06-54 | Virginia Tax

Tax Type

Individual Income Tax

Description

Taxpayer has not met the criteria showing that he abandoned his VA domicile

Topic

Persons Subject to Tax

Residency

Date Issued

05-31-2006

May 31, 2006

Re: § 58.1-1821 Application: Individual Income Tax

Dear *****:

This will respond to your letter in which you seek correction of an individual income tax assessment issued to ********* (the "Taxpayer") for the 2002 taxable year. I apologize for the delay in responding to your appeal.

- - - - FACTS

The Taxpayer was a domiciliary resident of Virginia in 2000. In 2001, the Taxpayer states that he and his spouse moved to ***** (State A). The Taxpayer has maintained a residence in Virginia, State A, and ***** (State B). He indicates that he spent part of 2002 at each of the homes.

Information provided to the Department by the Internal Revenue Service revealed that the Taxpayer used a Virginia address for numerous third-party information returns. Based on this information and other information obtained during an audit, the Department determined that the Taxpayer was a domiciliary resident of Virginia, and an assessment was issued for the 2002 taxable year.

The Taxpayer states that he and his spouse purchased a home in State A in late 2000, and subsequently moved there. He and his spouse obtained driver's licenses, registered automobiles and registered to vote in State A during 2001. The Taxpayer claimed the change in domicile from Virginia to State A was completed by January 1, 2002, at which time he states that he stopped filing individual income tax returns with Virginia. He contends that he remained a domiciliary resident of State A until January 1, 2005, when he moved back to Virginia. He requests, therefore, that the Department abate the assessment for the 2002 taxable year.

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 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 from Virginia, that person must intend to abandon his Virginia domicile with no intention of returning to that same domicile. Concurrently, that person must acquire a new domicile outside Virginia where that person is physically present with the intention 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 domicile.

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. In this case, the Taxpayer has the burden of proving that he changed his domicile. If the evidence is inadequate to meet this burden, the Department must conclude that the Taxpayer intended to return to his original Virginia domicile.

The Taxpayer performed a number of actions that are consistent with retaining a domicile in Virginia. He has maintained a permanent place of abode, including the purchase of new homes in Virginia in March 2001 and September 2002. These transactions occurred during the same period in which the Taxpayer claims to have established domicile in State A. The vast majority of the Taxpayer's third party financial documents for the 2002 taxable year, typically mailed in January or February 2003, reflect the address of his Virginia home. This indicates that the senders were notified during 2002 that the home in Virginia was the preferred residence for receipt of mail rather than State A.

The Taxpayer also performed a number of actions that are consistent with a change in domicile. He purchased a home in State A in November 2000. As part of the transition to State A, he changed his voting registration and automobile registration from Virginia to State A in April 2001. He obtained a State A driver's license in November 2001. He qualified for a State A homestead exemption and received a summons to jury duty in 2003.

Even while a domiciliary resident of Virginia during the 1999 through 2001 taxable years, the Taxpayer never spent enough time in any one state to be considered an actual resident. The Taxpayer spent the summer months in State B, the winter months in State A, and stayed in Virginia during the transition. According to the Taxpayer, this pattern was followed after he claims he changed his domicile to State A.

In fact, the Taxpayer purchased a home in Virginia nine months after effectuating his move to State A in January 2002. In February 2004, just 17 months later, the State A home was sold. Later in 2004, the Taxpayer and his spouse obtained Virginia driver's licenses.

The Department acknowledges that a change in domicile occurs as part of a process in which no single factor is determinative. A person's true intention must be determined with reference to all of the facts and circumstances of the particular case. As noted earlier, obtaining a new domicile requires actual abandonment of the old domicile and acquisition of the new domicile.

Although the Taxpayer took significant steps to establish domicile in State A, he has not met the burden of showing that he abandoned the Virginia domicile with no intention of returning. Therefore, the Taxpayer is subject to Virginia income taxation as a domiciliary resident for the 2002 taxable year and therefore must file accordingly.

The assessment for the 2002 taxable year was made based on the best information available to the Department. The Taxpayer may have additional information that more accurately reflects a true and correct filing for the 2002 taxable year. It is recommended, therefore, that the Taxpayer file an individual income tax return as a Virginia resident for the 2002 taxable year.

The requested tax return should be filed, along with payment, within 60 days from the date of this letter. The income tax return and payment, as applicable, should be mailed to: *****, Virginia Department of Taxation, Office of Policy and Administration, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203.

If the 2002 income tax return is not filed within the allotted time, the assessment will be upheld as issued, and collection action will resume. A schedule is enclosed showing the current outstanding balance. No additional interest will accrue provided the total outstanding balance is paid within 30 days from the date of this letter.

The Code of Virginia section cited, along with other reference documents, are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this determination, you may contact ********************** at ****************.

- - - - Sincerely,

- - - - Janie E. Bowen
        Tax Commissioner

AR/56085E

Rulings of the Tax Commissioner