Rulings of the Tax Commissioner

October 25, 2000


Re: Request for a Ruling: Individual Income and Estate Taxation

Dear ****

This will reply to your letters regarding the Virginia income tax and estate tax filing requirements for the * * * (the "Taxpayer").

FACTS

Prior to 1995, * * * (the "Decedent") was a domiciliary resident of another state. In April of 1995, the Decedent, who was unable to care for himself, was placed in a Virginia nursing home. He died at the nursing home in February of 1999. You are requesting a ruling as to whether the Taxpayer needs to file a Virginia estate tax return and Virginia income tax returns for the 1995 through 1999 taxable years.

RULING

Individual Income tax

All Virginia residents, provided that they have sufficient Virginia taxable income, are subject to Virginia income tax. Two classes of residents, a domiciliary resident and an actual resident, are set forth in Code of Virginia § 58.1-302. The domiciliary residence of a person means that the permanent place of residence of a taxpayer and the place to which he intends to return even though he may actually reside elsewhere. For a person to change domiciliary residency to Virginia, that person must intend to abandon his old domicile with no intention of returning to that same domicile. Concurrently, that person must acquire a new domicile where that person is physically present with the intention to remain there permanently or indefinitely. An actual resident of Virginia means "a person who, for an aggregate of more than 183 days of the taxable year, maintained his place of abode within Virginia, whether domiciled in Virginia or not."

In Public Document ("P.D.") 87-122 (3/31/87) (copy enclosed), the department ruled that an incompetent individual who was moved to Virginia by his guardian was not a domiciliary resident for Virginia estate tax purposes. The Commissioner's rationale was that Code of Virginia § 58.1-901 defines a resident for estate tax purposes as a decedent who was domiciled in Virginia at his death. As stated above, "domicile" requires the intent to leave one's old domicile and remain permanently or indefinitely in a new one. An incompetent individual lacks the requisite intent.

The department has further ruled in P.D. 00-68 (5/10/00) (copy enclosed) that an individual who involuntarily resided in a Virginia nursing home or retirement center for an aggregate of more than 183 in a taxable year was a Virginia resident for income tax purposes. The department considers a nursing home or other care giving facility a "place of abode" for the purpose of determining actual residency under Code of Virginia § 58.1-302.

Therefore, in the instant case, the Decedent was an actual Virginia resident for the 1995 through 1998 taxable years. However, because the Decedent died in February of 1999, he was not an actual resident of Virginia for the 1999 taxable year. As such, Virginia individual income tax returns must only be filed on behalf of the Taxpayer for the years that the Decedent was an actual Virginia resident.

Fiduciary Income Tax

Code of Virginia § 58.1-381 requires that every resident estate or trust, or nonresident estate or trust with Virginia taxable income, that files a federal income tax return must also file a Virginia fiduciary income tax return. Code of Virginia § 58.1-302 provides that a resident estate or trust is one of the following:

1) The estate of a decedent who at his death was domiciled in the Commonwealth:

2) A trust created by the will of a decedent what at his death was domiciled in the Commonwealth;

3) A trust created by or consisting of property of a person domiciled in the Commonwealth; or

4) A trust or estate which is being administered in the Commonwealth.

In the instant case, the Decedent was the beneficiary of a trust. It also appears that the Taxpayer possesses substantial assets. A review of the facts indicates that the decedent's trust was administered in Virginia by the Daughter and the Taxpayer is being administered by either the Son or the Daughter in Virginia. It appears that the Decedent's trust and the Taxpayer are both being administered in Virginia. Under such circumstances, the trust is a resident trust and the estate is a resident estate. If federal fiduciary income tax returns are required to be filed for the years in question, Virginia fiduciary income tax returns must also be filed.

Estate Tax

Code of Virginia § 58.1-902 provides that Virginia estate tax is imposed on the estate of residents subject to federal estate tax. Code of Virginia § 58.1-903 provides that the estates of nonresidents subject to federal estate tax may also be subject to Virginia estate tax if they contain property located in Virginia. A resident for estate tax purposes must be a domiciliary resident. Because the Decedent was not a domiciliary resident of the Commonwealth, he was not a resident for Virginia estate tax purposes. Therefore, in the instant case, the Taxpayer would only be required to file a Virginia estate tax return as a nonresident, if it owned property in Virginia.

I hope that the foregoing answers your questions. If you have any questions regarding this ruling, you may contact * * * at * * *



Danny M. Payne
Tax Commissioner