Tax Type
Individual Income Tax
Description
Virginia conforms to federal law concerning taxable distributions made by estates
Topic
Persons Subject to Tax
Reports
Date Issued
09-09-2005
September 9, 2005
Re: Protective Claim for Refund: Individual Income Tax
Dear *****:
This will respond to your letter in which you request a protective claim for refund for the 2001 taxable year on behalf your clients, ***** (the "Taxpayers').
FACTS
In 2001, the Taxpayers received beneficiary distributions from the ***** (the "Estate") and reported this income on their 2001 Virginia individual income tax return. The Estate is under examination by the Internal Revenue Service ("IRS"). The IRS contends that the Estate should have reported the taxable distributions and paid the income tax associated with these distributions. You are filing this protective claim along with an amended 2001 Virginia return, on behalf of the Taxpayers, to protect their right to file an amended return to claim a refund for the 2001 taxable year pending the outcome of IRS examination of the Estate.
DETERMINATION
Pursuant to the authority granted the Tax Commissioner by Va. Code § 58.1-1824, a protective claim for refund can be held pending the outcome of another case before the courts or the claim may be decided based upon its merits pursuant to Va. Code § 58.1-1821.
Virginia Code § 58.1-301 provides that terminology and references used in Title 58.1 of the Virginia Code will have the same meanings as provided in the IRC unless a different meaning is clearly required. Virginia "conforms" to federal law because it starts the computation of Virginia taxable income with federal adjusted gross income ("FAGI").
If the IRS prevails in its proposed change to the income tax liability of the Estate, the distributions should be removed from the Taxpayers' FAGI for 2001. Virginia Code § 58.1-1823 provides that any person may file an amended return with the Department requesting a refund within one year from the final determination of any change or correction in the liability of the taxpayer for any federal tax upon which the state tax is based. As such, the Taxpayers would be able to amend their Virginia individual income tax return to reflect the changes made by the IRS.
If the IRS does not allow the Taxpayers to remove the estate distributions from their federal individual income tax return, the Taxpayers would not be entitled to a refund because Virginia conforms to federal law and there would be no resultant change in the Taxpayer's FAGI.
Accordingly, a protective claim for refund under Va. Code § 58.1-1824 is not appropriate in this case and will not be granted. Pursuant to Va. Code § 58.1-1823, the Taxpayers may file an amended Virginia individual income tax return with the Department requesting a refund within one year from the final determination of any change or correction in their federal individual income tax liability.
The Code of Virginia sections cited, and other reference documents, are available online in the Tax Policy Library section of the Department's web site, located at www.policylibrary.tax.virginia.gov. If you have any questions concerning this response, please contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****.
-
-
-
-
-
-
-
- Sincerely,
-
-
-
-
-
-
-
-
-
-
-
-
-
- Kenneth W. Thorson
Tax Commissioner
- Kenneth W. Thorson
-
-
-
-
-
-
AR/55229B
Rulings of the Tax Commissioner