California Code of Regulations › Title 18 - Public Revenues › Division 3 - Franchise Tax Board › Chapter 2.5 - Personal Income Tax (Taxable Years Beginning After 12-31-54) › Subchapter 11 - Gross Income of Nonresidents › Section 17952 - * Income from Intangible Personal Property

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Income of nonresidents from rentals or
				  royalties for the use of, or for the privilege of using in this State, patents,
				  copyrights, secret processes and formulas, good will, trade-marks, trade
				  brands, franchises, and other like property is taxable, if such intangible
				  property has a business situs in this State within the meaning of (c)
				  below.
(b) Income of nonresidents
				  from intangible personal property such as shares of stock in corporations,
				  bonds, notes, bank deposits and other indebtedness is taxable as income from
				  sources within this State only if the property has a situs for taxation in this
				  State, except that if a nonresident buys or sells stock, bonds, and other such
				  property in California, or places orders with brokers in California to buy or
				  sell such property, so regularly, systematically and continuously as to
				  constitute doing business in this State, the profit or gain derived from such
				  activity is taxable as income from a business carried on here, irrespective of
				  the situs of the property for taxation.
(c) Intangible personal property has a
				  business situs in this State if it is employed as capital in this State or the
				  possession and control of the property has been localized in connection with a
				  business, trade or profession in this State so that its substantial use and
				  value attach to and become an asset of the business, trade or profession in
				  this State. For example, if a nonresident pledges stocks, bonds or other
				  intangible personal property in California as security for the payment of
				  indebtedness, taxes, etc., incurred in connection with a business in this
				  State, the property has a business situs here. Again, if a nonresident
				  maintains a branch office here and a bank account on which the agent in charge
				  of the branch office may draw for the payment of expenses in connection with
				  the activities in this State, the bank account has a business situs here.
If intangible personal property of a nonresident has
					 acquired a business situs here, the entire income from the property including
					 gains from the sale thereof, regardless of where the sale is consummated, is
					 income from sources within this State, taxable to the
					 nonresident.
(d) The source
				  of gains and losses from the sale or other disposition of intangible personal
				  property is determined at the time of the sale or disposition of that property.
				  For example, if a California resident sells intangible personal property under
				  the installment method, and subsequently becomes a nonresident, any later
				  recognized gain attributable to any installment payment receipts relating to
				  that sale will be sourced to California (absent a business situs exception).
				  Further, a California nonresident who sells intangible personal property would
				  be taxed by California on gain as it is recognized upon receipt of future
				  installment payments if the intangible personal property had a business situs
				  in California at the time of the sale.
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* This regulation is
					 substantially the same as Title 18, Cal. Adm. Code, Chapter 3, Subchapter 2,
					 Section 17211-14(f).
1.
					 Renumbering and amendment of Sections
					 17951-17954(f) to
					 Section 17952 filed 1-15-82; effective
					 thirtieth day thereafter (Register 82, No. 3).
2. Change without
					 regulatory effect amending subsection (a) and NOTE filed 12-10-2002 pursuant to
					 section 100, title 1, California Code of
					 Regulations (Register 2002, No. 50).
3. New subsection (d) filed
					 7-2-2007; operative 8-1-2007 (Register 2007, No.
					 27).
Note: Authority cited: Section
						19503,
						Revenue and Taxation Code. Reference: Sections
						17041
						and
						17952,
						Revenue and Taxation Code.