TaxTalk highlights: trust ownership, multi-state tax, nonresident tax and more.

• Author: Williams, Leonard W.
• Position: California tax

Change in ownership for beneficiaries is a frequent subject on the TaxTalk listserve.

In 1991, the Board of Equalization issued a Letter to Assessors (LTA) 91/08, "Change in Ownership Consequences of Real Property in an Estate or Trust Distributed on a 'Share and Share Alike' Basis." It is old, but still in force (the BOE withdraws out-dated LTAs).

The letter explains trust ownership concepts, and how it is possible to avoid a fractional reassessment on a distribution, given the right fact set.

The CPA who posted this information said that his office has used the concept to distribute property to one beneficiary using loans from the beneficiaries into the trust to balance the equities.

You can find the letter at www.boe.ca.gov/proptaxes/pdf/91_08.pdf.

Incorporated Entertainers or Professional Athletes who Perform in Many States

A CPA with a client who is an entertainer and performs in many states commented that she has had to file returns in California, Connecticut, New York, North Carolina and New Jersey in prior years. However, the client does not work in all of those states every year. But after filing once, those states have requested a return and a minimum tax fee regardless of whether or not the client earned any money there in a subsequent year.

The question was whether these are perpetual motion situations, or if there is a way to get out of the loop if there is no activity in subsequent years?

The question isn't easily or quickly answered. In addition, the rules for income taxes differ from those for employment and sales/use taxes.

The California CPA Education Foundation course, "Multi-State Taxpayer," which will be held Oct. 19 and taught by past CalCPA Chair Bob Petersen, looks into the complexities of this issue and offers helpful information.

Dealing with Employee Advances

A participant posted some verbiage from California's Employment Development Department indicating its position that employee advances are taxable when received, not when reported to the payroll service.

Another CPA commented that advances definitely need to be short term--less than one year outstanding. He added that in his experiences with examinations, he has had no arguments from IRS or EDD auditors as long as the advances were paid back or put through payroll within six to nine months.

In longer-term advances, the auditors have looked for a note of indebtedness that the company loaned the money to the employee. They also have looked for an interest...