Tax Type
Individual Income Tax
Description
Residency; Change of domicile
Topic
Taxpayers' Remedies
Date Issued
08-19-1996
August 19, 1996
Re: § 58.1-1821 Application: Individual Income Tax
Dear**********
This will reply to your letter in which you apply for the correction of individual income tax assessments on behalf on your clients, ****** (the "Taxpayers"). I apologize for the delay in responding to your letter.
FACTS
The Taxpayers, Virginia residents, moved to Germany in 1985. The Taxpayers state they intended to stay in Germany and, if they returned to the United States, would become Texas residents. Virginia resident returns were filed for 1990, 1991 and 1992, and subtractions were claimed for income earned while the Taxpayers lived in Germany. These returns were subject to an office audit whereupon the subtractions were disallowed and assessments were issued
You contend that the Taxpayers abandoned their Virginia domicile when they moved to Germany and, therefore, should not be required to file Virginia resident returns for 1990, 1991 and 1992. You believe nonresident returns should have been filed. You further state that if resident returns were required to be filed, then the Taxpayers should be entitled to a subtraction for the income earned in Germany.
DETERMINATION
Code Of Virginia § 58.1-302 sets forth two classes of residents, namely, a domiciliary resident and an actual resident. Domiciliary residents are those whose legal domicile is Virginia. The determination of a bona fide intention to change one's domicile is a factual matter which must be resolved on an individual case by case basis. See Public Document (P.D.) 90-197 (11/09/90) and P.D. 94-353 (11/23/94), copies enclosed.
In making this determination consideration is given to a number of factors including, but not limited to, sites of real and tangible property, location of banking accounts, motor vehicle registration and licensing, voter registration, and such other factors as reasonably deemed necessary to determine the person's domicile. A simple declaration of intent to abandon domicile, or physical presence elsewhere, is insufficient to rescind Virginia domicile.
Several factors indicate the Taxpayers did not abandon their Virginia domicile. They maintained their ties with Virginia including their home, car registration, voter registration, bank account, and driver's licenses. Their expressed intent to become Texas residents was not substantiated with similar actions; moreover, the Taxpayers did not reside in Texas during the tax years in question. Further, the Taxpayers did not own property, register to vote or execute other such actions to acquire a domiciliary residence in Germany.
Based upon the information provided, there is no basis to conclude that the Taxpayers abandoned Virginia as their domiciliary residence when they moved to Germany. Accordingly, the proper tax forms were used in the filing of the returns.
Code of Virginia § 58.1-322 (C)(7) provides a subtraction from federal adjusted gross income for "any amount included therein which is foreign source income as defined in § 58.1-302." Foreign source income under Code of Virginia § 58.1-302 includes interest, dividends, rents, royalties, license and technical fees, gains, profits or other income from the sale of intangible or real personal property located without the United States. The income earned while the Taxpayers lived in Germany was business or wage income. For Virginia purposes, such income is not eligible for the foreign source income subtraction.
Consequently, the assessments issued for the 1990, 1991 and 1992 tax years are correct. A schedule of the bills is attached for your convenience; interest has been updated through the date of your appeal. Because of the delay in responding to your letter, I will waive any interest that has accrued since you filed the appeal. These bills should be paid within 30 days to avoid the accrual of additional interest charges. Please forward payment to **** Virginia Department of Taxation, Office of Tax Policy, P.O. Box 1880, Richmond, Virginia 23218-1880. Should you have any questions, please contact her at**************
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/8290M
Rulings of the Tax Commissioner