Hello tax experts,

A client is thinking of moving to Texas from California and establishing permanent residency there. He wants to know if he will be taxed on certain income in California after he becomes a Texas resident for income tax purposes. Here are the facts as I understand them.

A Texas S corporation (T), which is a partner in a California LLC taxed as a partnership (C), receives non-passive income from C whose employees and partners perform talent management services in California. C files a California income tax return and issues T a K-1 as a non-resident partner. T files a California tax return to report the K-1 income from C and pays an equal amount to the Texas resident owner/employee of T (O/E) as wages reported on a W-2. O/E performs no services in California. Does O/E have California income to report on a nonresident California income tax return?

Same facts, except T is a California S corporation.