Tax Type
Individual Income Tax
Description
Taxes paid by residents to other states; Capital gain on disposition of real property
Topic
Credits
Date Issued
08-11-1994
August 11, 1994
Re: §58.1-1821 Application: Individual Income Tax
Dear**********
This will reply to your letter in which you protest the disallowance of an out-of-state tax credit claimed by your clients,*************** (the "Taxpayers"), for taxable year 1990. I apologize for the delay in responding.
FACTS
During taxable year 1990, the Taxpayers sold real estate which was located in Vermont. The real estate was not held for business purposes. The Taxpayers, as long-time residents of Virginia, filed a joint 1990 Virginia return which included a subtraction equal to the capital gain recognized from the Vermont real estate sale. The return was later selected for audit and the subtraction was disallowed on the basis that Va. Code §58.1-322 does not provide for such a modification. The Taxpayers submitted an amended Virginia return claiming a credit for income tax paid to Vermont on the capital gain income. This credit was denied. The Taxpayers protest the denial of the credit and request relief from the assessment.
DETERMINATION
Va. Code §58.1-332 (A) provides individuals a credit for income tax paid to another state:
Va. Code §58.1-332 (A) provides individuals a credit for income tax paid to another state:
-
- Whenever a Virginia resident has become liable to another state for income tax on any earned or business income for the taxable year... (Emphasis added)
- Whenever a Virginia resident has become liable to another state for income tax on any earned or business income for the taxable year... (Emphasis added)
The issue raised in your appeal is analogous to that addressed in this ruling. In both instances, the credit was denied on the basis that a particular capital gain from the sale of real estate was neither earned nor business income. Thus, for the same reasons set forth in P.D. 86-61, your application for relief cannot be allowed.
Accordingly, the assessment is correct. Attached is a schedule indicating the tax liability plus interest accrued through May 27, 1993, the date of your appeal. If the balance is paid in full within 30 days of the date of this letter, the Taxpayers will avoid accrual of additional interest. Please forward their payment to the Office of Tax Policy, the Virginia Department of Taxation, P.O. Box 1880, Richmond, Virginia 23282.
Sincerely,
Danny M. Payne
Tax Commissioner
Rulings of the Tax Commissioner