Tax Type
Individual Income Tax
Description
Exemptions; Personal exemptions.
Topic
Taxable Income
Date Issued
10-09-1997
October 9, 1997
Re: § 58.1-1821 Application: Individual Income Tax
Dear****************
********asked me to reply to your letter concerning the correction of an assessment issued to your wife by the department for the 1994 taxable year. You have requested a redetermination of the department's previous ruling issued to you and your wife (the "Taxpayers") on March 19, 1997, copy enclosed. Your case is currently being handled as an appeal pursuant to Code of Virginia § 58.1-1821, copy enclosed. I apologize for the delay in responding.
FACTS
The husband is an active duty member of the armed forces, whose domicile is in a state other than Virginia. The wife is a Virginia resident, and her entire income is taxable by this state. For the taxable year 1994, the Taxpayers filed separate federal individual income tax returns, and the husband claimed the exemption for the Taxpayers' daughter on his federal return. The wife did not claim the dependent exemption on her federal return, but claimed it on her separately filed Virginia return.
The wife's 1994 Virginia return was the subject of an office audit. Because the number of exemptions claimed on her state return exceeded the number claimed on her federal return, an adjustment was made to disallow the dependent exemption.
The department previously ruled that pursuant to the requirements of the Code of Virginia, the Virginia Individual Income Tax Regulations, and the department's longstanding written policy, Virginia is a conformity state and, as such, only those exemptions claimed for federal income tax purposes can be claimed on the Virginia income tax return. The Taxpayers contend the language in Code of Virginia § 58.1-322 is ambiguous concerning dependent exemptions and hereby request the department to reconsider its determination.
DETERMINATION
Code of Virginia § 58.1-322 (D) (2) (a), copy enclosed, provides “a deduction . . . for each personal exemption allowable to the taxpayer for federal income tax purposes." (Emphasis added)
Both of the Taxpayers were eligible to claim the dependent exemption on their separately filed federal returns; however, the exemption was only allowable on one return. An exemption cannot be considered allowed on one spouse's federal return if it was claimed on the other spouse's return. Consequently, once the husband claimed the dependent exemption on his federal return, it was no longer an allowable exemption on the wife's federal or Virginia return.
Further, Code of Virginia § 58.1-324 (C), copy enclosed, states, “Where husband and wife have not separately reported and claimed items of income, exemptions and deductions for federal income tax purposes . . . such items shall be allocated and adjusted . . .” (Emphasis added)
The Taxpayers elected to file married separately on their federal individual income tax returns. Because they separately claimed the exemption amounts at the federal level, they are not entitled to allocate these items in a different manner at the Virginia level.
I cannot conclude that Code of Virginia § 58.1-322 is ambiguous with respect to claiming exemptions. Instead, Virginia law is very clear on this issue. There is no basis to allow an exemption on your wife's Virginia return that was clearly not claimed on her federal return .
Accordingly, your request for the department to reconsider its determination cannot be granted. The department's assessment for the 1994 taxable year is correct as issued. The balance due of**** should be paid in full within 30 days to avoid the accrual of additional interest. Please forward your payment to the attention of ***at the Department of Taxation, Office of Tax Policy, Post Office Box 1880, Richmond, Virginia 23218-1880. If you have any questions, please contact ******** at *** .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12466M
Rulings of the Tax Commissioner