Which of the following taxpayers can take a California credit for taxes paid to another state?...

Which of the following taxpayers can take a California credit for taxes paid to another state?

Select one:

a. A resident of California is taxed on income by California and another state and the income has a source within the other state under California law. The other state has not allowed a credit for the net taxes paid to California.

b. A resident of California is taxed on income by California and another state and the income has a source within the other state under California law. The other state has allowed a credit for net income taxes paid to California.

c. A nonresident of California paid taxes imposed by and paid to his state of residence and was allowed a credit for net income taxes paid to California.

d. None of the above taxpayers can take a California Credit for Taxes Paid to Another State.

Solutions

Expert Solution

The correct choice is - a. A resident of California is taxed on income by California and another state and the income has a source within the other state under California law. The other state has not allowed a credit for the net taxes paid to California.

Explanation- Generally, residents of California may claim a credit only if the income taxed by the other state has a source within the other state under California law. Credit is allowed for net income taxes paid to another stateon income that is also subject to California tax.

No credit is allowed if the other state allows California residents a credit for net income taxes paid to California (which proves that choice 'b' is wrong).

Nonresidents of California may claim a credit only for net income taxes imposed by and paid to their states of residence and only if such states do not allow their residents a credit for net income taxes paid to California. (which proves that choice 'c' is wrong).

Choice 'd' can not be correct as taxpayers can take a California credit for taxes, paid to another state.

Please mention your doubts in the comment box ,if any

Thanks.

ekkarill92 answered 1 year ago

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