Benjamin v. Utah State Tax Commission
2011 Utah LEXIS 15
Utah2011Background
- Benjamin couple established Utah domicile circa 1995, later began purchasing Nevada residence in 9/2003 and moved to Nevada for tax domicile purposes.
- Mr. Benjamin sold Datamark stock in 2003 for a $9.25 million price, recognizing a large capital gain ( Utah tax implications discussed).
- They filed a Utah part-year resident return for 2003 and did not file a Utah return for 2004, asserting nonresidency during audit period.
- During 2003–2004 audit period, they adopted Nevada residency indicators (Nevada licenses, voter registration, bank accounts, Nevada address) but retained Utah residence at Sandy and continued to use Utah contacts and assets.
- Utah Tax Commission concluded they were Utah resident under the domicile or statutory test, assessed tax on all state taxable income, and imposed a 10% negligence penalty for nonpayment; Benjamins timely petitioned for review.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Benjamins were Utah residents under the domicile test | Benjamin alleged Nevada domicile and status as nonresidents. | Commission found continued Utah domicile or sufficient ties to Utah for domicile test. | Benjamins were Utah residents under the domicile test. |
| Whether Benjamins were Utah residents under the statutory test | If not domiciled in Utah, Benjamins argued non-Utah source income not taxed. | Statutory test satisfied due to abode in Utah and 183+ days in Utah. | Benjamins were Utah residents under the statutory test as alternative. |
| Tax on stock sale proceeds under either Utah residency status | If resident only under statutory test, stock sale proceeds may be taxed differently. | All Utah resident individuals taxed on state taxable income without source limit. | Taxable under either test; proceeds subject to Utah tax. |
| Whether the 10% negligence penalty was proper | Nonpayment based on good faith interpretation of law could negate penalty. | Taxpayer failed to rely on a legitimate good faith interpretation; penalty warranted. | Penalty upheld; nonpayment not based on good faith interpretation. |
Key Cases Cited
- O'Rourke v. Utah State Tax Comm'n, 830 P.2d 230 (Utah 1992) (domicile determinations are fact-intensive; substantial evidence standard)
- Salt Lake City S. R.R. v. Utah State Tax Comm'n, 987 P.2d 594 (2000 UT 90) (substantial evidence review of factual findings; deference to commission on findings)
- Clements v. Utah State Tax Comm'n, 893 P.2d 1078 (Utah Ct.App.1995) (totality of circumstances governs domicile intent)
- Grace Drilling Co. v. Bd. of Review, 776 P.2d 63 (Utah Ct.App.1989) (consideration of multiple factors in domicile determinations)
- Vermax of Fla., Inc. v. Utah State Tax Comm'n, 906 P.2d 314 (Utah Ct.App.1995) (negligence penalty review; reasonable investigation into law)