Did an out-of-state part-year return change Virginia's finding that a taxpayer became domiciled in Virginia in May 2007?

Plain-English summary

Virginia kept its conclusion that the taxpayer became a Virginia domiciliary in May 2007. The taxpayer asked for reconsideration and pointed to a part-year return filed in another state. That return showed that she and her spouse left the other state in April, which Virginia had already acknowledged.

The unresolved question was where the taxpayer established domicile after leaving. The Department said the evidence previously reviewed still showed that she established Virginia domicile in May.

Virginia had recommended a 2007 part-year Virginia return so liability would reflect only the resident portion of the year. The taxpayer filed that return, and the Department said it would process it and adjust the assessment. Although the request also asked about tax paid to the other state, the published determination does not separately decide or calculate a credit.

Common questions

Q: Did filing another state's part-year return prove continued domicile there?
A: No. It showed when the taxpayer left that state, not where she established domicile afterward.

Q: Did Virginia leave the original assessment amount unchanged?
A: The domicile finding stood, but Virginia said it would process the part-year return and adjust the assessment accordingly.

Citations and references

• 23 VAC 10-110-40.
• Virginia Public Document 11-113.

Subject

Department determined that the Taxpayer established a domicile in Virginia

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 12-30

Original ruling text

March 22, 2012

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you seek reconsideration of the Department's determination letter, issued as Public Document (P.D.) 11-113 (6/20/2011) to * (the "Taxpayer"), regarding an individual income tax assessment for the taxable year ended December 31, 2007. I apologize for the delay in this response.

FACTS

In P.D. 11-113 the Department determined that the Taxpayer established a domicile in Virginia in May 2007, and upheld the assessment. The Taxpayer requests a redetermination, contending the Department did not consider the filing of a 2007 * (State A) individual income tax return. The Taxpayer believes the determination was reached without consideration of all of the information provided. Further, the Taxpayer requests assurance that the Department took into account tax paid to State A on her income.

DETERMINATION

The Taxpayer and her spouse filed a part-year State A individual income tax return. According to the return, the couple moved out of State A in April 2007. In its determination, the Department acknowledged that the Taxpayer was a domiciliary resident of State A until May 2007. The issue under consideration is not whether the Taxpayer was a resident of State A for a portion of the 2007 taxable year, but where she established her domicile after moving from State A.

In P.D. 11-113, the Department found that the preponderance of evidence showed that the Taxpayer established a domicile in Virginia after abandoning her domiciliary residence in State A in April 2007. The Department concluded that the Taxpayer became a domiciliary resident of Virginia in May 2007.

In upholding that the Taxpayer was domiciliary resident of Virginia, the Department acknowledged that its 2007 assessment is based on the information it had on hand. While consideration was given to the State A part-year tax return, the Department recommended that the Taxpayer file a 2007 part-year Virginia return in order to more accurately reflect her Virginia tax liability for the portion of the year she resided in Virginia. Title 23 of the Virginia Administrative Code (VAC) 10-110-40 provides that individuals who are residents of Virginia for only part of a taxable year are taxed as residents for that portion of the year that they reside in Virginia.

The Taxpayer subsequently filed the 2007 part-year Virginia return, as recommended in P.D. 11-113. This return will be processed and the assessment will be adjusted accordingly.

If you have any questions regarding this determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-4826078211.E