Hello,
Need to clarify something.
I was a resident of Texas and my wife was a resident of California in 2006. We now live in California. I moved over here last week of December 2006 but did not start working here till the first week of Jan 2007. All my income in 2006 was in TX and my wife's in CA.
We plan to file our federal jointly and my wife plans to file her CA state separately as I don't have to file one for TX (no state taxes in TX). Is this possible? I have heard arguments from both sides and wanted to get some more advice.

Thanks.

Because you filed jointly on the federal return, I believe California will require you to file jointly on the California tax return.

However, you should file as a part-year resident, which will allow you to NOT pay California taxes on your Texas-based income.