Question

An active duty military service member's state of legal residence (domicile) is California, but he was stationed outside the state on permanent change of station orders for the entire tax year. His income was: $39,000 military pay, $200 interest (savings account in a California credit union), and $1,000 capital gain on the sale of stock. Which of the following statements is correct?

A. He must file a California resident return; his taxable income under California law is $39,000.

B. He must file a California nonresident return; his taxable income under California law is $39,000.

C. He must file a California resident return; his taxable income under California law is $40,200.

D. He is considered a nonresident of California and is not required to file a California return. He has no California taxable income.

Answer 1

Option (c) is the appropriate answer as:

As per definition of Californian resident:

A California resident is any individual who meets any of the following:

• Present in California for other than a temporary or transitory purpose.
• Domiciled in California, but located outside California for a temporary or transitory purpose.
  • Domicile is defined for tax purposes as the place where you voluntarily establish yourself and family, not merely for a special or limited purpose, but with a present intention of making it your true, fixed, permanent home and principal establishment. It is the place where, whenever you are absent, you intend to return.

Since the person in concern in Domiciled in California he is a California resident.

Also for a California residents - ALL income, including income from sources outside California will be taxed in California.