# Are capital gain from stock investments considered state sourced income?



## neuacnt (Sep 14, 2018)

Here is a situation that doesn't seem to have a lot of information about on google or here. 

Are capital gains from stock market investment considered state sourced income? Even if the person has no other source of income from the state and the his/her domicile is no longer in the state? This is assuming the account was opened in the same state and left open prior to expatriation. If it helps, the state in question is MA, US. It seems that it doesn't even matter whether the person is in the US or outside because it could very well be that someone forget to change their address with their bank/brokerage firm when moving to a new state.

It seems logical to assume that such capital gains are considered state sourced income since the bank will likely issue a 1099 to the state treasury department for the gains. 

It'd be awesome to hear your thoughts and experiences.


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## Bevdeforges (Nov 16, 2007)

In the tradition of all things tax, "it depends."

Where are you located and which taxes are you concerned with. For US purposes, your 1099 will indicate how much is declarable on Federal and State returns - but that assumes that you are liable for filing a state or a federal return.

If you live overseas, it depends on your local tax rules whether or not you have to declare the capital gain in your country of residence (and how), and the actual ability of the country of residence to tax a capital gain from the US depends on the tax treaty they have with the US.
Cheers,
Bev


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## neuacnt (Sep 14, 2018)

thank you Bev for the response. 

I guess the gist of my question is focused on US state level tax reporting. It is clear that on the federal level, tax has to be reported, regardless if one is living abroad, a different state, or has any income (not fully true, but you know what I mean), etc. Of course, whether one ends up paying any tax is really not the question here.

What's not clear, however, is whether one belong to a state of previous domicile has to report/pay tax for capital gains from publicly traded stock investments. If I understand correctly, in most of the states, if one is no longer considered of domicile of that state, one does not have to file tax, that is UNLESS, if one has "source of income from that state" (e.g. wage paid by an employer from that state). So back to the original question, for example, say ABC Bank is HQed in Colorado and has a branch in Massachusetts. Now there is an expat that used to live in MA and has an account in the aforementioned branch but is no longer tied to the state and have been living abroad for the entirety of the calendar year, and, has residency of another country. For sake of argument, he/she has domicile of that foreign country. Now, he/she also does not earn any income that is considered as sourced from the state of MA. Then does the capital gains of this expat from this ABC Bank branch in MA considered taxable for the state of MA? In another word, are capital gains from a stock investment by itself considered MA sourced income? 

Interestingly, if one's gross income is lower than 8000 in MA, then one does not have to file tax in MA, regardless of residency status. 

Of course,


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## Bevdeforges (Nov 16, 2007)

Being from Taxachusetts myself (well, a LONG time ago) I suspect that if your capital gain is under $8000, then no, you don't have to file. But check the rules for filing a Non-Resident return. Sometimes the threshold for that is different than for a regular old resident return.

And if you are resident overseas, you will sometimes find that the feds (and, I suppose, the state) just withhold whatever non-resident taxes are due before they send you the check. It may depend on what address you're using for your brokerage or bank account.
Cheers,
Bev


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