Tax Type
Individual Income Tax
Description
Change from one legal domicile to another
Topic
Persons Subject to Tax
Property Subject to Tax
Residency
Date Issued
06-14-2002
June 14, 2002
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****
This will reply to your letter in which you seek correction of the individual income tax assessment issued to ***** (the "Taxpayers") for the 1998 taxable year.
FACTS
In the fall of 1997, the Taxpayers retired from full-time employment in a foreign country ("Country A"). During 1997, the Taxpayer's sold their home in Country A and purchased a condominium in Country A. In December 1997, the Taxpayers purchased a house in Virginia. During the 1998 taxable year, the Taxpayers began renovating the Virginia residence but spent less than 100 days in Virginia. In 1998, the Taxpayers also acquired Virginia driver's licenses and they registered a vehicle in Virginia. All of the Taxpayers' information returns were sent to their Virginia address. For 1998, the Taxpayers reported rental income for the condominium unit on Schedule E of their federal income tax return.
The department determined that the Taxpayers were domiciliary residents of Virginia and assessed individual income tax, penalty and interest. The Taxpayers contend that they maintained their domiciliary residence in Country A during the 1998 taxable year.
DETERMINATION
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 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 another state, that person must intend to abandon his Virginia domicile with no intention of returning to Virginia. 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. A Virginia domiciliary resident, therefore, working in other parts of the country who has not abandoned his Virginia residency continues to be subject to Virginia taxation. Additionally, a person who is not a domiciliary resident of Virginia, but who stays in Virginia for an aggregate of more than 183 days is also subject to Virginia taxation.
In order to change from one legal domicile to another legal domicile, there must be (1) actual abandonment of the old domicile, coupled with an intent not to return to it, and (2) an acquisition of a new domicile at another place, which must be formed by personal presence and an intent to remain there permanently or indefinitely. The burden of proving that the domicile has been changed lies with the person alleging the change.
In determining domicile, consideration may be given to the individual's expressed intent, conduct, and all attendant circumstances including, but not limited to, financial independence, profession or employment, income sources, residence of spouse, marital status, sites of real and tangible property, motor vehicle registration and licensing, and such other factors as may be reasonably deemed necessary to determine the person's domicile. A person's true intention must be determined with reference to all of the facts and circumstances of the particular case. A simple declaration is not sufficient to establish residency.
The department concedes that it is difficult to know whether a taxpayer intends to return to his or her original domicile. The department determines a taxpayer's intent through the information provided. The taxpayer has the burden of proving that he or she has not abandoned his or her original domicile. If the information is inadequate to meet this burden, the Commissioner must conclude that the taxpayer did not intend to return to his or her original domicile.
While there is sufficient evidence to indicate that the Taxpayers may have acquired a Virginia domicile in 1998, the Taxpayer's activities in Country A did not demonstrate an intent to abandon their Country A domicile. Though the condominium was rented for a short period of time, the Taxpayers resided in the condominium in Country A for 200 days in 1998. The Taxpayers also continued to vote in Country A. Based on the evidence and circumstances surrounding this case, I find that the Taxpayers were domiciled in Country A in 1998.
However, because the Taxpayers spent significant time in Virginia, there may be income from Virginia sources. As such, they must file a nonresident Virginia income tax return reflecting any Virginia source income earned.
In accordance with this ruling, the assessment for the 1998 taxable year will be held in abeyance for 60 days to allow the Taxpayers to file a proper nonresident individual income tax return. Please send the return to the Virginia Department of Taxation, Office of Tax Policy and Administration, Appeals and Rulings, P.O. Box 1880, Richmond, Virginia 23218-1880, Attention: *****. If such return is not filed within the allotted time, the hold will be removed and collection actions will commence.
A copy of the Code of Virginia section cited is enclosed for reference purposes. This code section and other reference documents are also available online in the Tax Policy Library section of the department's web site located at www.tax.state.va.us. Prior year income tax forms and instructions are also located on the department's web site in the "Download Forms" section. If you have any questions regarding this determination, you may contact ***** at *****.
Sincerely,
Kenneth W. Thorson
Tax Commissioner
AR/37986B
Rulings of the Tax Commissioner