Tax Type
Individual Income Tax
Description
Residency
Topic
Taxpayers
Date Issued
07-09-1999
July 9, 1999
Re: Sec. 58.1-1821 Application: Individual Income Tax
Dear***
This will reply to your letter in which you protest the assessment made against your clients, ***** (the "Taxpayers') for the 1994 taxable year. I apologize for the delay in responding.
FACTS
The Taxpayers (a husband and wife) moved back to Virginia in December 1994. The Taxpayer was employed as a foreign service officer by the United States (U.S.) government. Due to the nature of the husband's employment, the Taxpayers have lived in numerous locations within and without the U.S. during his service with the U.S. Department of State. The Taxpayers maintain that they are and have always been domiciled in another state ("State A'). The Taxpayers are registered to vote and vote regularly in State A, they hold drivers' licenses from State A, and maintain bank accounts in State A.
The Taxpayers are members of numerous organizations and have professional memberships in State A. The husband's employment records indicate a State A address as the required destination for home leave after every long-term overseas assignment. State A also allows them to maintain their domiciliary status while they are out of state but exempts them from filing income tax returns as long as they meet certain requirements.
From February 1983 to August 1988, the Taxpayers lived in Virginia. The Taxpayers own four residences in Virginia, three of which were held as rental property and the fourth was used by the Taxpayers as a residence during the period. The Taxpayers appropriately filed Virginia Individual Income Tax returns during the initial time they resided in Virginia. In August 1988, the husband received an overseas assignment. After living in six different locations outside of Virginia, the Taxpayers returned to Virginia in December 1994. For the period between the time they lived in Virginia, the Taxpayers filed nonresident returns with Virginia as they continued to rent the residences they owned in Virginia. During this entire time, the Taxpayers kept their ties to State A. With every nonresident return the Taxpayers filed, they stated that they were still residents of State A.
For the 1994 taxable year, the Taxpayers filed a part-year resident return in Virginia. After an audit of the Taxpayers, the department determined that the Taxpayers' domicile was Virginia and assessed the Taxpayers additional income tax for the 1994 taxable year. The Taxpayers contest the adjustment and request that it be abated.
DETERMINATION
For purposes of income taxation there are two classes of residents in Virginia, (1) domiciliary residents and (2) actual residents. Domiciliary residents are those whose legal domicile is Virginia. Any person who is a domiciliary resident, who has not moved from Virginia with the intention of permanently residing outside of Virginia, is still a domiciliary resident even though he may be actually living somewhere else.
An actual resident is any individual who is not domiciled in this State, but who actually maintains a place of abode in Virginia for more than 183 days during the taxable year. An individual may remain an actual resident of Virginia until such time that he demonstrates the intent and actions necessary to establish his domicile in Virginia. A person's true intention must be determined with reference to all of the facts and circumstances of the particular case.
In Public Document (P.D.) 87-161, 6/2/87, copy enclosed, the department ruled on a set of circumstances very similar to the Taxpayers' case. In that ruling, the taxpayer was domiciled in California and employed as a foreign service officer. The taxpayer was contemplating purchasing a home in Virginia to use during the time in which the taxpayer was given an assignment in the Washington, D.C. area. The department ruled that the purchase of a house in Virginia was not enough to establish a domicile in Virginia if the taxpayer maintained her California domicile and took no overt steps to establish a domicile in Virginia. In addition, the department stipulated that the taxpayer would be subject to Virginia individual income tax as an actual resident if she resided in Virginia for more than 183 days in any calendar year. Further, the ruling states the taxpayer would become subject to Virginia income tax as a nonresident if she received income from the rental of the house in Virginia while she was not residing in Virginia.
Pursuant to P.D. 87-161, the Taxpayers never established a domicile in Virginia. From 1983 to 1988, the Taxpayers were actual residents of Virginia. They properly filed individual income tax returns for those years because of their actual resident status. From 1989 to 1993, the Taxpayers filed non-resident returns as informational returns to reflect the losses they were incurring in Virginia on their rental property. In 1994, they filed part-year resident returns as they were not actual residents, but earned income while living in Virginia.
Based on the facts provided, it is clear that the Taxpayers did not take any overt steps to establish a domicile in Virginia, except to purchase real estate. The purchases are not enough on their own to establish a domicile in Virginia. During the year in question, the Taxpayers properly complied with their duty to file income taxes. Despite being nonresidents of Virginia with no Virginia source income from 1989 through 1993, the Taxpayers filed informational returns reflecting the rental losses for those years. The filing of a part-year resident income tax return in 1994 was proper as they were not domiciliary residents and resided in Virginia for less than 183 days. The Taxpayers should note that if they ever leave Virginia and earn positive rental income, they will be required to file a non-resident income tax return to report their Virginia source income.
Accordingly, the assessment for the 1994 taxable year has been abated. The department's records indicate that the Taxpayers' personal property tax refund for 1998 was withheld and applied to the assessments. The refund in the amount of ***** plus an appropriate amount of interest will be returned to you. If you have any questions regarding this determination, you may call ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/20526G
Re: Sec. 58.1-1821 Application: Individual Income Tax
Dear***
This will reply to your letter in which you protest the assessment made against your clients, ***** (the "Taxpayers') for the 1994 taxable year. I apologize for the delay in responding.
FACTS
The Taxpayers (a husband and wife) moved back to Virginia in December 1994. The Taxpayer was employed as a foreign service officer by the United States (U.S.) government. Due to the nature of the husband's employment, the Taxpayers have lived in numerous locations within and without the U.S. during his service with the U.S. Department of State. The Taxpayers maintain that they are and have always been domiciled in another state ("State A'). The Taxpayers are registered to vote and vote regularly in State A, they hold drivers' licenses from State A, and maintain bank accounts in State A.
The Taxpayers are members of numerous organizations and have professional memberships in State A. The husband's employment records indicate a State A address as the required destination for home leave after every long-term overseas assignment. State A also allows them to maintain their domiciliary status while they are out of state but exempts them from filing income tax returns as long as they meet certain requirements.
From February 1983 to August 1988, the Taxpayers lived in Virginia. The Taxpayers own four residences in Virginia, three of which were held as rental property and the fourth was used by the Taxpayers as a residence during the period. The Taxpayers appropriately filed Virginia Individual Income Tax returns during the initial time they resided in Virginia. In August 1988, the husband received an overseas assignment. After living in six different locations outside of Virginia, the Taxpayers returned to Virginia in December 1994. For the period between the time they lived in Virginia, the Taxpayers filed nonresident returns with Virginia as they continued to rent the residences they owned in Virginia. During this entire time, the Taxpayers kept their ties to State A. With every nonresident return the Taxpayers filed, they stated that they were still residents of State A.
For the 1994 taxable year, the Taxpayers filed a part-year resident return in Virginia. After an audit of the Taxpayers, the department determined that the Taxpayers' domicile was Virginia and assessed the Taxpayers additional income tax for the 1994 taxable year. The Taxpayers contest the adjustment and request that it be abated.
DETERMINATION
For purposes of income taxation there are two classes of residents in Virginia, (1) domiciliary residents and (2) actual residents. Domiciliary residents are those whose legal domicile is Virginia. Any person who is a domiciliary resident, who has not moved from Virginia with the intention of permanently residing outside of Virginia, is still a domiciliary resident even though he may be actually living somewhere else.
An actual resident is any individual who is not domiciled in this State, but who actually maintains a place of abode in Virginia for more than 183 days during the taxable year. An individual may remain an actual resident of Virginia until such time that he demonstrates the intent and actions necessary to establish his domicile in Virginia. A person's true intention must be determined with reference to all of the facts and circumstances of the particular case.
In Public Document (P.D.) 87-161, 6/2/87, copy enclosed, the department ruled on a set of circumstances very similar to the Taxpayers' case. In that ruling, the taxpayer was domiciled in California and employed as a foreign service officer. The taxpayer was contemplating purchasing a home in Virginia to use during the time in which the taxpayer was given an assignment in the Washington, D.C. area. The department ruled that the purchase of a house in Virginia was not enough to establish a domicile in Virginia if the taxpayer maintained her California domicile and took no overt steps to establish a domicile in Virginia. In addition, the department stipulated that the taxpayer would be subject to Virginia individual income tax as an actual resident if she resided in Virginia for more than 183 days in any calendar year. Further, the ruling states the taxpayer would become subject to Virginia income tax as a nonresident if she received income from the rental of the house in Virginia while she was not residing in Virginia.
Pursuant to P.D. 87-161, the Taxpayers never established a domicile in Virginia. From 1983 to 1988, the Taxpayers were actual residents of Virginia. They properly filed individual income tax returns for those years because of their actual resident status. From 1989 to 1993, the Taxpayers filed non-resident returns as informational returns to reflect the losses they were incurring in Virginia on their rental property. In 1994, they filed part-year resident returns as they were not actual residents, but earned income while living in Virginia.
Based on the facts provided, it is clear that the Taxpayers did not take any overt steps to establish a domicile in Virginia, except to purchase real estate. The purchases are not enough on their own to establish a domicile in Virginia. During the year in question, the Taxpayers properly complied with their duty to file income taxes. Despite being nonresidents of Virginia with no Virginia source income from 1989 through 1993, the Taxpayers filed informational returns reflecting the rental losses for those years. The filing of a part-year resident income tax return in 1994 was proper as they were not domiciliary residents and resided in Virginia for less than 183 days. The Taxpayers should note that if they ever leave Virginia and earn positive rental income, they will be required to file a non-resident income tax return to report their Virginia source income.
Accordingly, the assessment for the 1994 taxable year has been abated. The department's records indicate that the Taxpayers' personal property tax refund for 1998 was withheld and applied to the assessments. The refund in the amount of ***** plus an appropriate amount of interest will be returned to you. If you have any questions regarding this determination, you may call ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/20526G
Rulings of the Tax Commissioner