Tax Type
Individual Income Tax
Description
Taxes paid by residents to other states; Timely filing of application
Topic
Credits
Date Issued
09-20-1994
September 20, 1994
Re: §58.1-1821 Application: Individual Income Tax
Dear****
This will reply to the letter concerning a request that***********(the "Taxpayers") be allowed to file an amended 1989 individual income tax return after the expiration of the statute of limitations.
FACTS
The Taxpayers, who are residents of Virginia, filed the Virginia 1989 income tax return on a timely basis and paid the tax due. Included in income was a capital gain from the sale of real property located in another state. In July 1993, the Taxpayers were notified by the other state that the gain was taxable; therefore, the Taxpayers paid the applicable tax to that state. The Taxpayers are requesting that they be allowed to claim the out-of-state tax credit on an amended Virginia income tax return for taxes paid to the other state even though the statute of limitations has expired.
DETERMINATION
Va. Code §58.1-1823 provides that an amended return may be filed within three years from the last day prescribed by law for the timely filing of the return or within ninety days from the final determination of a change or correction in the federal tax liability.
Generally, if an original 1989 return is timely filed, the statute of limitation for filing the amended return to request a refund will expire on May 1, 1993. However, if an amended return results from a change or correction on the federal income tax return, the statute of limitations is extended to ninety days after final determination of such change. There are no provisions to extend the statute of limitations based on changes or corrections to the income taxes for another state. Unfortunately, the Taxpayer's request to file an amended return occurred after the expiration of the statute of limitations; therefore, the filing of an amended 1989 return cannot be allowed.
In the event that the Taxpayer had been able to file an amended return within the statute of limitations, the Taxpayer still would not have been able to get relief by claiming a tax credit on the Virginia return for the taxes paid to the other state. In 1989, Va. Code § 58.1-332 provided that this credit be allowed for tax paid on earned or business income derived from another state. Therefore, in that a gain on the sale of realty is typically not considered earned or business income, the credit would not have been allowed on the Virginia return. While this code section was changed, beginning January 1, 1994, to allow an out-of-state credit for the tax paid in another state on the gain from the sale of a principal residence to the extent the gain is included in federal adjusted gross income, the change would not apply to the 1989 tax return.
I regret I am unable to favorably respond to your request. Please do not hesitate to contact the department should you need other assistance.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/7573N
Rulings of the Tax Commissioner