresident with New York source income and your New York adjusted gross income Federal amount column (Form IT-203, line 31) exceeds your New York standard deduction.
• You want to claim a refund of any New York State, New York City, or Yonkers income taxes withheld from your pay.
• You want to claim any of the refundable or carryover credits available.
• You had a net operating loss for New York State personal income tax purposes for the tax year, without having a similar net operating loss for federal income tax purposes.

[ErnieS0]

Even if you have negative New York income, you are still required to file a return if the amount in the “Federal amount column (Form IT-203, line 31) exceeds your New York standard deduction.”

The federal column if federal income, not NY income, so unless your federal income is less than the New York standard deduction, you would be required to file.