94-0380

Income Tax

Signed 1/19/96

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

XXXXX, )

Petitioners, : ORDER

v. : Appeal No. 94-0380

AUDITING DIVISION OF THE : Account No. XXXXX

UTAH STATE TAX COMMISSION, :

Respondent. : Tax Type: Income Tax

_____________________________________

STATEMENT OF CASE

This matter came before the Utah State Tax Commission for an Initial Hearing pursuant to the provisions of Utah Code Ann. §59-1-502.5, on XXXXX. Jane Phan, Administrative Law Judge, heard the matter for and on behalf of the Commission. Present and representing Petitioners was XXXXX, Enrolled Agent. Present and representing Respondent were XXXXX, Assistant Attorney General, XXXXX and XXXXX of the Compliance Auditing Unit of the Collection Division.

Petitioners are appealing the assessment of Utah individual income tax, penalties and interest totaling approximately $$$$$ for the years ending XXXXX through XXXXX as set out in the Statutory Notice dated XXXXX. Of this assessment the underlying tax amount for the years in question was $$$$$. The Penalties totaled $$$$$ and consisted of a 10% late filing penalty and a 15% penalty for intentional disregard of the law for each year in question. Interest was assessed at the statutory rate.

APPLICABLE LAW

It is the intent of the state legislature to impose on each resident individual for each taxable year a tax measured by the amount of his or her taxable income. (Utah Code Ann. §59-10-102.)

A resident individual is an individual who is domiciled in this state for any period of time during the taxable year. (Utah Code Ann. §59-10-103(1)(j)(I).)

The Commission has adopted the following definition of domicile as set out in Utah Admin. RuleR865-9I-2(D):

"Domicile" means the place where an individual has a true, fixed, permanent home and principal establishment, and to which place he (or she) has (whenever he is absent) the intention of returning. It is the place in which a person has voluntarily fixed the habitation of himself 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 domicile, a new domicile must be shown.

ANALYSIS

The main issue in this appeal is whether or not Petitioners were "domiciled" in the State of Utah for the purposes of Utah Code Ann. §59-10-103(1)(j)(I) for the years XXXXX through XXXXX. The second issue presented is whether or not the assessment of penalties or interest should be waived or reduced. Petitioners assert that they were not domiciled in the Utah during the years in question and request that the assessment of tax, penalties and interest be waived. Respondent asserts that the facts indicate Petitioners were domiciled in Utah for the years in question and requests that the assessments of tax, penalties and interest be sustained.

A taxpayer's domicile is a question of fact. The representatives of the parties proffered the following as facts at the hearing. Mr. XXXXX worked as a pilot for Delta Airlines and was based out of Salt Lake City during the years in question. In XXXXX Petitioners began renting a residence in Park City. Petitioners assert that they purchased the residence in Park City in August of XXXXX for $$$$$. From information provided at the hearing the Park City residence has about 4000 square feet above grade. Petitioners assert that their domicile was the State of Washington. They state that they owed a residence on XXXXX, Washington during the years in question and that the XXXXX residence was actually an "estate" and more valuable than the Park City residence. Petitioners estimated that the value of the XXXXX residence was around $$$$$ to $$$$$.

Petitioners' older child attended his senior year of high school at a public school in Park City during the XXXXX school year. The younger child attended public school in Park City beginning in the fall of XXXXX through the XXXXX school year. He went to school in Mexico for almost two years but returned for the last part of the last semester his senior year and graduated from the public high school in Park City in XXXXX.

Although the children attended school in Park City, Petitioners represent that they themselves were rarely in Park City. Petitioner XXXXX represented by an unsigned, written document that she was in Utah only 30-45 days in XXXXX, 108 days in XXXXX, 95 days in XXXXX, 83 days in XXXXX, 97 days in XXXXX, 57 days in XXXXX, and 43 days in XXXXX. It is unclear from the document whether XXXXX followed the same schedule. Also it appears from the document that much of the time Mrs. XXXXX traveled outside of Utah it was for vacations or to Los Angeles, not the XXXXX residence. From the document it appears that Mrs. XXXXX did spend much of the summers in Seattle. Petitioners represent that their children's grandparents stayed at the Park City residence to look after the children when the Petitioners were away.

Much of Petitioners' income came from investments and investment property in Washington and California. Petitioners had filed nonresident California income tax returns for California income.

During the years in question the Petitioners received a primary residential exemption on their property tax for the Park City residence. Petitioners' representative stated that Petitioners were not aware of how this happened. Mr. XXXXX obtained a resident hunting and fishing license in XXXXX. Many of the 1099's issued to Petitioners and other financial documents were sent to the Petitioners at the Park City address. Petitioners' tax preparer was located in Park City. Petitioners represent that the remained registered voters in Washington and retained their Washington drivers license. Cars were registered in both Utah and Washington.

The Respondent had assessed a 10% late filing penalty and a 15% intentional disregard penalty. However, in this case an intentional disregard penalty is inappropriate because the circumstances as presented do not indicate sufficient intent on the part of Petitioners.

DECISION AND ORDER

In making a determination of Petitioners domicile for the years in question the Commission has considered all the information proffered. The Commission finds it significant that Petitioners minor children resided at the Park City residence to attend school in Park City. Generally domicile is considered to be the place where the family, in this case Petitioners' minor children, reside. The Commission considers the other information presented and the records of the Tax Commission, and finds Petitioners were domiciled in Utah for the period in question. The Commission affirms the assessment set out in the XXXXX Statutory Notice for the period of XXXXX through XXXXX as to the tax, the 10% late filing penalty and the interest. Sufficient circumstances were presented to waive the 15% penalty assessed for intentional disregard. However, the Commission instructs the Respondent to give credit to Petitioners for the income tax paid to the State of California where, and to the extent, appropriate.

This decision does not limit a party's right to a Formal Hearing. However, this Decision and Order will become the Final Decision and Order of the Commission unless any party to this case files a written request within thirty (30) days of the date of this decision to proceed to a Formal Hearing. Such a request shall be mailed to the address listed below and must include the Petitioner's name, address, and appeal number:

Utah State Tax Commission

Appeals Division

210 North 1950 West

Salt Lake City, Utah 84134

Failure to request a Formal Hearing will preclude any further administrative action or appeal rights in this matter.

DATED this 19th day of January, 1996.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

W. Val Oveson Roger O. Tew

Chairman Commissioner

Joe B. Pacheco Alice Shearer

Commissioner Commissioner