In Appeal of Eddie C. Davis and Cynthia L. Davis, the taxpayer had received non-qualified stock options from her employer. During 2005, she exercised a number of the options and also moved from California to Texas while continuing to work for the same employer. At issue in the case was how much of the income from the options is attributable to her period of California residency. The taxpayer argued that only the period between the time the options vested and were exercised should be taken into account and the portion attributable to California should be based on the number of days she was a California resident during this period, compared to the total number of days in the period. Before the California State Board of Equalization, the Franchise Tax Board argued and the Board found that the counting of days should begin with the dates the options were granted, not the dates on which they vested. This resulted in a much larger share of the income having a California source and being taxable by California.
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