California Franchise Tax Board

In that case, the income is California source income.

While the FTB does not dispute this, in Legal Ruling 2022-02, the FTB takes the position that when a partnership has unrealized receivables or inventory, the sale of the partnership interest is two distinct sales.

First, the sale of the intangible partnership interest, which is treated as taxable gain sourced to the state of the residence of the seller, And second, the sale of the partnership's IRC Section 751 unrealized receivables and inventory.

This deemed sale is treated as if the partnership sold the unrealized receivables or inventory immediately prior to the sale of the partnership interest.

During the tax year at issue, JCB sold a portion of its Tory Birch partnership interests and passed through the gain received from the sale to its partners.

The partners took the position that all of the distributions from JCB's sale of its Tory-Birch partnership interests were attributable to the sale of an intangible and therefore should be sourced to their states of residence and were not taxable to California.

Following its reasoning in Legal Ruling 2022-02, the FTB reduced one of the taxpayers' net operating loss for the tax year at issue by over $2.5 million and assessed an additional $1,500 in tax against the other taxpayers.

The Office of Tax Appeals held that IRC Section 751 is not a sourcing rule and does not convert the sale of a partnership interest into two separate transactions.

There is another allegation that cuts to the heart of trust in charitable giving.

Officials allege donors were told contributions were tax-deductible even after the IRS and California Franchise Tax Board revoked Wagmore's tax-exempt status.

Tax deductibility matters to donors, not just for financial reasons, but because it signals legitimacy.

A tax-exempt charity carries a stamp of official recognition.

But I would rather you just pay me I don't know, $150,000 a year base salary and then $4 million worth of stock every year.

Aren't I allowed to make that negotiation? Can't I do that? Wouldn't that be smart to do? Why would I instead of getting a half a million dollar salary and get killed? by the IRS and the Franchise Tax Board.

Would it be wiser to take a lower salary and have them make up the compensation in other forms at a lower tax rate? Isn't that smart? Doesn't anybody think that's a good idea? Wouldn't you do that? So if a firefighter working overtime winds up, you know, earning $186,000 next year, and I make a base pay of 150, but I'm actually taking home 4 million in value, then yes, I'm paying lower taxes than the firefighter.

So I don't know what kind of

State departments of revenue do not rely on self-reported estimates or casual declarations of residency.

State tax agencies such as the New York Department of Taxation and Finance and the California Franchise Tax Board utilize sophisticated forensic tools to reconstruct a taxpayer's movements.

When an individual files a non-resident return or ceases filing altogether, the tax department initiates an audit that places the entire burden of proof upon the taxpayer.

Under standard administrative law, the taxpayer must affirmatively prove their physical whereabouts for all 365 days of the year.

it is not hard to find it.

And there's an organization called the Franchise Tax Board in California who has the expertise, the resources and the tax returns of these 250 people.

This is not hard to administer.

And and and so you know i think there's just a public education dimension to this that if we want to fix our common problems in my opinion going forward where we have this much inequality we can't let the ultra rich off the hook