Tax Type
Individual Income Tax
Description
Restricted stock options
Topic
Subtractions and Exclusions
Date Issued
04-06-1987
April 6, 1987
Re: Virginia Code § 58.1-1821 Application
Individual Income Tax
Dear *************
This is in reply to your letter of October 2, 1986 in which you make application for correction of the individual income tax assessments issued to you and your wife for taxable years 1979 and 1980.
FACTS
The instant assessments resulted from the disallowance of subtractions from federal adjusted gross income that you claimed on your Virginia individual income tax returns for taxable years 1979 and 1980. These returns were examined by the department and on September 20, 1982 a letter explaining the proposed adjustments was mailed to the address shown on your 1980 income tax return. When the department received no response to its letter, assessments were issued for taxable years 1979 and 1980.
You now contest these assessments on the basis that the subtractions claimed were for income received from restricted stock options held in escrow by your previous employer and distributed to you when the company was sold to a new owner, prior to you becoming a Virginia resident. In support of your contention, you indicate that you claimed the subtractions based upon the advice of the Commissioner of the Revenue in the locality in which you were a resident at that time.
DETERMINATION
Virginia Code § 58.1-322 states that "the Virginia taxable income of a resident individual means his federal adjusted gross income for the taxable year" with certain modifications. Thus Virginia has elected to conform its tax code to that of the federal government and to treat income derived from stock options is substantially the same manner as the federal government.
Of the subtractions, deductions and modifications to federal adjusted gross income enumerated in Virginia Code § 58.1-322, as noted above, none provides for the exclusion of restricted stock options distributed to an individual prior to becoming a Virginia resident. As a Virginia resident, to the extent that the gain on the stock options was taxable for federal tax purposes, such gain was taxable for Virginia purposes in the same taxable year.
Based upon the information that you have submitted, there appears to be no basis for adjusting the instant assessments.
Sincerely,
W.H. Forst
Tax commissioner
Rulings of the Tax Commissioner