Question

Domicile plays a central role in state taxation by providing the required nexus for a state to subject all of the income of an individual to its state income tax. Including an individual state gift, inheritance, and estate taxes at the place location time of the award or death. The article enhances understanding the governing principles that apply in determining an individual’s place of residence and the state to subject income tax.

The governing principles state that an individual can only have one resident at a time and not two, and physically moving from one doesn't terminate it as a legal domicile. To end one's place of residence, an individual must acquire a new site and intend to abandon the old one. The individual must have a real fixed permanent home and a principal establishment to the place such that whenever absent, he has the intentions of returning to the residence.

Impact arise in three cases, one where the taxpayer works at a different state and visits the family regularly at final state, the Tax Commission ruled that where he was employed was not a permanent place. Hence the taxpayer was domiciliary termed an Idaho since he owned Idaho driving license and had no indication that he intended to abandon Idaho residence. Second is the Georgia case where the taxpayer moved with her spouse and children and purchased a house in Georgia. Later moved to work in the United Kingdom Embassy but they stayed at the Embassy apartment in 2011, hence they were subjected to Georgia state income taxation. Similar to the third case where the taxpayer worked in Texas and stayed in Georgia but continuously referred Rhode Island home. Hence he became a domiciled at Rhode since it was back.

The author thou questioned Fowler’s case since the court drew analysis based on their unsuccessful attempt to obtain Florida driver’s license, register the car, register as Florida voter and their intention of being Florida residence as from January 20, 2006. It failed to attribute the sale of stock on February 3, 2006, where Mrs. Fowler served as Assistant Secretary for three years in North Carolina. The charitable contributions after the sale of the business in 2006 and during that year, the taxpayers spent most of 2006 - 2007 days in North Carolina before finalizing the proposal.

The court and IRS'S brings out the contradiction in the governing principles of determining an individual's domicile. Since thou, the Fowlers changed their address to Florida they continued using certain correspondence and billing and bank statements from North Carolina. The insurance policy that they purchased on their North Carolina home for a period of July 31, 2006 to July 31, 2007 had a stipulated location that dwelling is not seasonal or secondary. The court failed to consider Fowlers' behavior prior to January 20,2006 and emphasized on a single observed event, hence ignoring taxpayers’ subsequent conduct.

QUESTION: INTERPRETATE THE ABOVE ARTICLE IN YOUR OWN WORDS.

Answer 1

State income taxes such as individual state gift inheritance and estate taxes are determined by the domicile of a person. As per the governing principles and individual can be a resident of only one place at a time. So to determine the domicile the individual should abandon the old place and have a real fixed permanent home and principal establishment at the place where the domicile is established.

In a case where the individual works in a different state and has a home in another the domicile will be established at the place where he had a home if there was no indication that he intended to abandon the same.

Contradiction was noted in the fowler's case where the Fowler changed their address to Florida but continued using correspondence address of North Carolina. In this case the court failed to consider their earlier behaviour and emphasised on a single observed event.