Did a nonresident owe Virginia tax on dividends and bond interest reported to a Virginia mailing address?

Subject

Stock dividends and bond interest were not derived from intangibles employed in VA

Plain-English summary

Virginia abated the assessment because the nonresident's identified income was not from Virginia sources. Federal information returns had used the address of a Virginia house she owned, but the address did not determine sourcing.

Her income came from rental property, Social Security benefits, stock dividends, and bond interest. The rental property was outside Virginia, and the dividends and interest did not arise from intangibles employed in a Virginia business, trade, profession, or occupation.

Because the taxpayer did not have the Virginia-source income required for the assessment, Virginia canceled it for 2003.

What this means for you

• A Virginia mailing address on an information return does not itself create Virginia-source income.
• Nonresident investment income may become Virginia-source when the intangible is employed in a Virginia business.
• Document residence, asset location, and the business use or nonuse of investment assets.

Citations and references

• Va. Code §§ 58.1-325 and 58.1-321.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 07-215

Original ruling text

December 20, 2007

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 assessment issued to * (the "Taxpayer") for the taxable year ended December 31, 2003.

FACTS

The Taxpayer, a resident of * (State A), received federal informational returns at an address of a house she owned in Virginia. A review of the Department's records indicates the Taxpayer had not filed a Virginia individual income tax return for the taxable year at issue. When requested information was not timely provided by the Taxpayer, the Department determined that the Taxpayer had Virginia source income and issued an assessment. The Taxpayer contests the assessment, asserting that she was a resident of State A and had minimal Virginia source income that would not subject her to a Virginia filing requirement.

DETERMINATION

Pursuant to Va. Code § 58.1-325, a nonresident individual who has income from carrying on a business, trade, profession, or occupation within Virginia is required to file a Virginia individual income tax return, unless the individual meets the filing exception described in Va. Code § 58.1-321. The Virginia taxable income of a nonresident is computed by multiplying his Virginia taxable income (computed as if he were a resident) by the ratio of his net income, gain, loss, and deductions from Virginia sources to his net income, gain, loss, and deduction from all sources.P. D. 07-215

A review of the evidence indicates that the Taxpayer derived her income from rental property, Social Security benefits, stock dividends, and bond interest. Under Virginia law, income from rental property located outside Virginia, Social Security benefits, stock dividends, and bond interest are not considered Virginia source income to a nonresident individual. In the instant case, the stock dividends and bond interest were not derived from intangibles employed in a business trade, profession or occupation carried on in Virginia. As such, the Taxpayer is not subject to Virginia income tax.

Accordingly, the Virginia income tax assessed against the Taxpayer for the taxable year ended December 31, 2003, has been abated. The Code of Virginia sections cited are 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 about this determination, you may contact * in the Department's Office of Policy and

Administration, Appeals and Rulings, at *.

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-1671390986B