Did a couple living in their out-of-state home for medical treatment reestablish Virginia domicile because they owned a Virginia townhouse and used its address?

Subject

Virginia domicile was not reestablished during medical move

Plain-English summary

Virginia found that the couple had not reestablished Virginia domicile in 2009 and abated the resident assessment. They moved into their State A home in October so the husband could receive treatment at a nearby hospital.

Their Virginia connections included a former home held as rental property, a townhouse used by their daughter, two vehicles registered for their children, and the townhouse address on federal and nonresident returns. But those returns were filed after the husband's January 2010 death, when the wife had moved into the townhouse.

After weighing the full timeline, Virginia concluded that the 2009 Virginia address did not prove a return to Virginia domicile during that tax year.

What this means for you

• Property ownership and a mailing address do not automatically establish domicile.
• The timing and reason for an address appearing on a later-filed return matter.
• Medical moves, actual residence, family circumstances, vehicles, and property are weighed together.
• No single domicile factor controls; the overall evidence and chronology decide the result.

Citations and references

• Va. Code § 58.1-302.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 14-137

Original ruling text

August 11, 2014

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 your clients, * (the "Taxpayers") for the taxable year ended December 31, 2009. I apologize for the delay in responding to your appeal.

FACTS

The Taxpayers, a husband and wife, moved from Virginia to * (Country A) in 2001. They retained their former Virginia residence as rental property. In November 2007, the Taxpayers relocated to (Country B). The Taxpayers purchased a residence (the "Townhouse") in Virginia in November 2006 for their daughter to reside in while attending school. In June 2008, they purchased a residence in ** (State A).

In October 2009, the Taxpayers moved to their residence in State A in order for the husband to receive treatment at a State A hospital. They did not file a State A or Virginia return for 2009, but filed nonresident returns in * (State B) and *** (State C) using the Townhouse address. In addition, their 2009 federal return used their Townhouse address.

The husband passed away in early January 2010. The wife relocated to the Townhouse and filed a joint resident Virginia income tax return for the 2010 taxable year on behalf of herself and her deceased husband.

Under audit, the Department concluded that the Taxpayers were domiciliary residents of Virginia for the 2009 taxable year and issued an assessment for tax, penalty and interest due. The wife appeals the assessment, contending the Taxpayers were neither actual nor domiciliary residents of Virginia during the taxable year in question.

DETERMINATION

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 reside elsewhere. For a person to change domiciliary residency to another state or country, that person must intend to abandon his Virginia domicile with no intention of returning to Virginia. Concurrently, that person must acquire a new domicile where that person is physically present with the intention to remain there permanently or indefinitely. 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. A Virginia domiciliary resident, therefore, working in other parts of the country or in another country who has not abandoned his Virginia residency continues to be subject to Virginia taxation. Additionally, a person who is not a domiciliary resident of Virginia, but who stays in Virginia for an aggregate of more than 183 days is also subject to Virginia taxation.

In order to change from one legal domicile to another legal domicile, there must be (1) actual abandonment of the old domicile, coupled with an 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 an 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 or domicile.

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 Virginia domicile. If the information is inadequate to meet his or her burden, the Tax Commissioner must conclude that he or she intended to remain indefinitely in Virginia.

The Taxpayers took a number of actions indicating an intent to re-establish their domicile in Virginia in 2009. The Taxpayers owned two vehicles registered in Virginia during the 2009 taxable year for the use of their children. The Taxpayers filed their 2009 federal and nonresident tax returns using their Townhouse address. In addition, the wife began residing in the Townhouse after the husband's death in early 2010.

The evidence, however, indicates the Taxpayers moved into their State A home in 2009. The State A residence was closer to the hospital where the husband was being treated.

The Department acknowledges that a change of domicile occurs as part of a process in which no single factor is dispositive. After carefully weighing all the evidence, I find that the Taxpayers did not reestablish their Virginia domicile in 2009. The Virginia address used on the 2009 income tax returns reflected the fact that the returns were filed after the wife relocated to the Townhouse in January 2010.

Accordingly, the Taxpayers were not residents of Virginia for the 2009 taxable year and were not required to file a Virginia income tax return. Accordingly, the assessment issued to the Taxpayers for the 2009 taxable year will be abated.

The Code of Virginia sections cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions 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,

Craig M. Burns

Tax Commissioner

AR/1-5551581328.B