Skip to Main Content


Legal Ruling No. 174

October 17, 1957


When a nonresident sells his contract right to purchase a tangible asset which is under construction in this state, his profit is not income from sources within the state.

Taxpayer, a resident of Mexico, contracted to purchase an airplane from a California company. Prior to the time the plane was completed, the taxpayer decided not to complete the purchase and sold his interest to the company for a profit of $150,000. Advice is sought as to whether the gain is taxable as income from California sources.

Under Regulation 17211-17214(c) gain from the sale of tangible personal property in California is taxable to nonresidents. Under the law of sales, goods that must be manufactured are "future goods". California Civil Code 1796. The purchaser of these articles acquires no title or property in such goods until they are placed in a deliverable condition. In this case, the airplane was not in deliverable condition until completion and title did not pass to the taxpayer prior to the resale back to the manufacturer. Consequently, when the taxpayer resold the contract he sold only an intangible right evidenced by a purchase agreement. Such a right had its situs in Mexico, the domicile of the taxpayer, and the profit did not constitute income from California sources.

Is there something wrong with this page?

Help Us Improve Our Website

Don't include social security numbers or other personal/confidential information.

Feedback received: Thank you for your help.

If you need assistance, contact us.

Oops! Something went wrong.

We appreciate your feedback. Please try again later

Chat with an FTB Representative

You are leaving

We do not control the destination site and cannot accept any responsibility for its contents, links, or offers. Review the site's security and confidentiality statements before using the site.

If you have any issues or technical problems, contact that site for assistance.

Ahora está saliendo de

Nosotros no controlamos el sitio web al que se destina y no podemos aceptar ninguna responsabilidad por su contenido, enlaces, u ofertas. Revise las declaraciones de seguridad y confidencialidad del sitio antes de usar el sitio. Si tiene algún problema en general o técnico, comuníquese con ese sitio para obtener asistencia.

Si tiene algún problema en general o técnico, comuníquese con ese sitio para obtener asistencia.