Help determining residency

Hi guys. I'm trying to figure out the 2010 residency filing for two married clients and it's making my brain hurt!

Husband and wife have have lived in Virginia for 10 years. Voter registration, primary residence, driver's license, vehicle registration, Last Will and Testament, etc... are all Virginia-based. No question about Virginia residency status. Both hubby and wifey worked for the US Gov't as civilians until this month. They have now retired and are drawing federal retirement annuity payments.

Clients also own a vacation home in North Carolina. Just last week, they moved into their NC residence. They are in the process of changing all "residency indicators" to NC. But they maintain their VA home as their new vacation home. This is a legit and permanent move to NC. They do intend to sell VA home in a couple of years.

How do they file their 2010 income taxes for each State? Resident or part-year resident???

Virginia's Dept of Revenue website defines a "resident" as "a person who lives in Virginia, or maintains a place of abode here, for more than 183 days during the year." Does having a second house in VA qualify as "maintain[ing] a place of abode"?

On the other hand, the website goes on to define a "part-year resident" as one "who moves out of Virginia during the year to become a resident of another state". That's also true of my clients.

So which one is it? My gut tells me part-year resident in both States, but Virginia's unclear definitions are making me unsure.

Reply to
kastnna
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If it were me, I'd follow your gut. A person can move to a different state after July 2 without the first state claiming the person was a resident for the entire year.

Where I've read about the 183 day rule being invoked was in the case of a celebrity who had a vacation home in Southampton NY and in fact spent more than 183 days there in a calendar year. People who move from the Northeast to FL, but keep their old place as a vacation home, know to stay the majority of the year in FL.

Reply to
Stan K

My interpretation of VA statutes 58.1-302 and -303 is that if a VA resident moves out of VA with the intent to change domicile then that person is a part year resident of VA for the period prior to his actual departing the state and all income is subject to VA tax. Once removed from the state, VA could only tax VA source income of a nonresident.

Your clients would file in 2010 as VA part-year residents and they would file in NC as part-year residents. If they have intangible income (e.g., interest, dividends, etc.), it is taxable by the state in which they were a resident at the time of receipt of the funds.

Reply to
Alan

Thank you both. Part-year in both states was the way I was also leaning.

The interesting twist is that, as mentioned, both clients received a federal annuity pension payment. NC does not tax these (under certain circumstances, for which they qualify), but VA does. The income from these annuities is over $125k annually. Since it is not VA source income, I'm trying to get them out of VA as soon as possible.

regards, Nate

Reply to
kastnna

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