95-1238
____________________________________
PETITIONER, :
:
Petitioner, : ORDER
:
v. : Appeal No. 95-1238
:
AUDITING
DIVISION OF THE : Account No. #####
UTAH STATE TAX COMMISSION, :
STATE OF UTAH, :
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 February 18,
1997. G. Blaine Davis, Administrative
Law Judge, heard the matter for and on behalf of the Commission. Present and representing XXXXX, together
with PETITIONERS REP. on the telephone.
Present and representing Respondent was Mr. Gale Francis, Assistant
Attorney General, together with Mr. Brent Taylor, Mr. Dan Engh and Mr. Frank
Hales from the Auditing Division.
Petitioner
is appealing the assessment of income taxes, penalties and interest for the tax
years 1993, 1994 and 1995. Petitioner
did not file or pay Utah individual income taxes for those years asserting that
he had abandoned Utah as a domicile and had never re-established his domicile
in Utah.
Prior
to 1988, Petitioner and his wife resided in the State of Utah through 1987, and
filed Utah resident individual income tax returns. Petitioner was hired by XXXXX in late 1987, and was transferred
to XXXXX, XXXXX in July, 1988. In
XXXXX, Petitioner established a checking account, obtained a drivers license,
and purchased a home. Petitioner and
his wife thereafter lived for several years in XXXXX. For 1988, Petitioner filed a part-year resident return in Utah,
and a part year resident return in XXXXX.
Petitioner and his wife and children resided in XXXXX for 1989, 1990,
1991, and through the early part of 1992, and they filed XXXXX tax returns for
those years.
Near
the end of June, 1992, Petitioner was transferred to XXXXX, XXXXX. At the time of the transfer, Petitioner and
his wife were experiencing marital problems, and there were discussions
regarding the possibility of divorce, but no petition for divorce was filed at
that time. Petitioner considered himself
to be separated from his wife. In
September 1992, Petitioner and his wife sold their home in XXXXX. The proceeds from the home were divided
equally between Petitioner and his wife.
Petitioner’s wife came to Utah and purchased a home using her half of
the proceeds from the XXXXX home as a down payment, but she could not obtain
the loan without the signature of Petitioner.
Therefore, Petitioner’s name appeared on the deed of the property, and
Petitioner signed the loan documents to assist his wife in obtaining the
home. Petitioner retained his share of
the proceeds from the XXXXX home, and was then sent to work in XXXXX, XXXXX.
Petitioner’s
wife and children resided in Utah during 1992, 1993, 1994 and 1995. During those years, Petitioner’s children
attended schools in Utah, and his wife and children were, for all purposes,
domiciled in the State of Utah.
Petitioner’s wife also had a vehicle which was registered in
Petitioner’s name in the State of Utah.
In
July, 1995, Petitioner returned to the United States, and was stationed in
XXXXX. When he returned, the parties
determined that the marriage was finished, and Petitioner’s wife filed a
complaint for divorce in court in Utah in August, 1995. The parties negotiated and fought regarding
the terms of the divorce, but it was ultimately finalized on November 13,
1996. As a requirement of the divorce,
Petitioner signed a Quit-claim Deed on the Utah home from himself to his spouse
in October 1996.
For
1992, Petitioner filed a joint federal tax return with his wife showing an
address in XXXXX, Utah. He filed a 1992
part-year resident return in XXXXX, indicating he intended to terminate his
domicile in XXXXX. For 1993,
Petitioner’s federal income tax return does not show an address and he did file
a Utah nonresident or part-year resident return showing his address as the
XXXXX in XXXXX, XXXXX. For 1994, the
address shown on Petitioner’s federal return and Utah non or part-year resident
return was also XXXXX in XXXXX, XXXXX.
The 1993 and 1994 returns were married filing separate returns. For 1993 and 1994, the W-2 forms of
Petitioner from the federal government show Utah as the state for Petitioner,
and it shows Utah withholding tax for each of those years. There was no withholding for any other
state.
The
federal return was prepared by PETITIONERS REP., a CPA in XXXXX, Utah, who is a
relative of Petitioner. During 1992,
1993, 1994, and 1995, Petitioner had interest income from bank accounts in the
State of Utah. In 1993, Petitioner also
had interest income in the State of XXXXX.
On Petitioner’s federal tax return, he claimed his children as
exemptions.
The
parties represented that during the time Petitioner was in XXXXX, XXXXX, his
wife never went to XXXXX to visit him.
The withholding forms filed by Petitioner which were prepared in 1992
and filed with his employer list Utah for withholding tax purposes for all
years.
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).)
Domicile
is defined as the place where an individual has a true, fixed, permanent home
and principal establishment, and to which place he or she has the intention of
returning whenever he or she is away.
It is the place in which a person has voluntarily fixed the habitation
of himself and family, not for a mere special or temporary 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. (Utah Admin. Rule R-9-2I(D).)
ANALYSIS
It
is very clear that Petitioner was a resident and domicile of the State of Utah
through approximately July 1988. It is
equally clear that Petitioner then became a resident and domicile of the State
of XXXXX, and continued to be a resident and domicile of that state through
approximately September 1992. The real issue in this proceeding is where
Petitioner was domiciled in 1993, 1994 and 1995, which are the years at issue
in this proceeding.
In
September 1992, Petitioner and his wife sold their XXXXX home and used his
wife’s portion of the proceeds to purchase a home in Utah. The home was placed in joint tenancy between
Petitioner and his wife, and the loan on the home was in the name of Petitioner
and his wife. Petitioner continued to
be married to his wife, and his wife and children resided within the
State of Utah and were domiciled within the
State of Utah. However, Petitioner did
go to XXXXX, XXXXX, and was not physically present in the State of Utah, other
than very short visits, during the three year period. Nevertheless, his withholding forms with his employer did list
Utah as his state of domicile, he showed Utah as his address for one year’s tax
return, he filed a non-resident return in Utah for two of the years, and he did
have bank accounts which earned interest within the State of Utah during that
time period.
When
Petitioner returned to the United States in 1995, he and his wife ultimately
went through a divorce, which Petitioner represents had been discussed prior to
the time he went to XXXXX. Petitioner
was then stationed in the State of XXXXX.
During the time Petitioner was out of the country, he did not have a
Utah drivers license, but continued to utilize his XXXXX driver’s license.
During
the period of 1993, 1994 and 1995, Petitioner’s wife and children were clearly
domiciled in the State of Utah and continued to avail themselves of the schools
and other benefits of the state.
Petitioner did own real property within the State of Utah, obtained a loan
within the State of Utah, but he did not own real property or have a loan on
real property in any other location except the State of Utah.
A
person’s residence is normally deemed to be at the location of the person’s
family i.e., where he has fixed the habitation of himself and his family. In this case, that was Utah.
It
is normally required that a person have a single domicile. Although Petitioner was physically in XXXXX,
XXXXX, there was no question that he did not intend his domicile, or the place
to which he usually returned, to be XXXXX.
He was working for XXXXX, and clearly maintained that he was a citizen
of the United States and that he intended to return to the United States. Based upon that premise, it is also a normal
requirement that individuals must have a domicile in one state or another if
they are citizens of the United States.
This therefore becomes a case of determining the state with which
Petitioner had more contacts than any other state. In this case, Petitioner did not have any contacts with any other
state except XXXXX, and his contacts there were limited to a XXXXX driver’s
license and a small bank account for a portion of the time within that
state. In 1992, when Petitioner filed a
part-year resident return in XXXXX, it was an indication that he was
terminating XXXXX as his domicile. If
not, then he should have filed a regular resident tax return in XXXXX for 1992,
and not a part-year return.
If
Petitioner is to be domiciled in a state of the United States, the only two possibilities
are Utah and XXXXX. His 1992 XXXXX tax
return is evidence that he intended to terminate XXXXX as his domicile. He then established many more ties and
contacts with the State of Utah than he did with any other state.
Accordingly,
the Commission determines that during the period in question, Petitioner had
more contacts with the State of Utah than with any other state, that his wife
and children continued to reside in this state, and that Petitioner’s domicile
during the periods at issue was therefore the State of Utah.
DECISION AND ORDER
Based
upon the information presented at the hearing, and the records of the Tax
Commission, the Commission finds Petitioner was domiciled in the State of Utah
during the years 1993, 1994, and 1995. The
Tax Commission affirms the assessment against Petitioner for the deficiency of
individual income tax and interest for those years. The Commission waives the penalties which were assessed. It is so ordered.
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 14 day of APRIL, 1997.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
W. Val
Oveson Richard
B. McKeown
Chairman Commissioner
Joe B.
Pacheco Alice
Shearer
Commissioner Commissioner
^^