(a) The
following rules are applied if during the taxable year the status of a taxpayer
changes from resident to nonresident, or from nonresident to resident.
(1) For the period of residence, the tax is
imposed on income from whatever source derived, as provided in section
18-235-4-02.
(2) For the period of
nonresidence, the tax is imposed on Hawaii source income, as provided in
section 18-235-4-03. Part-year residents shall not be eligible for the election
in section 18-235-4-03(c).
(3) If
it cannot be determined whether all or part of a taxpayer's income was
generated during the period of residence, that amount of income shall be
multiplied by the ratio that the period of residence bears to the entire
taxable year. The product shall be the portion attributable to Hawaii, unless
the taxpayer demonstrates to the satisfaction of the department that the result
attributes to Hawaii out-of-state income that was received or derived during
the period of nonresidence.
(4) The
credit for tax paid to another state under section
235-55,
HRS, shall be allowed only for tax paid on out-of-state income allocable to the
period of residence.
Example: T, an unmarried cash basis calendar
year taxpayer, was a resident of Arizona on January 1, 1993. T moved to Hawaii
on April 1, 1993, and continued to work as an insurance agent. T is a Hawaii
resident for the remainder of 1993. T received $20,000 as gain from the sale on
March 20, 1993, of Arizona real property held for investment. T earned
commissions of $25,000 for policies sold after April 1, 1993. T earned initial
and renewal commissions of $12,000 for policies sold before that date, $4,000
of which T earned before April 1, 1993. In addition, T had signed a business
consulting contract with one Arizona client, for which T was paid an additional
$1,200 for services rendered throughout the year. T's Hawaii income is computed
as follows:
(1) The $20,000 gain is
out-of-state income earned when T was a nonresident. None of it is attributable
to Hawaii.
(2) The commissions of
$25,000 are from a trade or business carried on in Hawaii, and are Hawaii
source income. The commissions were earned when T was a Hawaii resident. All of
these commissions are attributable to Hawaii.
(3) The $12,000 in commissions earned before
April 1993 is from a trade or business carried on in Arizona, and is thus
out-of-state income. However, only $4,000 was earned when T was a nonresident.
The remaining $8,000 is attributable to Hawaii.
(4) It cannot be determined whether the
remaining $1,200 in commission income was generated while T was a Hawaii
resident. Thus, because T was a resident for nine months in 1993, 9/12 x
$1,200, or $900, shall be attributable to Hawaii unless T demonstrates
otherwise to the satisfaction of the department.
