Re: Montana and change of Domicile

There are multiple issues at play here. The simplest one, as mentioned earlier, is that Montana source income from selling real property in Montana is going to be taxed by Montana no matter where in the world you live (subject to Montana filing requirements and uncommon exceptions, of course). The other issue you seem to be running into is residency. Residency is usually determined by the overall strength of your ties to a particular location, such as where you live, voter registration, drivers license, location where you carry out social, professional, and religious activities, where your family lives, where you earn compensation, etc.

Each state and country defines its own residency rules, in the case of Montana it is based either on your domicile or having a permanent place of abode in Montana even if temporarily absent. Domicile and residency are separate but related concepts. Your domicile is established at birth and does not change until you establish a new one. You can only have one domicile, but may actually be a resident of multiple states or countries depending on how they each define their rules (but this is not common). It sounds like Montana is asking you to prove you are no longer a Montana resident. Why does it matter? Because while Montana source income (such as your land sale) will always be taxable to Montana, the rest of your income would not be taxable by Montana unless you are a resident. So, if your residency in Montana never ended, by Montana's rules, you would actually be liable for Montana tax on ALL your income during the period in question (subject to statute of limitations). If you can demonstrate that you ended your Montana residence by both establishing a new domicile and abandoning your permanent place of abode in Montana, then you should be clear of all issues since that time except, of course, your sale of real property (and other source income) from Montana. While I am not an expert on Montana tax rules, I have briefly researched their residency rules as the basis of the above discussion. In the year you ended your Montana residency, did you file a part-year resident return? If so, you can probably start your documentation effort right there. You also mention talking to a tax advisor in the past -- you might want to re-consult same, or consider whether they may have been mistaken. As for what the Montana dept. of revenue tells you, they are not really on your side, as you may have guessed. Suggest you get a new tax advisor (Enrolled agent or CPA in Montana) to help with this.

-Mark Bole

Every state does not have different laws as to taxability of land if they have an income tax. The sale is taxable, period. However, the issue about your residency is a different matter, hence they're asking about passport, drivers license, etc. That is only in order to determine which type of return you should be filing; either as a resident or non resident. ChEAr$, Harlan Lunsford, EA n LA