Personal Income Tax Issues Related to Residency and Domicile
Lane Powell Shareholder John Gadon co-authored an article in the American Law Institute and American Bar Association’s publication The Practical Tax Lawyer titled “Personal Income Tax Issues Related to Residency and Domicile.” The article was published in the May 2012 issue. Gadon was asked to author the article with Debra Herman, of counsel at Morrison and Foerster, and Felicia Hoeniger, counsel at Robinson and Cole, after the three had given a presentation on the same subject at the Fall 2011 ABA Tax Section meeting. Gadon wrote the first section of the article, which is focused on domicile, how domicile is determined, change of domicile, factors in determining change of domicile, abandonment of domicile, and domicile for military personnel and for students.
A person’s domicile is significant because a state may tax the worldwide income of a person domiciled there. Domicile is a question of fact based on the person’s intent to remain in, or to return to, a particular state. Generally, once domicile has been established in a particular state, it remains there until the person establishes a new domicile elsewhere. Cases involving a change in domicile are frequently litigated, particularly where a taxpayer moves from a high income tax jurisdiction to a low or no tax jurisdiction. Typically, the high tax jurisdiction claims that the taxpayer has not changed his or her domicile and assesses taxes based on the person’s continued status as a state resident.