My husband and I are full time residents of California but still have a small ownership percentage in a K-1 partnership from when we lived in NY 10 years ago. Not much income, but just enough so we have to file a return. The IT-203 worksheet asks for the amount of our IRA contribution that comes from NY sources. Can we consider the NY contribution equal to the income we received so that we owe no tax to NY?

Probably not, because the income on the K-1 is probably considered to be PASIVE income and not eligible to be considered earned compensation for an IRA.

For partnership income to be considered earned compensation, you must provide services to the partnership that help in the production of income.