Virginia State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in Virginia, with full citations and the original source on every page.
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Could a startup real estate business deduct losses beyond current property income when its operations showed a genuine profit motive?
Yes. The wife was a licensed realtor, the couple kept separate business records, advertised properties, held open houses, spent about 25 hours weekly on the activity, and expected appreciation. Startu…
Did a Virginia driver's license, family mailing address, and visits establish Virginia domicile for a long-term Country A resident?
No. The taxpayer had lived in Country A since 1989, kept no Virginia home or registered vehicle, used family in Virginia to receive tax mail, and visited regularly. A Virginia license was strong contr…
Was a 1997 Virginia amended return timely for a credit after another state finally taxed part of a retirement lump sum?
Yes. Virginia followed the IRS closing agreement treating the 1997 lump sum as capital gain, a category eligible for the other-state tax credit. The other state's audit became final on October 25, 200…
Did a taxpayer abandon Virginia domicile in July 2005 despite retaining a Virginia home and some vehicle registrations?
Yes. The taxpayer moved into a State A residence in July 2005 and declared that date on his Virginia part-year return. Later actions—including surrendering his Virginia driver's license, obtaining a S…
Could a couple choose the federal home-sale gain exclusion for their former Virginia residence when another home also qualified?
Yes. The couple had used both the Virginia and State A homes as principal residences for at least two years within the relevant five-year periods. IRC § 121(f) allowed them to elect which qualifying s…
Did owning a Virginia vacation home, registering a car, and obtaining a Virginia driver's license make the taxpayer domiciled in Virginia?
No. The Virginia home and vehicle were used for vacations, and the taxpayer obtained the Virginia license for convenience. More importantly, he kept a permanent home, employment connection, vehicles, …
Could Virginia residents subtract combat pay already excluded federally and claim the full $15,000 extended-duty subtraction?
No. The record did not show any combat pay remaining in federal adjusted gross income, so there was nothing for Virginia's combat-zone subtraction to remove. The husband also received basic military p…
Could a Virginia resident subtract military pay earned in Virginia before a later combat-zone deployment?
No. Pay earned while the service member was stationed in Virginia before deployment was not attributable to combat-zone service. His later combat pay was already excluded from federal adjusted gross i…
Could taxpayers add a 30% Virginia depreciation deduction for property fully expensed under IRC § 179 when no federal bonus depreciation was claimed?
No. The couple fully expensed the 2004 business property under IRC § 179 and claimed no federal bonus depreciation. Virginia's fixed-date conformity rules adjusted federal bonus depreciation; they did…
Did a nonresident owe Virginia tax on income passed through from a Virginia LLC and S corporation?
Yes. The Virginia LLC and S corporation operated in Virginia, and the LLC apportioned all its income to Virginia. Under federal-conformity and pass-through rules, the income kept its Virginia-source c…
Were hotel owners Virginia residents for 2005-2007 when they kept Virginia property but spent fewer than 183 days there?
No. The couple established State A domicile through their full-time hotel business, home, vehicles, and the husband's license and voting registration. Virginia property and the wife's Virginia license…
Could a taxpayer defeat a Virginia assessment by arguing that only federal-connected work and money are taxable?
No. Virginia starts with federal adjusted gross income and taxes resident income unless a specific Virginia modification applies; taxability is not limited to federal-connected employment or money. Th…
Could a late 2003 Virginia overpayment claim offset a 2004 assessment after an IRS correction moved retirement income between years?
No. The federal correction became final on October 20, 2006, and Virginia said the amended 2003 return had to be filed by October 22, 2007. The couple waited until April 2008. Even though the same ret…
Could a 2003 overpayment reported on an August 2007 original return be credited against a 2004 Virginia assessment?
No. The three-year period for the 2003 overpayment expired May 1, 2007, and the taxpayer filed the original return on August 29, 2007. Calling the request a credit or carryforward rather than a refund…
Could a taxpayer challenge old Virginia assessments in 2008 when the latest assessment had been issued in May 2001?
No. For these pre-August 15, 2003 assessments, Virginia's then-existing policy accepted an administrative appeal within the three-year period for a judicial remedy. The latest assessment was dated May…
Did a couple abandon Virginia domicile after moving, buying a home, and operating a business in another state while retaining Virginia ties?
Yes. The couple established a permanent home and demanding business in another state and proved an intent to remain there indefinitely. Keeping an unsold Virginia house, an old Virginia registration, …
Could Virginia refund a 2003 overpayment when the original return was filed in April 2008 after the refund deadline?
No. Virginia's refund statute required the return or written claim within three years of the timely filing deadline. The April 2008 original return came after the applicable period, even considering t…
Did a taxpayer change Virginia domicile in June 2005 after moving to State A for a non-temporary job while retaining a Virginia driver's license?
Yes. The taxpayer stopped renting in Virginia, established a State A home, registered his car there, and accepted employment that was not shown to be temporary. Although retaining a recently renewed V…
Could Virginia residents subtract a New York state pension when their employee contributions had not been taxed by New York?
No. Virginia's subtraction applied only to the extent retirement contributions had been subject to another state's income tax after being deductible federally. The couple's prior New York returns show…
Did part-year Virginia residents have to prorate S-corporation capital gain that documentation showed arose after they moved away?
No. Virginia generally treated property or business income as earned evenly through the year unless the taxpayer documented a specific timing. On reconsideration, the couple supplied records clearly s…
How did Virginia tax S-corporation income after a couple moved away, merged the Virginia company, and performed no later Virginia work?
The original Virginia S corporation had nexus for all of 2004 because it operated in Virginia before the move and remained in existence until a September merger. Its income had to be divided between t…
How did Virginia source a nonresident consultant's salary and dividends from his Virginia corporation?
Virginia apportioned the consultant's salary using documented days worked in Virginia compared with days worked elsewhere, rather than attributing all salary to Virginia through a corporate equitable …
Could a taxpayer recover a 2001 Virginia overpayment, or use it against a 2003 balance, after filing the return in January 2008?
No. Even with a valid filing extension, the deadline for a 2001 refund claim expired November 1, 2005. The January 2008 return was too late under Va. Code § 58.1-499(D), so Virginia denied both a refu…
Could Virginia residents subtract foreign-source income from their 2007 Virginia taxable income?
No. Virginia began with the residents' federal adjusted gross income, which included the foreign income, and no Virginia modification authorized a subtraction in 2007. The General Assembly had repeale…
Could beneficiaries subtract federally taxable lump-sum death benefits received from annuity contracts on their Virginia income-tax return?
Yes. Virginia said the subtraction applied because each payment came from an annuity contract between an annuitant and insurer, was paid to the beneficiary in a lump sum, and was subject to federal in…
Could Virginia residents defeat assessments based on IRS changes when they filed no timely state amendments and supplied no proof the federal data was wrong?
No. The 2003 appeal was filed after the cited 90-day deadline. For 2004 and 2005, the residents had not timely reported the IRS changes and offered no evidence that the federal information or Virginia…
What does Virginia Ruling of the Tax Commissioner P.D. 09-9 conclude about Military wages resulting from combat duty or extended active duty?
No. Combat pay already excluded from federal adjusted gross income could not receive Virginia's combat-pay subtraction. The extended-active-duty subtraction was also reduced dollar for dollar when bas…
How much refund could a taxpayer receive after filing a part-year return beyond the normal three-year deadline?
Only one payment qualified. The late part-year return was outside the normal three-year refund period, and no IRS change supported the separate 60-day federal-adjustment rule. Virginia could refund as…
What does Virginia Ruling of the Tax Commissioner P.D. 09-17 conclude about Salary related to prior employment does not affect Taxpayer's right to subtraction?
Yes. Federal law treated the retiree as an employee and reported the taxable value of excess group-term life-insurance coverage as Form W-2 wages. Because his total W-2 income for 2006 was below $15,0…
Did a California shareholder owe Virginia nonresident tax on pass-through income from an S corporation with a Virginia office?
Yes. The S corporation's Virginia-source income remained Virginia-source income when passed through to the nonresident shareholder, even though he worked only in California. Because he filed no Virgin…
What does Virginia Ruling of the Tax Commissioner P.D. 09-10 conclude about Taxpayers failed to pay the tax due reported on the return?
Yes. Virginia taxed the pension distributions because the couple received them after becoming Virginia residents, even though the employment and pension accrual occurred in another state. Virginia did…
Did a traveling artist abandon Virginia domicile by owning homes and studios elsewhere while retaining a Virginia home, license, and voter registration?
No. Despite homes, studios, vehicles, and business ties in other states, the artist kept a preexisting Virginia residence, renewed a Virginia driver's license in 2003, remained registered to vote, con…
What did the Chesterfield County Circuit Court decide in Ross L. McDonald's case against the Virginia Department of Taxation?
The court entered judgment for the Virginia Department of Taxation on every allegation. It granted a motion to strike part of Ross McDonald's complaint after his proof and then found, after all eviden…
How did the Richmond Circuit Court resolve the consolidated DiBelardino and Dutton tax-assessment cases?
The court reached opposite results. It upheld the Department's assessment against Ezio and Stephanie DiBelardino because their Virginia property interests supplied minimum contacts sufficient for due …
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These are official tax letter rulings and advisory opinions issued by Virginia's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.