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NJ-1041 & NJK-1: will I have to pay NJ tax?

I will soon be preparing the final federal and New Jersey forms 1041 for my mother's estate. The estate did earn income in 2012, all of which I will distribute to myself.

At the federal level, I understand I will issue a K-1 to myself and pay tax on my 1040. But what about New Jersey? I am a resident of California. Will I need to issue myself a NJK-1 and file a non-resident income tax return to the great $#@% state of NJ?
  • Any help for a deceased PA resident with a FL Trust which contains NJ Real Estate?
  • Start a new question, please, and be specific about what info you need.
Very sorry for your loss. Not exactly up on NJ law or anything, but was your mother a domiciliary of NJ when she died? If so, I believe the estate would be considered a resident estate.

  • Yes, it's an NJ resident estate. The estate paid income tax on NJ-1041 last year for TY2011. The estate is now closed, so I have to distribute the 2012 income to myself.

    It just didn't occur to me until today that in addition to my federal and CA returns, I might have to file an NJ non-resident return.

    How does that work? I will distribute estate income to myself. Fine. I will pay federal income tax on that income. Fine. But which state expects me to pay state income tax on that income? CA or NJ?
  • Well, it seems to me that IF you have to file an NJ non-res return you'd only have to pay tax on NJ-source income.

    Oh, and of course, whatever income you pass through to yourself will have to be reported on your CA personal tax return.
  • I ran across that term looking through the NJ instructions today, but didn't find a definition. What is NJ-source income?

    The estate's income was only from investments: interest, dividends, and sales of securities. Some of the securities were NJ muni bonds. Most were generic investments like ETFs and CDs with no tie to the state of NJ.

    Or is it all NJ-source income because the estate was domiciled in NJ?
  • NJ-sourced would include rental/royalty income from property located in NJ, p-ship income allocated to NJ, net gain from the sale of property located in NJ, etc. From what you described, it doesn't appear as if you have any.

    So, your last question? I did a quick google search and came up with:

    New Jersey Tax Nexus
    A resident estate or trust does not have sufficient nexus with New Jersey and is not subject to New Jersey tax if it meets all of the following requirements:
    • There are no tangible assets in New Jersey; and
    • There is no income from New Jersey sources; and
    • There are no trustees or executors in New Jersey.

    Although estates and trusts that meet these requirements are not subject to tax, Form NJ-1041 must be filed along with a statement certifying the trust’s or estate’s exempt status.
  • Good find, thanks. I'm still baffled by their fuzziness on "income from New Jersey sources." Does that include dividends from NJ muni bonds or the sale thereof?
  • Nope. Not according to this (same publication):

    "New Jersey source income does not include income or gains from intangible personal property unless it is earned, received, or acquired in connection with a trade, business, or occupation carried on in New Jersey"
  • Bingo! Thank you! I must be going blind from staring at this stuff for too long.
  • LOL! No problem - and I know the feeling. ;-)