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State Taxability of 6252 Interest Payment

Maxine
Level 4

 

I have always followed the rule that interest received is taxed by the taxpayer's home state.  However this one is giving me a headache.  Taxpayer's inherited an installment sale of farm ground in a different state.  I have all of the information needed to file the 6252, no problem there.  However the buyer (who is out of state) issued them a 1099int for the interest portion and since that is a part of the installment sale income should it go on the non-resident state return with the principle portion or is it income to the home state.  Thanks for any advice, I need to get this finished off and out the door.

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IRonMaN
Level 15

I don't do MO and I try to avoid IA whenever possible, but the interest sounds like it would be considered source income in the state where the sale took place.

ACME Taxes, Tatoos, Tires and Tomatoes (I had to get rid of the turtles - they kept running away)

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BobKamman
Level 14

I think it might depend on the state, and it might make a difference that this was a business (farm) rather than, for example, a private residence or raw land.  

Maxine
Level 4

Yes it was a farm.  I know when they came in last fall and I calculated an estimated tax payment for MO, I only incuded the principal portion thinking that the interest would be taxable to IA (home state).  Now I am doubting myself since the interest is part of the installment agreement from MO.

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IRonMaN
Level 15

I don't do MO and I try to avoid IA whenever possible, but the interest sounds like it would be considered source income in the state where the sale took place.

ACME Taxes, Tatoos, Tires and Tomatoes (I had to get rid of the turtles - they kept running away)

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Maxine
Level 4

 

That is what I was thinking, thanks for the confirmation. 

IRonMaN
Level 15

Always happy to try and help my southern friends 😁 

ACME Taxes, Tatoos, Tires and Tomatoes (I had to get rid of the turtles - they kept running away)
The_AntiTax_Man
Level 5

@Maxine  From the IA DOR expanded instructions:

Nonresidents of Iowa should file IA return [if > $1,000] and report:

          Wages earned in Iowa

  • Income from Iowa property
    • rental income
    • capital gain on the sale of property
  • Self employment income earned while working in Iowa
  • Iowa unemployment benefits
  • Iowa gambling winnings
  • Income from pass-through entities, such as partnerships and S-corporations

_________________________________________________________

As you can see, investment income from interest and dividends are not listed.