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State Taxability of 6252 Interest Payment

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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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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.

ex-AllStar, ex-Lutefisk taste taster, ex-ACME product tester
and ex marks the spot where those rocks and anvils hit me.

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Level 11

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.  

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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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Highlighted
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.

ex-AllStar, ex-Lutefisk taste taster, ex-ACME product tester
and ex marks the spot where those rocks and anvils hit me.

View solution in original post

Level 4

 

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

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Level 15

Always happy to try and help my southern friends 😁 

ex-AllStar, ex-Lutefisk taste taster, ex-ACME product tester
and ex marks the spot where those rocks and anvils hit me.
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@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.