Gross Income of Nonresidents

Chapter 11 of Part 10 of Division 2 of the Revenue and Taxation Code deals with gross income of nonresidents under the California Personal Income Tax Law.

Section 17951 provides that, for purposes of computing “taxable income of a nonresident or part-year resident,” in the case of nonresident taxpayers, the gross income includes only the gross income from sources within this state. The gross income of a nonresident taxpayer does not include income not subject to the Personal Income Tax Law by operation of the five specified federal laws.

Section 17952 provides that, for purposes of computing “taxable income of a nonresident or part-year resident,” income of nonresidents from stocks, bonds, notes, or other intangible personal property is not income from sources within this state unless the property has acquired a business situs in this state, with specified exceptions.

Section 17952.5 provides how “taxable income of a nonresident or part-year resident” is computed including gross income of a nonresident. It defines the terms “qualified retirement income” and “qualified retirement income.”

Section 17953 states that, for purposes of computing “taxable income of a nonresident or part-year resident,” income of estates and trusts distributed or distributable to nonresident beneficiaries is income from sources within this state only if distributed or distributable out of income of the estate or trust derived from sources within this state.

Section 17954 states that, for purposes of computing “taxable income of a nonresident or part-year resident,” gross income from sources within and without this state is allocated and apportioned under rules and regulations prescribed by the FTB.

Section 17955 provides how “taxable income of a nonresident or part-year resident” is computed, and not including dividends, interest, or gains and losses from qualifying investment securities if any of four specified conditions apply.

This section does not apply to income derived from investment activity that is interrelated with any trade or business activity of the nonresident or an entity in which the nonresident owns an interest in this state, whose primary activities are separate and distinct from the acts of acquiring, managing, or disposing of qualified investment securities, or if those securities were acquired with working capital of a trade or business activity conducted in this state in which the nonresident owns an interest. The following terms are defined: “investment partnership,” “qualifying estate or trust,” and “qualifying investment securities,” and “qualifying investment securities.”