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June 1, 2019
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Tax on Interest and Dividend income for California part-year residents

  • June 1, 2019
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I lived in California for over 20 years till May 2015 and permanently moved overseas for a different job with the same employer. I received employer stock via ESPP and RSU plans while I was a CA resident. I sold a portion of the ESPP stock in March 2015 (while I was a resident) in a Qualifying Disposition. FTB pub 1004 clearly states that the LTCG and Ordinary Income associated with this sale are taxable in California.

So far so good. I have a question on dividend income from ESPP and RSU stock. I received dividends from both ESPP and RSU holdings, both while I was a resident and also as a nonresident.

How does California treat this dividend income? I believe it taxes dividends received while I was a resident; how about dividends received while I was a nonresident? Is it considered income earned from a California source (my ESPP and RSU were granted while I was employed and lived in California)?

Additionally, I received dividends from my equity holdings and interest from cash deposits. I assume I only pay tax on those received while I was a resident - is that correct?

Thanks a lot in advance for the advice and help!

Best answer by TomYoung
Per Pub 1031:
"Interest and Dividends: Interest and dividends generally have a source where you are a resident."

While you resided in California the dividends received are clearly "California-sourced" but after you moved they are not. 

Tom Young

1 reply

TomYoungAnswer
June 1, 2019
Per Pub 1031:
"Interest and Dividends: Interest and dividends generally have a source where you are a resident."

While you resided in California the dividends received are clearly "California-sourced" but after you moved they are not. 

Tom Young
June 1, 2019
What if the interest and dividends are owned by husband and wife, and husband is Texas resident, will only half be California-sourced, since interest is community income?