Connecticut Administrative Code › Title 12 - Taxation › 740(a) - INCOME TAX › Part III - Part-year Resident individuals & trusts › Section 12-700(c)-1 - Part-year resident individuals

Current through July 10, 2024
(a) Individuals who
				change their resident status from resident to nonresident or from nonresident
				to resident shall compute their tentative Connecticut income tax liability as
				if they were resident individuals, except that, if they are required to accrue
				items under Section
				12-717(c)(1)
				or (2) of the general statutes, those items,
				in accordance with this section, are added to or subtracted from, as the case
				may be, their Connecticut adjusted gross income before the computation of their
				tentative Connecticut income tax liability as if they were resident
				individuals. Thus, the modifications to federal adjusted gross income which are
				made by a resident individual in determining Connecticut adjusted gross income
				are also made by a part-year individual, but the Connecticut adjusted gross
				income of part-year resident individuals (1) changing their status from
				resident to nonresident is increased or decreased, as the case may be, by the
				items accrued under Section
				12-717(c)(1)
				of the general statutes, to the extent not otherwise includible in Connecticut
				adjusted gross income for the taxable year and (2) changing their status from
				nonresident to resident is decreased or increased, as the case may be, by the
				items accrued under Section
				12-717(c)(2)
				 of the general statutes, to the extent
				included in Connecticut adjusted gross income for the taxable year. Then, after
				Connecticut adjusted gross income is so increased or decreased, any exemption
				allowed under Section
				12-702 of
				the general statutes is taken, and the tax rate is applied, resulting in a
				tentative tax. After deduction of any credit allowed under Section
				12-703
				of the general statutes, the tentative tax is prorated by multiplying the
				tentative tax by a fraction, the numerator of which is the part-year resident's
				Connecticut adjusted gross income derived from or connected with sources within
				this state (see §
									12-717(a)-1
				of this Part) and the denominator of which is the part-year resident's
				Connecticut adjusted gross income from all sources, as increased or decreased
				under this subsection.
(b) In cases
				where a part-year resident individual's Connecticut adjusted gross income
				derived from sources everywhere, as increased or decreased under subsection (a)
				of this section, is less than his or her Connecticut adjusted gross income
				derived from or connected with sources within this state, then (1) such
				individual's Connecticut adjusted gross income derived from or connected with
				sources within this state, reduced by the amount of the exemption allowed under
				section
				12-702 of
				the General Statutes, shall be such individual's Connecticut taxable income
				derived from or connected with sources within this state (to which amount the
				tax rate is applied) and (2) such individual's Connecticut adjusted gross
				income derived from or connected with sources within this state shall be such
				individual's Connecticut adjusted gross income for the purpose of determining
				the credit allowed under section
				12-703
				of the General Statutes (which credit is then subtracted from the amount to
				which the tax rate is applied).
(c)
				Examples: The following examples illustrate the application of this section. In
				each example, assume that, for federal income tax purposes, the taxpayer uses
				the cash receipts and disbursements method of accounting and uses the calendar
				year as his or her accounting period:
Example 1: On September 15, 1993, Taxpayer X, a resident
				  unmarried individual, quits his job in Connecticut in anticipation of moving to
				  Montana. X's 1993 wages from this job amount to $60,000, $55,000 of which X has
				  received by the time that he moves. (The other $5,000 X receives after he has
				  moved.) On September 10, 1992, X had sold undeveloped land that he held for
				  investment purposes, taking back from the purchaser a purchase money mortgage
				  calling for five equal installment payments on September 10, 1992, 1993, 1994,
				  1995 and 1996. By reason of X's use for federal income tax purposes of the
				  installment method of accounting with respect to the recognition of gain from
				  the sale of this land, X shall realize a capital gain of $10,000 each year for
				  five years, or $50,000 in total. X moves to Montana on October 1, 1993, finds a
				  job there and receives $20,000 therefrom during the rest of the taxable year. X
				  does not post a bond or other security acceptable to the Commissioner under
				  Section
				  12-717(c)(4)
				  of the general statutes.
X's federal adjusted gross income (and his Connecticut
				  adjusted gross income, before special accruals) for his 1993 taxable year is
				  $90,000. In determining X's Connecticut adjusted gross income as a part-year
				  resident individual, the amount required to be specially accrued under Section
				  12-700(c)(2)(A)
				  of the general statutes is the $30,000 gain, which is added to X's Connecticut
				  adjusted gross income. (Any deduction or loss required to be specially accrued
				  would have been subtracted from X's Connecticut adjusted gross income.) This is
				  the amount of the $50,000 gain that accrued prior to X's change of status not
				  otherwise includible in X's Connecticut adjusted gross income for the 1993
				  taxable year. X's Connecticut adjusted gross income, as increased by the item
				  of gain accrued under Section
				  12-717(c)(1)
				  of the general statutes, is $120,000.
X's Connecticut adjusted gross income derived from or
				  connected with Connecticut sources consists of three elements:
(1) X's Connecticut adjusted gross income
				during the period of residence (January 1, 1993 to September 30, 1993) is
				$65,000.
(2) X's Connecticut
				adjusted gross income derived from or connected with sources within Connecticut
				during the period of nonresidence (October 1, 1993 to December 31, 1993) is $0.
				(No item that is accrued to the portion of the taxable year prior to the change
				of status is taken into account in determining Connecticut adjusted gross
				income derived from or connected with Connecticut sources for the portion of
				the taxable year after the change of status.)
(3) The amount of the special accruals that
				are required by Section
				12-717(c)(1)
				of the general statutes and that are added to X's Connecticut adjusted gross
				income during the period of residence is $35,000-the $30,000 gain and the
				$5,000 wages. This is the amount of the $50,000 gain and the amount of the
				wages that accrued prior to X's change of status and that did not otherwise
				properly enter into X's federal adjusted gross income for the portion of the
				taxable year prior to such change of status or a prior taxable year under X's
				method of accounting.
X's tentative tax is $5,400 ($120,000 multiplied by 4.5%).
				  X's tentative tax is multiplied by a fraction, the numerator of which is
				  $100,000-X's Connecticut adjusted gross income derived from or connected with
				  Connecticut sources, and the denominator of which is $120,000-X's Connecticut
				  adjusted gross income, as modified by Section
				  12-700(c)(2)(A)
				  of the general statutes. Thus, X's tax is $4,500.
Example 2: On February 1, 1993, Taxpayer Y, a nonresident
				  unmarried individual, in anticipation of moving to Connecticut, closes her
				  Florida business that she has conducted as a sole proprietor. Y's only income
				  received to that point in the taxable year has been derived from this business
				  and amounts to $30,000. This does not include one large account receivable from
				  1992 in the amount of $40,000. Y moves from Florida on February 15, 1993, still
				  not having collected the account receivable and still owing $5,000 for the
				  December 1992 rent and $5,000 for the January 1993 rent to the proprietorship's
				  landlord. Y obtains a job in Connecticut and receives $80,000 therefrom during
				  the rest of her 1993 taxable year. On July 1, 1993, the full amount of the
				  receivable is paid to Y who then immediately pays her Florida landlord the
				  $10,000 rent due.
Y's federal adjusted gross income (and her Connecticut
				  adjusted gross income, before special accruals) for her 1993 taxable year is
				  $140,000 (consisting of the profit from the Florida proprietorship of $60,000
				  and the earnings of $80,000 from her Connecticut job). In determining Y's
				  Connecticut adjusted gross income as a part-year resident individual, the
				  amount required to be specially accrued under Section
				  12-700(c)(2)(B)
				  of the general statutes is the $40,000 account receivable, which is subtracted
				  from Y's Connecticut adjusted gross income, and the $10,000 rental expense,
				  which is added to Y's Connecticut adjusted gross income. The $40,000 account
				  receivable accrued prior to Y's change of status and is included in Y's
				  Connecticut adjusted gross income for her 1993 taxable year. The $10,000 rental
				  expense also accrued prior to Y's change of status and is included in Y's
				  Connecticut adjusted gross income for her 1993 taxable year. Y's Connecticut
				  adjusted gross income, as increased and decreased by the items of income and
				  deduction accrued under Section
				  12-717(c)(2)
				  of the general statutes, is $110,000.
Y's Connecticut adjusted gross income derived from or
				  connected with Connecticut sources consists of three elements:
(1) Y's Connecticut adjusted gross income
				derived from or connected with sources within Connecticut during the period of
				nonresidence (January 1, 1993 to February 14, 1993) is $0.
(2) Y's Connecticut adjusted gross income
				during the period of residence (February 15, 1993 to December 31, 1993) is
				$110,000.
(3) The amount of the
				special accruals that are required by Section
				12-717(c)(2)
				of the general statutes and that are subtracted from Y's Connecticut adjusted
				gross income during the period of nonresidence is $30,000-the $40,000 account
				receivable is subtracted therefrom and the $10,000 rental expense is added
				thereto. This is the amount of the $40,000 receivable and the amount of the
				$10,000 rental expense that accrued prior to Y's change of status and that did
				not otherwise properly enter into Y's federal adjusted gross income for the
				portion of the taxable year prior to such change of status or a prior taxable
				year under Y's method of accounting.
Y's tentative tax is $4,950 ($110,000 multiplied by 4.5%).
				  Y's tentative tax is multiplied by a fraction, the numerator of which is
				  $80,000-Y's Connecticut adjusted gross income derived from or connected with
				  Connecticut sources, and the denominator of which is $110,000--Y's Connecticut
				  adjusted gross income, as modified by Section
				  12-700(c)(2)(B)
				  of the general statutes. Thus, Y's tax is $3,600.