How to Correctly Split Federal Loss From Stock/Options (1099B) Investments Between Two States?

Question

I have been actively investing in the stock market, and received my 1099B.

Mid-year, I moved states.

For the sake of simplicity, Jan-Jun in State A, and Jul-Dec in State B.

I have more than enough investments to have more than 6000 in losses across the year

More than 3000 of losses in each state during that 6 month period, each.

For the sake of Federal tax return, I get to deduct only up to 3000 of losses.

Bu then, for each State, when asked to allocate the portion of the 3000 loss from the reported federal return for each state, how should I approach this?

Should I evenly split it 1500/1500 between the states, or because I have more than 3000 loss during each 6 month period in each state, can I allocate 3000/0 (or 0/3000), or even better, am I allowed to claim the whole 3000 in each state (3000/3000)?

Answer 1

I don't have an authoritative reference for this. But what I would do is take the ratio of capital losses realized in State A and State B, and then prorate the $3000 according to that. So if you realized $7500 of losses in State A, and $2500 in State B, I would allocate $2250 of the loss to State A and $750 to State B. You could also prorate it according to the months you lived in each state, so $1500 for each. I don't believe you could do $3000 in each state, even if you had over $3000 realized in each, because on most partial-year resident returns your resident + non-resident portion needs to add up to your federal amount, which is $3000. Allocating $3000 in one state and $0 in another would satisfy this, but it would be hard to justify if questioned.