Connecticut Administrative Code › Title 12 - Taxation › 740(a) - INCOME TAX › Part III - Part-year Resident individuals & trusts › Section 12-717(c)(1)-1 - Special accruals: change from resident to nonresident

Current through July 10, 2024
(a) Where the resident status of an
				individual changes from resident to nonresident, such individual shall,
				regardless of the method of accounting normally employed, accrue and include
				for the portion of the year prior to the change of resident status any items of
				income, gain, loss or deduction accruing prior to the change of residence, if
				not otherwise properly includible or allowable for Connecticut income tax
				purposes for such portion of the taxable year or for a prior taxable year. That
				is, in computing Connecticut adjusted gross income for the period of residence,
				such individual shall include in Connecticut adjusted gross income derived from
				or connected with Connecticut sources all items required to be included if a
				federal income tax return were being filed for the same period on the accrual
				basis, together with any other accruals, such as deferred gain on installment
				obligations, which are not otherwise includible or deductible for federal or
				Connecticut income tax purposes either for such resident period or for a prior
				taxable period. See §
									12-717(c)(4)-1
				of this Part for relief from the special accrual requirements of this
				section.
(b) The provisions of this
				section also apply to part-year resident trusts, and wherever reference is made
				in this section to a part-year resident individual, such reference shall be
				construed to include a part-year resident trust, and any reference to a
				part-year resident individual's Connecticut adjusted gross income derived from
				or connected with Connecticut sources shall be construed to include a part-year
				resident trust's Connecticut taxable income derived from or connected with
				Connecticut sources.
(c) Examples.
Example 1:
If an individual sells her
				  business at a gain under a contract whereby the purchase price is to be paid in
				  installments, and later changes her status from resident to nonresident, she
				  shall accrue to the period of residence the entire amount of gain remaining
				  unpaid from such installment obligations, regardless of the method of
				  accounting she normally uses in reporting her transactions.
Example 2:
If a trust sells its business or
				  assets at a gain under a contract whereby the purchase price is to be paid in
				  installments, and the trust later changes its status from resident to
				  nonresident, the fiduciary of the trust shall accrue to the period of residence
				  the entire amount of the gain remaining unpaid from such installment
				  obligations, regardless of the method of accounting the trust normally uses in
				  reporting such transactions.
Example 3:
Where a beneficiary of a trust or
				  estate changes status during the taxable year from resident to nonresident,
				  such beneficiary shall accrue to the period of residence any trust or estate
				  income credited, distributed, payable or required to be distributed to such
				  beneficiary as of the date of such beneficiary's change of residence.
(d) A gain, the recognition of
				which is deferred for federal income tax purposes, need not be accrued for
				Connecticut income tax purposes solely because of the change of residence. For
				instance, a gain realized on sale of an individual's principal residence, the
				recognition of which gain for federal income tax purposes is properly deferred
				under section 1034 of the Internal Revenue Code, need not be accrued to the
				period prior to such individual's change of residence.
(e) The amounts of the accrued items of an
				individual to be reported for the period of Connecticut residence are
				determined with the applicable modifications described in §§
									12-701(a)(20)-2
				and
				12-701(a)(20)-3
				of Part I as if such accrued items were includible or allowable for federal
				income tax purposes. Similarly, the amounts of the accrued items of a trust to
				be reported for its period of Connecticut residence are determined with the
				applicable modifications of §§
									12-701(a)(10)-2
				and
				12-701(a)(10)-3
				of Part IV as if such accrued items were includible or allowable for federal
				income tax purposes.
Example:
On September 10, 1992, B, a
				  resident individual who, for federal income tax purposes, uses the cash
				  receipts and disbursements method of accounting and uses the calendar year as
				  his accounting period, retires from employment in Connecticut and moves to
				  Florida. B's salary up to the date of termination amounts to $18,000. On
				  September 1, B's employer notifies him that, under his employment contract, B
				  shall receive on October 1, 1992 a bonus of $1,000, subject to no
				  contingencies.
Dividend income received before the change of residence
				  amounted to $550, and on August 15, 1992, the XYZ Corporation declares a
				  dividend of $600, payable to B on September 20, 1992 if he is a stockholder of
				  record on September 6, 1992. B also holds State of California bonds on which
				  interest in the amount of $300 is received on the first day of each calendar
				  quarter (January 1, April 1, July 1 and October 1, 1992).
On January 2, 1992, B closed title with C on a tract of
				  vacant land in Pennsylvania, taking back from C a purchase money mortgage that
				  calls for annual payments on July 1 of each year. By reason of B's use for
				  federal tax purposes of the installment method of accounting with respect to
				  this transaction, B shall realize a capital gain of $1,000 each year for five
				  years, or $5,000.
On September 1, 1992, B enters into a contract with D to sell
				  B's beach property in Connecticut to D, subject to D's investigation of title
				  and obtaining a stipulated mortgage. The property to be sold is not B's
				  principal place of residence and is not used for rental purposes. The closing
				  of title on this property is held on October 20, 1992. B realizes a capital
				  gain of $20,000 which is included in determining the gain from the sale or
				  exchange of property reported on B's 1992 federal income tax return.
On B's 1992 Connecticut part-year resident income tax return,
				  B includes in his Connecticut adjusted gross income for the period of residence
				  the following items:
Regular salary . . . . . . . . . . . . . . . . . . .
							 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$18,000
Bonus-not forfeitable . . . . . . . . . . . . . . . .
							 . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,000
Dividends received before change of residence . . . .
							 . . . . . . . . . . . . . . . . . . . . .
550
Dividends accrued as of record date. . . . . . . . .
							 . . . . . . . . . . . . . . . . . . . . . . . . .
600
Gain on sale of Pennsylvania property ($1,000 from
							 1992 payment;
$4,000 accrued). . . . . . . . . . . . . . . . . . .
							 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,000
Modification under §
														12-701(a)(20)-2
							 for California bond interest ($900
received on January 1, April 1 and July 1, plus $233
							 accrued on account
of interest payable October 1) . . . . . . . . . . .
							 . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,133
For the period of nonresidence, B includes in Connecticut
				  adjusted gross income derived from or connected with Connecticut sources the
				  capital gain on the sale of the Connecticut beach property ($20,000). Such gain
				  is not accruable to the period of residence during the taxable year because of
				  the conditions stated in the contract of sale.
Because B accrues the bonus payment to his period of
				  residence during 1992, he is not required to take it into account in his period
				  of nonresidence during 1992 as an item of income derived from Connecticut
				  sources, even though B actually receives it when he is a nonresident. See
				  §
										12-717(c)(3)-1
				  of this Part.
(f) While
				this section pertains to Section
				12-717(c)(1)
				of the general statutes, for purposes of supplementary interpretation, as the
				phrase is used in Section
				12-2
				of the general statutes, the adoption of this section is authorized by Section
				12-701(c)
				of the general statutes.