Does capital asset located in a nonresident state sold at a loss also get reported the same in my resident state? Both states show $3k loss plus loss carryforward.

[caligirl1]

Does an investment capital asset located in a nonresident state sold at a loss also get reported the same in my resident state?  I am a resident of California and sold land in Hawaii.  Both the California (resident) and Hawaii (nonresident) tax returns are showing the longterm capital loss and a loss carryforward amount.  Is this correct?  I don't expect to have any future transactions in Hawaii and therefore won't be able to apply the carryforward loss to any future Hawaii capital gains, but will the California carryforward balance be available to apply to future California capital gains?

[DanielV01 · Accepted solution]

Yes.  Your resident state taxes all of your income regardless of where it comes from.  Following this same principle, your resident state must also include losses that are reported from income received from other states.  Your California return is correct as reported.

According to Hawaii tax law, if you did not have 1180 in taxable Hawaii income, you don't need to file a Hawaii return.  If all you have is capital loss in Hawaii, it is not necessary to report this as a nonresident.  If Hawaii questions, you can send them a copy of Federal Schedule D.  But Hawaii doesn't need to track your capital loss, since you will likely use that loss up unless you return to live (or produce income from) Hawaii.