The incorrect statement regarding the capital gain income of Ken is D. California taxes the installment proceeds received by a nonresident to the extent the income from the sale was from a California source.
Ken's capital gain income is the increase in his California rental property's value. Capital gain is realized when Ken sells the property.
As profits from the sale of a capital asset, such as Ken's California rental property, shares of stock, a business, a parcel of land, or a work of art, capital gains are taxable. The opposite of a capital gain is called a capital loss. A capital loss arises when an asset is sold at price less than its basis value.
A. The capital gain income is taxable by California in both 2019 and 2020 because the property was located in California.
B. The capital gain income is taxable by California only in 2020 because the property was located in California.
C. The interest income is not taxable by California and has a source in Ken's state of residence.
D. California taxes the installment proceeds received by a nonresident to the extent the income from the sale was from a California source
Thus, the incorrect statement about the capital gain income is Option D.
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