Tax Type
Individual Income Tax
Description
Taxpayer successfully abandoned his Virginia domicile
Topic
Domicile
Date Issued
10-23-2009
October 23, 2009
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 "Taxpayer") for the taxable years ended December 31, 2005 through 2007.
FACTS
In July 2002, the Taxpayer, a Virginia resident, purchased a residence in ***** (State A). That same month the Taxpayer also surrendered his Virginia driver's license and acquired a State A driver's license and registered to vote in State A. In 2004, the Taxpayer formed a limited liability company in State A. In September 2005, the Taxpayer sold his State A residence and purchased another residence in State A.
During the taxable years at issue, the Taxpayer maintained several vehicles registered in Virginia and several vehicles in *****. He continued to own his Virginia residence. The Taxpayer owned 50% of a C corporation (the "Corporation") that operated a chain of retail stores in Virginia. The Taxpayer also owned and managed a retail shopping center in Virginia.
The Taxpayer spent less than 183 days in Virginia each year, taking care of an elderly parent, maintaining the shopping center and helping to operate the Corporation. He filed nonresident Virginia income tax returns that attributed all the income generated from the retail shopping center to Virginia and attributed all of the Taxpayer's salary from the Corporation to State A.
Under audit, the Department determined the Taxpayer was a domiciliary resident of Virginia for the taxable years at issue and assessed additional tax and interest. The Taxpayer concedes that he has performed services on behalf of the Corporation while in Virginia and bears additional tax liability on his salary from the Corporation, but contends that he successfully changed his domicile to 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 the permanent place of residence of a taxpayer and the place to which he intends to return even though he may actually reside elsewhere. 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.
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 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 original domicile. If the information is inadequate to meet this burden, the Commissioner must conclude that the taxpayer did intend to return to his or her original domicile.
In the instant case, the Taxpayer performed a number of activities that are consistent with establishing domicile in State A. He surrendered his Virginia driver's licenses and acquired a State A driver's license and registered to vote in State A. He established a permanent place of abode and has consistently maintained such an abode in State A since July 2002. He formed and operated a business venture in State A, and he had several vehicles registered in State A.
The Taxpayer also performed actions indicative of maintaining a Virginia domicile. The Taxpayer has owned a permanent place of abode in Virginia, which he established prior to purchasing the home in State A. He owns and actively participates in the operation of the Corporation and a retail shopping center in Virginia. He, continues to maintain several personal vehicles registered in Virginia.
After carefully weighing all of the evidence, I find that the Taxpayer successfully abandoned his Virginia domicile and established domicile in State A prior to the 2005 taxable year. The Taxpayer admits, however, that he provided services to the Corporation while he was in Virginia. Accordingly, the Taxpayer must file amended nonresident Virginia individual income tax returns for the taxable years ended December 31, 2005 through 2007, attributing his salary based on the number of days that he performed services on behalf of the Corporation while in Virginia.
Please send the amended returns to the Virginia Department of Taxation, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203, Attn: *****. The amended returns must be filed within 45 days from the date of this letter. Once the amended returns are processed, the assessments will be adjusted.
The Code of Virginia section cited and 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 regarding this determination, you may contact ***** at *****.
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- Sincerely,
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- Janie E. Bowen
Tax Commissioner
- Janie E. Bowen
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AR/1-2833536773.B
Rulings of the Tax Commissioner