96-1038
Income Tax
Signed 6/30/97
BEFORE THE UTAH STATE TAX
COMMISSION
____________________________________
PETITIONER, :
:
Petitioner, : ORDER
:
v. : Appeal No. 96-1038
:
COLLECTION
DIVISION OF THE :
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 June 4, 1997. Jane Phan, Administrative Law Judge, heard
the matter for and on behalf of the Commission. Present and representing Petitioner was PETITIONERS REP., Esq.,
of XXXXX, along with PETITIONER and PETITIONER. Present and representing Respondent was Brain Tarbet, Assistant
Attorney General, along with Kenneth Cook and Wallace Black of the Collection
Division.
Petitioner
is appealing the assessment of Utah individual income tax, penalties and
interest for the years 1989 through 1992.
Respondent made the assessment based on the assertion that Petitioner
was a resident of Utah during this period.
Except for a part year Utah resident return filed in 1991, Petitioner
did not file Utah resident individual income tax returns, nor pay Utah resident
individual tax for the years in question, based on his assertion that he was
not a Utah resident.
APPLICABLE LAW
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 except for the following issues, as to
which the burden of proof shall be upon the commission:
(1) whether the
petitioner has been guilty of fraud with intent to evade tax;
(2) whether the
petitioner is liable as the transferee of property of a taxpayer, but not to
show that the taxpayer was liable for the tax; and
(3)whether
the petitioner is liable for any increase in a deficiency where such increase
is asserted initially after a notice of deficiency was mailed . . .
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).)
ANALYSIS
The
issue in this appeal is whether Petitioner was a "resident
individual" in the State of Utah for the purposes of Utah Code Ann.
§59-10-103(1)(j) for the tax years 1989 through 1992. A resident individual is one who is "domiciled" in the
State of Utah. Petitioner was clearly a
resident and domiciled in the State of XXXXX prior to 1989. In order to show that he did not become a
Utah resident Petitioner must show that: 1) he did not abandoned his Georgia
domicile; and 2) that he did not intend to and did not, in fact, establish a
new domicile in Utah.
Petitioner
was clearly a resident of XXXXX from about 1974 through the end of 1988. A civil proceeding against Petitioner’s wife
had been commenced in XXXXX. Petitioner
was not a party in the civil suit. In
1987 divorce proceedings for Petitioner and his wife were filed in XXXXX, but
then stopped on the advice of her attorney because any division of property
resulting from the divorce would be seized in the civil suit. In 1988 the decision of the court was
rendered and a substantial judgment was entered against Petitioner’s wife. According to Petitioner, this provided the
motivation to leave XXXXX to avoid collection pursuant to the judgment. Petitioner indicated that his wife chose
Utah as the place to relocate.
Petitioner
asserted that he followed his wife to Utah merely to facilitate a divorce. Sometime in the fall of 1988 Petitioner, an
airline pilot, requested a base transfer to XXXXX. Sometime towards the end of 1988 he purchased two condominiums in
XXXXX, Utah. In January 1989 he was
transferred and he moved to Utah with his wife and minor son. He did not file XXXXX individual income tax
returns after the 1988 tax year. He
maintains that beginning in January 1989 he lived in a few different
condominiums in XXXXX or at a condominium he purchased in XXXXX in July
1989. In July 1990 Petitioner was divorced
but the custody and alimony issues were scheduled for trial in November
1990. In July 1990, Petitioner married
XXXXX. XXXXX owned a residence in
XXXXX, but came to Utah to live with Petitioner.
The
alimony and custody case which had been scheduled for trial in November 1990
was continued by the judge, who subsequently retired before hearing the
case. Then the trial was rescheduled
and bumped a second time. The trial did
not go forward until November 1991.
However, all the issues were not resolved until February 1992. After his marriage in July 1990, during the
period of the custody and alimony proceedings, Petitioner and XXXXX lived in
various condominiums owned by Petitioner or a rental in XXXXX, Utah. Petitioner and XXXXX also spent time in the
XXXXX condominium until it was sold in January 1991. Petitioner does not assert that he was a XXXXX resident during
this period. Petitioner sold or
transferred all of his Utah properties in 1992.
For
the custody proceeding, the residency of the custodial parent became an
issue. In documents and for the legal
proceeding, Petitioner maintained that he was a resident of XXXXX, Utah, and
that he intended to remain in XXXXX, Utah.
He said that he felt these representations were necessary to obtain custody
of his son. He also said that he wanted
to move to XXXXX, but if it would have been necessary to remain in Utah for
custody of his son, he would have made the sacrifice.
The
first issue to consider is whether or not Petitioner abandoned his XXXXX domicile
when he moved to Utah in 1989.
Petitioner maintains that he remained a resident of XXXXX through mid
1990 when he married XXXXX. Petitioner
did not sell his XXXXX residence until 1992.
He did travel to XXXXX to maintain the residence and visit friends. However, from the information presented he
did not reside in XXXXX during this period.
He moved his wife and son to Utah for 1989, worked full time out of
theXXXXX and lived in various condominiums in Utah and XXXXX. The fact remains that if Petitioner was a
resident of XXXXX in 1989 and through mid 1990 he was required to file and pay
XXXXX state income taxes. Petitioner
did not do so. For these reasons
Petitioner abandoned his XXXXX domicile.
Then
next issue to consider is whether Petitioner intended to, and did in fact,
establish domicile in the State of Utah.
Beginning in January 1989 Petitioner clearly lived in Utah. He worked full time out the XXXXX until 1992. He lived in various condominiums which he
owned, including some time spent in XXXXX.
He claimed Utah residency and intent to remain in Utah when it
benefitted him in the proceedings to obtain custody of his son. He filed a part year resident return in Utah
for 1991. Petitioner had more
domiciliary contacts with Utah than any other state during the audit period.
Petitioner’s
representative argues that Petitioner was in Utah only for a special or
temporary purpose. However, if
Petitioner was not a resident of Utah he would need to have residency
elsewhere. He was not a XXXXX resident
because he abandoned his XXXXX domicile.
Petitioner asserts that in mid 1990 he became a resident of XXXXX, but
the facts do not support this. Although
he married XXXXX in July 1990, and she owned a residence in XXXXX, he did not
move to XXXXX, but remained in Utah. In
fact XXXXX moved to Utah to be with Petitioner.
Penalties
as well as statutory interest were assessed on the tax liability for the period
in question. The penalties were the 15%
intentional disregard penalty and the 10% penalty for failure to file. The Commission finds sufficient
justification for waiver of the 15% penalty.
DECISION AND ORDER
After
considering the information presented the Commission finds that Petitioner
abandoned his XXXXX domicile and established domicile in Utah for the audit
period. The Commission notes that
Petitioner had more ties with Utah than any other stated during the audit
period. Petitioner argues that he was
in Utah for a special and temporary purpose, that of obtaining a divorce and
for the alimony and custody proceedings.
However, Petitioner would need to be a resident elsewhere if he was in
Utah for only a special or temporary purpose.
Based
upon the information presented at the hearing, and the records of the Tax
Commission, the Commission finds that Petitioner was a resident of Utah for the
1989 through 1992 tax years. The
additional income tax, as well as the 10% failure to file penalty and interest
assessed by Respondent are upheld.
Sufficient reasonable cause was found to waive the 15% intentional
disregard penalty.
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 30 day of JUNE, 1997.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
W. Val
Oveson Richard
B. McKeown
Chairman Commissioner
Joe B.
Pacheco Alice
Shearer
Commissioner Commissioner
^^