Did a taxpayer establish domicile outside Virginia even though his wife, home, vehicle, doctor, and more of his days remained tied to Virginia?

Subject

Taxpayer changed domicile despite retaining substantial Virginia ties

Plain-English summary

Virginia abated 2005 and 2006 residency assessments after finding that the taxpayer had changed his domicile to another state despite substantial continuing Virginia ties. He had previously treated himself as a Virginia resident while caring for ill parents. After they died, he bought another home in the other state and returned there.

The taxpayer maintained and renewed that state's driver's license, voted there, registered a vehicle there, filed its intangible personal property tax returns for the years at issue, and reported Virginia-source income on Virginia nonresident returns.

At the same time, he kept a Virginia home and vehicle, spent more days in Virginia than in the other state, continued seeing a Virginia physician, and had a wife who remained a Virginia resident. The Commissioner treated domicile as a process and found the complete conduct sufficient to show the taxpayer intended to become domiciled in the other state in 2005.

What this means for you

• Domicile turns on abandonment of the old home and acquisition of a new one with permanent or indefinite intent.
• No single retained tie automatically defeats a change.
• A spouse's Virginia residence, a Virginia home, and substantial time in Virginia are important but must be weighed with all other conduct.
• Home purchase, licensing, voting, vehicle registration, state filings, and consistent nonresident returns can support the new domicile.
• The reason and timing for earlier Virginia ties can help explain when the change process became complete.

Common questions

Did spending more days in Virginia make the taxpayer a domiciliary resident?

No. It was a significant tie, but the complete record showed the intent to become domiciled in the other state.

Did the wife's Virginia domicile control the husband's result?

No. Her residence was considered, but domicile was determined from the taxpayer's own full pattern of conduct.

When did Virginia find the change occurred?

In 2005, when the taxpayer returned to the other state after his parents died and bought another home there.

What was the assessment result?

The 2005 and 2006 Virginia resident assessments were abated.

Citations and references

• Va. Code § 58.1-302.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 10-107

Original ruling text

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 assessments issued to * (the "Taxpayer") for the taxable years ended December 31, 2005 and 2006. I apologize for the delay in responding to your letter.

FACTS

The Taxpayer and his wife were domiciliary residents in Virginia. The wife remained domiciled in Virginia to care for her mother. She also has a daughter in Virginia.

The Taxpayer purchased a house, obtained a driver's license, and registered to vote in * (State A) in 2001. He participated in State A elections and registered an automobile in State A. However because his parents were ill, the Taxpayer remained a Virginia resident and filed Virginia resident individual income tax returns for 2001-2004 taxable years.

In 2005, after his parents passed away, the Taxpayer purchased another house in State A. By this time, the Taxpayer had terminated his membership in a number of Virginia social clubs. The Taxpayer continued to maintain a home in Virginia where his wife remained as a Virginia resident. He also kept an automobile registered in Virginia and continued to see a physician in Virginia.

The Taxpayer owns rental real estate property in a number of states including Virginia. For the 2005 and 2006 taxable years, he filed a Virginia nonresident income

tax return.

Under audit, the Department determined the taxpayer was a domiciliary resident of Virginia and assessed additional tax for the 2005 and 2006 tax years. The Taxpayer contends that he changed his domicile to State A in 2005.

DETERMINATION

There are 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.

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 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.

In this case, the Taxpayer performed a number of actions that are consistent with a change in domicile. In February 2005, the Taxpayer signed a contract to purchase a house and in April 2005 he closed on the purchase. In February 2004, he renewed his State A's driver's license and renewed it again in April 2007. He registered to vote in State A and participated in State A elections. He filed State A intangible personal property tax returns for tax years 2005 and 2006 taxable years in June 2009. The Taxpayer reported his Virginia source income on a Virginia nonresident income tax return for the years in question.

At the same time, the Taxpayer maintained a number of connections with Virginia. He continued to maintain a home and a motor vehicle registered in Virginia. For the tax years at issue, the Taxpayer spent more days in Virginia than he did in State A. His wife remained a Virginia resident. The Taxpayer also continued to receive medical treatment from his physician located in Virginia.

The Department acknowledges that a change in domicile may occur as part of a process in which no single factor is dispositive. The Taxpayer admitted to retaining his Virginia domicile for the 2001 through 2004 taxable years while caring for his parents. Although he continued to maintain strong ties with Virginia in 2005 and 2006, I find the Taxpayer's conduct was sufficient to show his intent to become domiciled in State A, when he returned to State A after the death of his parents. As such, the assessments for the 2005 and 2006 taxable years have been abated.

The Code of Virginia section cited is 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 ***.

Sincerely,

Linda D. Foster

Deputy Tax Commissioner

AR/1-2933439485.D