It is a little known fact that if a nonresident of Colorado owns real estate in Colorado, such as a ski condo, the nonresident must file a DR 104 and complete the 104PN Part-Year/Nonresident Computation Form upon sale or receipt of rent.
For example, a taxpayer who lives in California and owns a vacation ski condo in Aspen must file a Colorado State Income Tax Return DR 104 upon the sale of the condo or if taxpayer has rental income with respect to the ski condo. As such, taxpayer would likely file two State tax returns: a California return and a Colorado return.
In addition to Colorado real estate, the following income sources are taxed:
- The ownership of any interest in real or tangible personal property in Colorado
- A business, trade, profession, or occupation carried on in Colorado
- The distributive share of partnership or limited liability company income, gain, loss, and deduction determined under CRS section 39-22-203
- The share of estate or trust income, gain, loss, and deduction determined under CRS section 39-22-404
- Income from intangible personal property, including annuities, dividends, interest, and gains from the disposition of intangible personal property to the extent that such income is from property employed in a business, trade, profession, or occupation carried on in Colorado. A nonresident, other than a dealer holding property primarily for sale to customers in the ordinary course of his trade or business, shall not be deemed to carry on a business, trade, profession, or occupation in Colorado solely by reason of the purchase and sale of property for his own account.
- His share of subchapter S corporation income, gain, loss, credit, and deduction allocable or apportionable to Colorado.
DR 0107 Colorado Nonresident Partner or Shareholder Agreement is the form used to establish jurisdiction over the nonresident partner (1065) or nonresident S Corporation (1120S) shareholder. This formed is signed by the partner/shareholder and then filed by the partnership/s corp. By signing this form the partner or shareholder promises to file a DR 104 as a nonresident of Colorado and report the income from the resident partnership or s corp. In this way, the State of Colorado extends its jurisdiction to nonresident partners and shareholders thereby defeating state tax evasion techniques.
Consequently, if you receive a K1 from a Colorado partnership or Colorado S Corp, be ready to file a DR 104.