LSN 90-3

Special Notice Concerning Liability Of Nonresident Individuals For Connecticut Capital Gains Tax

Under a recently enacted law effective for taxable years beginning on or after January 1, 1990, nonresident individuals recognizing, for federal income tax purposes, capital gains income from the sale or exchange of realty located in Connecticut are subject to the Connecticut capital gains tax. Formerly, only resident individuals were subject to the tax. Nonresident individuals recognizing capital gains income from the sale or exchange of realty located other than in Connecticut or recognizing capital gains income from the sale or exchange of property other than realty are not subject to the tax.

Joint or separate tax returns

Nonresident married individuals who file a joint federal income tax return must file a joint tax return for Connecticut capital gains tax purposes. Nonresident married individuals who file separate federal income tax returns must file separate tax returns for Connecticut capital gains tax purposes.

Estimated tax

Nonresident individuals who, for federal income tax purposes, are calendar-year taxpayers will be required to file a declaration of estimated tax (Form 394 ESA) on or before June 15, 1990 if their estimated capital gains tax liability for the period January 1, 1990 through May 31, 1990 is $2,000 or more. Payment of 100% of the estimated tax liability for that period must accompany the declaration. If their estimated capital gains tax liability for calendar year 1990 is more than $2,000, they will be required to file a Form 394 ESB and pay 100% of their estimated tax liability for calendar year 1990 on or before February 15, 1991.

(Nonresident individuals who, for federal income tax purposes, are other than calendar-year taxpayers should file declarations and make payments of estimated tax by substituting the 15th day of the sixth month of their fiscal year beginning in 1990 for June 15, 1990 and the 15th day of the second month following the end of their fiscal year beginning in 1990 for February 15, 1991.)

Partnerships, S corporations, trusts and estates

If a nonresident individual is a partner of a partnership that sells or exchanges realty located in Connecticut, that individual will recognize, for Connecticut capital gains tax purposes, capital gains income from the sale or exchange of that realty to the same extent that such individual recognizes, for federal income tax purposes, capital gains income from such sale or exchange. Similar rules apply if the nonresident individual is a shareholder of an S corporation, or a beneficiary of a trust or estate, that sells or exchanges realty located in Connecticut.

For more information, call the Taxpayer Services Division at (860) 297-5962 or (Connecticut callers outside the Greater Hartford area) 1-800-382-9463.

LSN 90-3 (NEW 5/90)