Signed 7/9/03







Petitioner, )


v. ) Appeal No. 01-0507

) Account No. #####


OF THE UTAH STATE TAX ) Tax Type: Income


) Judge: Phan

Respondent. )




The above-captioned matter came before the Commission on Petitioner's appeal from the assessment of the audit for the 1998 tax year. The parties have signed a Memorandum of Understanding and request that the appeal be withdrawn.


Based on the foregoing, the Commission dismisses this appeal.


DATED this 9th day of July , 2003.




Pam Hendrickson R. Bruce Johnson

Commission Chair Commissioner



Palmer DePaulis Marc B. Johnson

Commissioner Commissioner



Income Tax

Signed 7/9/03









v. ) Appeal No. 01-0507

) Parcel No. #####


THE UTAH STATE TAX ) Tax Type: Income Tax


) Judge: Phan

Respondent. )




Marc Johnson, Commissioner

Jane Phan, Administrative Law Judge



For Petitioner: PETITIONER

For Respondent: Laron Lind, Assistant Attorney General

Dan Engh, Manager, Income Tax Auditing

Brenda Salter, Senior Auditor




This matter came before the Utah State Tax Commission for a Formal Hearing on August 15, 2002.

Based upon the evidence and testimony presented at the hearing, the Tax Commission hereby makes its:


1. Petitioner is appealing an audit deficiency of additional Utah individual income tax, penalties and interest for the tax year 1998. The Statutory Notice of Estimated Income Tax was issued on March 5, 2001. The amount of the income tax was $$$$$, the penalty $$$$$ and the interest $$$$$. Interest continues to accrue on the unpaid portion of the balance. Following the Initial Hearing in this matter, Petitioner did pay the portion of the tax deficiency that related to income he received as part of a severance package from his employment in Utah.

2. For the tax year at issue, Petitioner did not file a Utah return. He filed a federal return and a non or part-year resident return in Arizona. It is Petitioner's contention that he was not a resident, nor domiciled in Utah during the tax year 1998.

3. Petitioner had moved to Utah in 1989 and was employed by COMPANY 1, in the St. George area from March 1989 through November 1997. He resided in St. George in a residence with his wife. Petitioner testified that he moved from his residence in Utah sometime in November 1997, shortly after his wife left him. His wife took with her only every piece of furniture and appliances in the residence plus many of the light fixtures and window coverings as well. The discord with the wife spilled over into his employment and it was mutually determined that he would resign from his employment with COMPANY 1. He stopped working for COMPANY 1 in November but received a paycheck from them into December due to his vacation time. He was given a severance package and issued a W-2 from COMPANY 1 for the severance payment in the amount of $$$$$, but the payment was not made until the 1998 tax year. After the Initial Hearing decision finding that it was subject to tax as Utah source income, Petitioner paid the tax deficiency relating to this portion of his income.

4. In November, after leaving employment with COMPANY 1, Petitioner took his fifth-wheel trailer home and headed for STATE. He parked the fifth-wheel on BLM land outside of CITY, STATE. Petitioner would occasionally move his fifth-wheel from one location to another on BLM land, as it is illegal to stay on BLM land more than fourteen days. He obtained a post office box in CITY. Petitioner opened a new bank account in March 1998, in CITY, at COMPANY 2. However, his prior accounts were also with COMPANY 2 so he had access to the prior accounts in CITY. Although the new account used the CITY post office box address, Petitioner did not change his address on his other bank accounts so those statements were addressed to the Utah residence.

5. Rather than search for employment, it was Petitioner's intent that he would find a business opportunity and start a business in STATE. Petitioner testified that he had tried to purchase land and set up a trailer park. He looked for land to purchase, talked to zoning and other county officials about the types of permits that were required. Eventually he determined that the costs were too high and he did not start a business in STATE.

6. Petitioner's divorce was final in January 1998.

7. In January 1998, Petitioner listed for sale with a real estate agent the Utah residence which he had shared with his now ex-wife. There were some problems with the residence with erosion and settling on the lot, as well the fact that it was located across the street from a cattle feedlot, so the residence did not sell. Although Petitioner did correct many of the problems with the residence and erosion on the lot and relisted it on subsequent occasions, the residence has not sold to this day.

8. Petitioner did return to Utah during 1998 on a few occasions to check on the Utah residence, but he never stayed more than a few days and he stated that he would bring his fifth-wheel and sleep in that, as there were no beds in the residence. The residence was broken into on two occasions during 1998. Petitioner provided the electric utility bills which indicated very little electric usage for the period from January 1, 1998 through June 1998. They support his testimony that he did not reside in the residence during this period. However, Petitioner also provided his April 1998 phone bill which indicated that long distance or last call activations had been made from the telephone at his Utah residence on March 27, 1998, April 1, 2, and 7, 1998.

9. During the period of time that Petitioner resided in his trailer near CITY, STAQTE he sold stock in COMPANY 1 through a brokerage firm. From the 1099-Bs issued from COMPANY 3, Petitioner received $$$$$ and $$$$$ from the sales. Petitioner did not claim the gain from these sales on any state tax return.

10. It was in March 1998 when Petitioner gave up trying to start a business in STATE and he took a full time job working for CITY 2, STATE 2.

11. Petitioner moved his fifth-wheel near CITY 2 in March 1998 and that is where he resided. As CITY 2 is just over the state line from STATE, sometimes he stayed in his fifth-wheel on the STATE side of the state boundary and sometimes on the STATE 2 side. He says he had looked at housing near CITY 2 but determined he could not justify paying another mortgage, since his Utah residence had not sold. He worked full time for CITY 2 until June of 1998 when he decided that it was just not the right situation and at that point he moved his fifth-wheel trailer and headed up to STATE 3 to start a construction business.

12. Petitioner was originally from STATE 3, and although he had resided in Utah eight or more years while working for COMPANY 1, he maintained his STATE 3 commercial drivers license during the entire period that he was in Utah, STATE and working for CITY 2, STATE 2.

13. Also in June of 1998 Petitioners' Utah residence was again broken into and vandalized. He determined he needed to have someone live in the residence to prevent further damage. On his way to STATE 3 he arranged for PERSON and her children to move into the Utah residence. She moved in during June and began getting some of the problems with the erosion and settlement of the lot repaired. In November 1998, PERSON needed to purchase a functioning motor vehicle, but because of her credit history could not qualify for the loan. Petitioner did purchase the car in his name for financing reasons and the car was registered in Utah. However, the car was for PERSONíS use.

14. In STATE 3, Petitioner moved his fifth-wheel and parked it behind an acquaintance's business in CITY 3, STATE 3, where he started his construction business. He resided in his fifth-wheel trailer while living in STATE 3. In July 1998 he registered his car in STATE 3 and renewed his STATE 3 drivers license. Petitioner immediately began purchasing heavy construction equipment and setting up a construction business in STATE 3 for which operations commenced in August 1998. He acquired insurance for the business from an STATE 3 insurance agent, although his personal vehicle remained insured through a Utah agent with the Utah address. Petitioner did not file an STATE 3 return in 1998 as he said he had only losses in STATE 3. He purchased a gravel pit, a lot on which to build a house in April and May 1999. He obtained a STATE 3 contractors license in June of 1999.

15. In 1999 he decided that since he could not work in Idaho during much of the winter, he would work in the CITY area during the winter. He registered COMPANY 4 in Utah in November 1999.

16. For the tax year 1999, he filed a Utah resident tax return. He states he does not know why his accountant prepared a Utah return, but he felt that it was irrelevant as he had no tax liability due to business losses. For 1999 he also filed an STATE 3 Part-Year Resident & Nonresident Income Tax Return.

17. In the fall of 2000, Petitioner was injured on the job and afterwards it became apparent that he could no longer work construction. He did move back to the Utah residence which he had been unable to sell in January 2001. He eventually closed the business and sold all of his equipment in July 2001.

18. Petitioner was clearly not in Utah 183 days or more during the 1998 calendar year.

19. Petitioner abandoned his Utah residence prior to January 1, 1998. He had moved from the Utah residence and listed it for sale. In addition he terminated his Utah employment, and divorced his wife with whom he had resided in Utah.

20. Petitioner established a new domicile in STATE 3 in June 1998 and Petitioner remained domiciled in STATE 3 through out the remainder of the year.

21. Although he may have intended to establish a domicile in Nevada from November 1997 through the end of March 1998, Petitioner did not establish a domicile in STATE during this period.


A tax is imposed on the state taxable income of every resident individual for each taxable year. (Utah Code Ann. '59-10-104).

Resident individual is defined in Utah Code Ann. '59-10-103(1)(j) as follows:


A "resident individual" is either:

(i) an individual who is domiciled in this state for any period of time during the taxable year; or

(ii) an individual who is not domiciled in this state but maintains a permanent place of abode in this state and spends in the aggregate 183 or more days of the taxable year in this state.


For purposes of determining whether an individual is domiciled in this state the Commission has defined "domicile" in Utah Administrative Rule R865-9I-2(D) as follows:

the place where an individual has a true, fixed, permanent home and principal establishment, and to which place he has (whenever he is absent) the intention of returning. It is the place in which a person has voluntarily fixed the habitation of himself or herself and family, not for a mere special or temporary purpose, but with the present intention of making a permanent home.

After domicile has been established, two things are necessary to create a new domicile: first, an abandonment of the old domicile; and second, the intention and establishment of a new domicile. The mere intention to abandon a domicile once established is not of itself sufficient to create a new domicile; for before a person can be said to have changed his or her domicile, a new domicile must be shown.


The Utah Legislature has specifically provided that the taxpayer bear the burden of proof in proceedings before the Tax Commission. Utah Code Ann. '59-10-543 provides the following:

In any proceeding before the commission under this chapter, the burden of proof shall be upon the petitioner . . .


The Tax Commission is granted the authority to waive, reduce, or compromise penalties and interest upon a showing of reasonable cause. Utah Code Ann. '59-1-401(10).


The issue in this appeal is whether Petitioner was in fact a "resident individual" in the State of Utah for the purposes of Utah Code Ann. '59-10-103(1)(j) for the tax year 1998.

Considering whether Petitioner was domiciled in the Utah during the 1998 the Commission weighs all the facts presented. From the facts it is clear that he did not spend in the aggregate more than 183 days per year in Utah. A resident individual, in the alternative, is one who is "domiciled" in the State of Utah. Petitioner was clearly a resident and domiciled in Utah prior to 1998. In order to show that he was no longer domiciled in Utah during 1998 Petitioner must show: 1) that he abandoned his Utah domicile; and 2) that he intended to and did in fact establish a new domicile.

In reviewing the information it is clear to the Commission that Petitioner did abandon his Utah domicile prior to the beginning of the 1998 tax year. It is also clear that he established a new domicile in STATE 3 in June 1998. The real issue in this matter is whether Petitioner actually established domicile in STATE or STATE 2 during the first half of the year at issue. The issue is significant in that a large portion of Petitioner's federal taxable income came in the form of sales of stock which took place during the period Petitioner purported to be a resident of STATE. If Petitioner was, in fact, a resident of Nevada, there is no state taxable income on the sales. If, as Respondent suggests, he was still domiciled in Utah at the time he sold the shares, 100% of the federal taxable income resulting from the sales is also subject to Utah income tax.

At the Formal Hearing there are two items which are different from what the Commission understood of the case at the Initial Hearing. Following the Initial Hearing it was thought that while in CITY, Petitioner parked his fifth-wheel at a trailer park at the casinos in CITY. Instead, Petitioner parked his fifth-wheel on BLM land which is inherently impermanent. The second item was that in the Initial Hearing it was not important as to when Petitioner established a new domicile. He had clearly abandoned the state of Utah at the end of 1997 and the Commission concluded that although it had taken him some time to establish a new domicile he did eventually establish a domicile in STATE 2 and then STATE 3. Now, Respondent points out there is an issue as to whether Petitioner actually established a domicile in STATE because of the capital gains he received during the period of time Petitioner was in STATE.

Petitioner may have intended to establish domicile in STATE, but intent alone is not sufficient. In addition to intent, one must, in fact, establish domicile. Camping on BLM land does not establish domicile.

The Commission has the authority to waive penalties if it finds reasonable cause. In this case it appears that Petitioner made a first time error, in addition it is a difficult determination as to where he was domiciled so the circumstances warrant waiver of all penalties.


For the period at issue, since the Commission has found that Petitioner did not, in fact, establish a new domicile in STATE, Petitioner remained domiciled in Utah through the end of March 1998. For this reason he is liable for Utah individual resident income tax on income he received from January 1 through March 31, 1998 pursuant to Utah Code Ann. '59-10-104.



Based upon the foregoing, the Tax Commission orders that the audit be adjusted so that the amount of tax is based on Petitioner being a resident of Utah through the end of March 1998 and that he not be domiciled in Utah for the remainder of the year. In addition the Commission waives all penalties assessed and orders Respondent to show credit on the adjusted audit for the amount of tax and interest Petitioner paid following the Initial Hearing in this matter. It is so ordered.

DATED this 2nd day of October , 2002.


Jane Phan

Administrative Law Judge


The Commission has reviewed this case and the undersigned concur in this decision.

DATED this 2nd day of October , 2002.



Pam Hendrickson R. Bruce Johnson

Commission Chair Commissioner



Palmer DePaulis Marc B. Johnson

Commissioner Commissioner