Scenario #3: Fred and Wilma (husband and wife) moved during the tax year (on August 1) from Virginia to Georgia because Fred accepted a new promotion from his employer. All but $500 of Fred's moving expenses were reimbursed by his employer. The $500 would be included as a moving expense deduction on their federal taxes. They decided to keep their old house in Virginia as a rental property and were able to rent it out immediately. The rental lease started on August 1, which was the day they arrived in Georgia. A month later, Wilma found a good job just over the Georgia state line at a large hospital in South Carolina. Based on this scenario, select the appropriate answer for each of the following questions.

With three different states involved, Fred and Wilma are in a quandary over their tax submissions for the year of the move. Fred believes that he has finally figured out his Virginia tax return. Which of the following statements is correct?

a) Only a part-year return should be submitted to Virginia, which would prorate all exemptions and deductions and include income only for the period of residence in Virginia.

b) The part-year return submitted to Virginia would prorate all exemptions and deductions, include a deduction for moving expenses, and include income only for the period of residence in Virginia.

c) Part-year and nonresident returns should be submitted to Virginia. Neither of these would include moving expenses. The part-year return would prorate exemptions and deductions and include income only for the period of residence in Virginia.

d) The part-year return submitted to Virginia would include compensation for the period of residence in Virginia and rental income for the Virginia rental house.

Fred consulted a tax advisor for help filing his state tax returns. What action should Fred take in filing these returns for the period of August 1-December 31?

a) He should submit only a part-year return to Georgia. This would include all income for the period of residence in Georgia and a travel expense deduction.

b) He should submit a part-year return to Georgia, a nonresident return to South Carolina, and both part-year and nonresident returns to Virginia. The Georgia return would include all income for the period of residence in Georgia.

c) He should submit only a part-year return to Georgia and a nonresident return to Virginia for the rental income.

d) He should submit a part-year return to Georgia and nonresident returns to Virginia and South Carolina. The Georgia return would include all income received as compensation for services during the period of Georgia residency. The rental income would only be reported on the nonresident Virginia return and taxes on it would be paid to Virginia.