When a nonresident sells his contract right to purchase a tangible asset which is under construction in this state, his profit is not income from sources within the state. Taxpayer, a resident of Mexico, contracted to purchase an airplane from a California company.
Advice is sought as to whether the gain is taxable as income from California sources.
California Civil Code 1796. The purchaser of these articles acquires no title or property in such goods until they are placed in a deliverable condition. In this case, the airplane was not in deliverable condition until completion and title did not pass to the taxpayer prior to the resale back to the manufacturer. Consequently, when the taxpayer resold the contract he sold only an intangible right evidenced by a purchase agreement. Such a right had its situs in Mexico, the domicile of the taxpayer, and the profit did not constitute income from California sources.