Document Number
95-330
Tax Type
Individual Income Tax
Description
Taxes paid by residents to other states; Capital gain on disposition of real property
Topic
Credits
Date Issued
12-27-1995
December 27, 1995


Re: Request for Ruling: Individual Income Tax


Dear******************

This will reply to your letter of October 10, 1995, in which you request a ruling as to the applicability of the Virginia out-of-state tax credit to your client,************** (the "Taxpayer" ) .
FACTS

The Taxpayer is a resident of Virginia who sold real property located in Connecticut during 1995. For the past 30 years, the property has been used as a summer vacation home by the Taxpayer and her family. Connecticut imposes a tax on the capital gain from the sale of the property, and does not allow an out-of-state tax credit because the Taxpayer is a resident of Virginia. You request a ruling as to whether Virginia will allow an out-of-state tax credit for the tax paid to Connecticut.
RULING

Code of Virginia § 58.1-332 (A) provides in part:
    • 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 terms earned or business income are defined in Virginia Regulation (VR) 630-2-332 as follows:
    • Earned income shall mean wages, salaries, or professional fees and other amounts received as compensation for professional services actually rendered . . . (Emphasis added)

      Business income shall mean income derived from an activity which constitutes a "business" for federal income tax purposes for which a federal Schedule C, E, or F must be filed... (Emphasis added)
A capital gain resulting from the sale of a summer vacation home does not constitute earned or business income within the meaning of the department's regulation. The department has previously ruled on a similar issue. See Public Document (P.D.) 94-243 (8/11/94), copy attached. Accordingly, the Taxpayer will not qualify for an out-of-state tax credit on the disposition of the real estate.

If you have any questions regarding this ruling, you may contact *****at****************.

Sincerely,




Danny M. Payne
Tax Commissioner



OTP/10660P



Rulings of the Tax Commissioner

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