Tax Type
Individual Income Tax
Description
Installment sale of residence
Topic
Taxability of Persons and Transactions
Date Issued
07-03-1984
July 3, 1984
Re: Request for Ruling/Individual Income Tax
Dear *****
This will refer to your letters of May 2, 1984 and June 1, 1984 to the Department of Finance of the City of ***** in which you request a ruling on behalf of your client, *****. Those letters have been forwarded to this agency for response.
Based upon the information set forth in your correspondence, your client's only income from Virginia sources is a sum reported annually from the installment sale of her former residence within this state. Inasmuch as your client receives no other Virginia source income, you request permission for her to revoke her election to use the installment basis, thus allowing her to report all income from the sale of her Virginia home on her 1984 state income tax return.
The basis for determining the Virginia taxable income of residents and nonresidents alike is an individual's federal adjusted gross income (see §§ 58-151.013(a) and (f)(1) of the Code of Virginia). Thus Virginia has chosen to conform its income tax laws relating to individuals to those of the federal government. Accordingly, when a taxpayer elects to use the installment method for federal tax purposes to report the gain from the sale of property, he likewise elects the same method for Virginia tax purposes.
Because the Virginia tax is based directly upon a taxpayer's federal adjusted gross income, the department cannot permit your client to revoke her previous election unless she is permitted to revoke her election for federal purposes under the provisions of Internal Revenue Service Regulation 15A.453-1(d). An election of this sort for Virginia purposes only, enabling your client to report all income from her home sale on her 1984 Virginia tax return, would be contrary to state law and could prove highly improper should Virginia raise its income tax rates in the future or should your client move to a state other than North Carolina in which such income might be taxable.
Therefore, based upon the foregoing, I must deny your client's request inasmuch as she has expressed no intent to discontinue the use of the installment method for reporting income for federal purposes from the sale of her former Virginia residence.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner