Tax Type
Individual Income Tax
Description
Spouse remained a domiciliary resident of Virginia.
Topic
Domicile
Persons Subject to Tax
Records/Returns/Payments
Taxable Income
Date Issued
06-22-2010
June 22, 2010
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you seek correction of the individual income tax assessment issued to your clients, ***** (the "Taxpayers") for the taxable year ended December 31, 2007.
FACTS
The Taxpayers, a husband and wife, were domiciliary residents of Virginia. In July 2006, the Taxpayers purchased residential property in ***** (State A). In October 2006, the husband retired from his employment, and the Taxpayers moved to ***** (State A).
The wife surrendered her Virginia voter's registration in November 2006 and her Virginia driver's license in February 2007. The husband surrendered his Virginia license and voter's registration card in February 2008. The Taxpayers purchased new motor vehicles in 2007 and 2009 registering both vehicles in Virginia.
The Taxpayers filed a Virginia nonresident individual income tax return for taxable year 2007. Under audit, the Department determined the Taxpayers were actual and domiciliary residents of Virginia and assessed the Taxpayers additional tax, penalty and interest. The Taxpayers appeal the assessment on the basis that they spent more time in State A, and believe they have demonstrated their intent to become domiciled in State A.
DETERMINATION
Two classes of residents, a domiciliary resident and an actual resident, are set forth in Va. Code § 58.1-302. The domiciliary residence of a person means the permanent place of residence of a Taxpayer and the place to which he intends to return even though he may actually reside elsewhere. An actual resident of Virginia means a person who, for an aggregate of more than 183 days of the taxable year, maintained his place of abode within Virginia.
The Department determines a taxpayer's intent through the information provided. The Taxpayer has the burden of proving that he or she has abandoned his or her original domicile. If the information is inadequate to meet this burden, the Department must conclude that the Taxpayer did intend to return to his or her original domicile.
Actual Residency
A taxpayer who is a domiciliary resident of a state other than Virginia, but spends significant portions of his time in Virginia (whether for business or personal reasons) should retain records to substantiate where he spent his time. An account book, diary, log, statement of expenses, trip sheet, or similar record in which the information as to where such taxpayer spent each day of the taxable is recorded. Absent such record, the Department must rely on the best available information to make a determination.
The Taxpayers contend they became residents of State A in the 2007 taxable year. The Taxpayers provided credit card statements and their personal calendar to support their claim of spending 137 days in Virginia, 37 days in other states and the remaining 191 days in State A.
Although credit card and debit card statements are helpful in determining how much contact a taxpayer has with Virginia, they may not be reliable in determining the precise number of days a taxpayer spends in Virginia. Reasons for this lack of reliability include vendors that may not transmit transactions on the day they occur, cards with multiple users, banks that may not record a transaction on the date it occurs, and generally, credit cards are not used on a daily basis.
When a taxpayer fails to keep sufficient records as to the number of days or portions of days spent in Virginia„ credit card and debit card statements can be used to estimate such taxpayer's days spent in Virginia. In this case, the Taxpayers provided statements to support their claim that they spent less than 183 days in Virginia and were, therefore, not actual residents during the 2007 taxable year.
Domiciliary Residency
In order to change from one legal domicile to another legal domicile, there must be (1) actual abandonment of the old domicile, coupled with intent not to return to it, and (2) an acquisition of a new domicile at another place, which must be formed by personal presence and intent to remain there permanently or indefinitely. The burden of proving that the domicile has been changed lies with the person alleging the change.
In determining domicile, consideration may be given to the individual's expressed intent, conduct, and all attendant circumstances including, but not limited to, financial independence, profession or employment, income sources, residence of spouse, marital status, sites of real and tangible property, motor vehicle registration and licensing, and such other factors as may be reasonably deemed necessary to determine the person's domicile. A person's true intention must be determined with reference to all of the facts and circumstances of the particular case. A simple declaration is not sufficient to establish residency.
The Taxpayers performed a number of activities to support establishing domicile within State A. They purchased residential property within State A in July 2006. They registered a vehicle within State A. The wife obtained a State A voter's registration card in November 2006 and State A driver's license in February 2007. The Taxpayers used their address in State A on their 2007 federal income tax return, and they received financial documents at their State A residence.
The Taxpayers also performed activities consistent with maintaining a domicile in Virginia. They maintained a permanent place of abode and registered vehicles during 2007 and 2009 in Virginia. The husband maintained his Virginia driver's license and voter's registration card. The husband's W-2 reported Virginia withholding and financial documents were mailed to the Taxpayers' Virginia residence. The Taxpayers' personal physicians were located in Virginia.
The Taxpayers contend the house located in Virginia was for sale, but due to a slow market, they decided to use it as a second residence. They also state that the husband was waiting until his 65th birthday to register for a State A driver's license. Eliminating the need to re-new the license in the following year, he obtained a State A driver's license in 2008.
The Department acknowledges that a change in domicile occurs as part of a process in which no single factor is dispositive. A person's true intention must be determined with reference to all of the facts and circumstances of the particular case. The wife began the process of abandoning her Virginia domicile in 2006 and early 2007 when she changed her voter registration and driver's license to State A. However, the husband failed to take sufficient steps to show that he intended to abandon his Virginia domicile until 2008. In addition, on a tax exemption application form filed with State A for Tax Year 2009 and signed under penalties of perjury, the Taxpayers declare that the wife became a permanent resident of State A in July 2006, while the husband became a permanent resident of State A in February 2008.
Based on the foregoing, I find that the wife successfully changed her domicile to State A for the 2007 taxable year. The husband, however, remained a domiciliary resident of Virginia.
Virginia Code § 58.1-326 estates, "if a husband or wife is a resident and the other is a nonresident, separate taxes shall be determined on their separate Virginia taxable incomes on such single or separate forms as may be required by the Department, unless both elect to determine their joint Virginia taxable income as if both were residents." (Emphasis added.) The Taxpayers are requested to file accurate Virginia individual income tax returns for the 2007 taxable year, along with payment of the balance due, within 30 days from the date of this letter.
If the Taxpayer fails to file a return, the current outstanding assessment will be upheld and become due and payable. Please send the requested return or payment of the assessment to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203, Attn: *****.
The Code of Virginia sections cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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- Linda D. Foster
Deputy Tax Commissioner
- Linda D. Foster
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AR/1-3997878973.D
Rulings of the Tax Commissioner