Tax Type
Individual Income Tax
Description
Distribution from a retirement plan not reported as Virginia source income
Topic
Assessment
Records/Returns/Payments
Date Issued
05-09-2005
May 9, 2005
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 your clients, ***** (the "Taxpayers"), for the taxable year ended December 31, 2001.
FACTS
In 1996, the Taxpayers, a husband and wife, moved from ***** ("State A') and became Virginia domiciliary residents. In July 2001, they listed their Virginia home for sale. In August 2001, the Taxpayers contracted to purchase land in State A in order to build a new home.
The Department audited the Taxpayers and determined that they established domicile in State A on October 31, 2001. The auditors also found that the Taxpayers received a distribution from a retirement plan in September 2001 that was not reported as Virginia source income on the Taxpayers' original part-year return. As a result, the auditors assessed additional income tax and interest for the 2001 taxable year. The Taxpayers contend that they established domicile in State A prior to the September 2001 distribution because they resided in State A for the months of September and October 2001 after listing their Virginia home for sale and putting a contract on property in State A.
DETERMINATION
Two classes of residents, a domiciliary resident and an actual resident, are set forth in Va. Code § 58.1-302. The domiciliary residence of a person means that 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 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.
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. The Department concedes that it is difficult to know whether a taxpayer intends to return to Virginia. The Department determines a taxpayer's intent through the information provided. The Taxpayer has the burden of proving that he or she has abandoned his or her Virginia domicile. If the information is inadequate to meet his or her burden, the Department must conclude that he or she intended to return to Virginia.
In this case, the Department concedes that the Taxpayers established a new domicile in State A on October 31, 2001. The Taxpayers claim to have established domicile in State A prior to that date. Thus, the issue becomes not whether a change of domicile occurred, but when did the Taxpayers take sufficient action to abandon their Virginia domicile and obtain a new domicile in State A.
The Department acknowledges that changing domicile is a process that can occur over time, and therefore, is not contingent upon a taxpayer completing all steps required. The Department must, therefore, make a judgment based on the preponderance of evidence as to when a change has occurred.
The Taxpayers assert that when they put their Virginia home on the market in July 2001, executed a contract to purchase land in State A in August 2001, and stayed with friends and relatives in State A in September and October 2001, they expressed their intent to change their domicile to State A. One of the requirements for a change domicile to take place is the establishment of a permanent place of abode in the new state. The facts in this case indicate that the Taxpayers' Virginia home did not sell until June 2002, the Taxpayers did not actually purchase the land in State A until October 31, 2001, and they purchased another home in State A in September 2002 while waiting for a house to be built on the land.
As evidence of their residency in September and October 2001, the Taxpayers have provided an affidavit from their daughter dated August 25, 2004, almost three years after the events took place. The Taxpayers have provided no objective evidence, such as a rental agreement, that would indicate that their stay at their daughter's home constituted the establishment of a permanent residence. In addition, the Taxpayers have provided no information as to their place of abode between October 2001 and September 2002 when they purchased a home in State A. In fact, they spent at least 80 days in Virginia in 2002. Based on this evidence alone, the Department could reasonably conclude that the Taxpayers did not change domicile until September 2002.
Other evidence, however, demonstrates that the Taxpayers established a State A domicile before September 2002. The Taxpayers reported on a State A tax return, under penalty of perjury, that they established residency in State A on October 31, 2001. They also filed a declaration of State A domicile, registered to vote, and closed on the purchase of their land on October 31, 2001. In addition, the Taxpayers reported on their 2001 Virginia part-year return that they resided in Virginia through December 15, 2001. Based on these numerous declarations by the Taxpayers, I conclude that the auditor correctly determined that the Taxpayers changed domicile to State A on October 31, 2001. The self-serving affidavit dated August 25, 2004 cannot negate the objective evidence in this case.
CONCLUSION
Accordingly, your request for the abatement of Virginia individual income tax assessment issued to the Taxpayers for the taxable year ended December 31, 2001 is denied. The enclosed schedule shows that Taxpayers' Virginia individual income tax liability for the 2001 taxable year, including updated interest.
No further interest will accrue provided the outstanding assessment is paid within the 30 days from the date of this letter. The Taxpayers should remit their payment to: Virginia Department of Taxation, 3600 West Broad Street, Suite 160, Richmond, Virginia 23230, Attn: ***** . If you have any questions concerning payment of the assessment, you may contact ***** at *****.
The Code of Virginia section cited is available on-line in the Tax Policy Library section of the Department's web site, located at www.policylibrary.tax.virginia.gov. If you have any questions regarding this determination, you may contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****.
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- Sincerely,
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Kenneth W. Thorson
Tax Commissioner
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AR/52512B
Rulings of the Tax Commissioner