Benjamin v. UTAH STATE TAX COM'N
2011 UT 14
Utah2011Background
- Appellants Arthur and Gail Benjamin challenged Utah State Tax Commission’s finding they were Utah resident individuals for 2003–2004 (audit period).
- Commission held they were Utah residents under either domicile or statutory test, and upheld a 10% negligence penalty.
- Benjamins moved to Nevada in 2003, obtained Nevada licenses, voter registration, and Nevada bank accounts; nevertheless maintained Utah ties.
- Benjamin sold Datamark stock in 2003, recognizing a large gain taxable in Utah if resident for tax purposes.
- Audit relied on days in Utah and connections to determine residency; 2005–2008 proceedings culminated in Commission decision affirmed by the Utah Supreme Court.
- Court resolves that Benjamins were Utah resident individuals under both tests and upholds negligence penalty.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Benjamins were Utah residents under the domicile test | Benjamin argues they abandoned Utah domicile in 2003 | Commission found domicile preserved due to totality of factors | Yes; domicile retained during audit period |
| Whether Benjamins were Utah residents under the statutory test | Even if not domiciled, they maintained abode and 183+ Utah days | They satisfied both prongs of statutory test | Yes; Benjamins satisfied statutory test as Utah residents |
| Taxability of stock sale proceeds under Utah law for residents | If non-domiciled under statutory test, proceeds may not be taxed in Utah | All Utah resident individuals taxed on state taxable income, regardless of domicile | Taxable; proceeds subject to Utah tax under state taxable income rules |
| Validity of the 10% negligence penalty | Penalty not justified by good faith interpretation of law | Penalty warranted due to negligent nonpayment and inconsistent representations | Upheld; penalty proper as no good faith basis for nonpayment |
| Effect of residency determination on possible source of income treatment | Non-Utah source income not taxed if not domiciled | Resident individuals taxed on all state taxable income; no source limitation for residents | Incorrect distinction; residents taxed on all state taxable income; stock sale taxed |
Key Cases Cited
- O'Rourke v. Utah State Tax Comm'n, 830 P.2d 230 (Utah 1992) (domicile/residency factual review; substantial evidence standard)
- Salt Lake City S. R.R. v. Utah State Tax Comm'n, 987 P.2d 594 (Utah Ct.App. 1999) (standard for reviewing factual findings; statutory interpretations are legal questions)
- Grace Drilling Co. v. Bd. of Review, 776 P.2d 63 (Utah Ct.App. 1989) (consideration of totality of circumstances in residency determinations)
- Clements v. Utah State Tax Comm'n, 893 P.2d 1078 (Utah Ct.App. 1995) (use of totality-of-circumstances framework in domicile analysis)