Capital Gains Tax by State?

Question

Family is selling property in CT own by S-Corp there. Owners are residents in FL, MI & NY. Where and how much (state) capital gains are due (if any). Individual gain would be $300K.

Answer 1

The S-Corp will have a CT source gain. (I assume the property is real or tangible property). All of the above will have a taxable Federal gain. Either 15% long term or 25% for net non recaptured section 1250 gain. (Assume the property was purchased after 1986 so I will leave off my discussion section 1250 recapture on ACRS assets). The 25% gain will be to the extent that depreciation was taken on the property. The remainder is a section 1231 gain. (Section 1231 is what professionals refer to as "best of Both Worlds" Capital Gain if income and ordinary loss if a loss. You will also need to consider if you've had 1231 losses in the last five years, if so you could have ordinary income to that extent.

If you have passive losses, reported on form 8582, carried over from last year it may very well free up these losses. Consult a tax professional on this if you do not know what I am talking about.

CT's tax rate is 5%. On a state level there is no difference between types of income, ie no preferential rates. You'll need to pay tax to CT. If you live in NY you'll get full credit for the tax paid to CT. (NY has a higher rate than CT - State is 6.85%, city is 6.85 plus NYC is about 3.7%) The person living in NY/NYC will also need to pay NY the difference between the CT rate and the state city rate for NY. MI will yeild essentially the same if the tax rate is higher than CT's 5%. In Michigan it is very possible to be subject to a city tax as well.

For the FL resident - there is no tax in FL. So you only are subject to Federal and CT.

Everyone will need to file a CT non resident return.

You should all seek professional advice about payiing estimated taxes. It is very likely that you could use a "safe harbor" by paying in 110% of last years tax for Federal.

The above should also be considered for the various states. I strongly suggest you consult a professional.

BTW is that a Striper in your hands? If so NICE Fish!

Answer 2

You really will need to research this yourself through the individual state tax authorities.

FL has no income tax. MI and NY do and there will be tax consequences there. The fly in the ointment is CT. Since the property is located there, there may be CT taxes due as well, though the NY and MI residents will get a credit on their state returns for the CT taxes paid, if any.

Answer 3

It is hard to anser your question, without more specifics.
This is a big money question. I would call the IRS and ask them. I had a cap gain question once, and two accountants (with big fancy offices and over 20yrs exp) gave me wrong advice that would have cost me over $20k. Only because I think the tax code changes all the time and is so complicated. Instead, I called the IRS and asked them. They may give you a code #, so you can review the tax code yourself as well. Print the code and keep it with your return, and write down what the IRS tells you. Keep those things with your tax papers in order to have a record if they call you later. You can also provide them to the person who may do your taxes. Usually, capital gains are 15% of the amount of gain. This number is adjusted based on individuals, families, first property, first sale in a year, type of property sold, and maybe 25 more questions. Once you figure out your federal tax obligation it will be easy to figure out your state obligations.
When calling the IRS, do it first thing in the a.m. and be ready for a long phone call. While on the phone eat your breakfast and have a couple of magazines to read while you are on hold. Even better is if you have speaker phone.

Answer 4

it relatively is a federal tax administered via the IRS. The trees tried to absolutely do away with capital beneficial properties taxes, and have decreased it to laughably low tiers. maximum states plug in numbers from federal returns and word their tax fee.