7 Or. Tax 526 | Or. T.C. | 1978
Appeal pending.
The court's initial decision in this case involved the State of Oregon's power to tax the gains realized by plaintiffs on the sale of two California residences (in Belmont and Palo Alto), where recognition of those gains was deferred, pursuant to IRC (1954), § 1034, until after plaintiffs were domiciled in Oregon. Plaintiffs argued that Oregon lacked the power to tax the gains because they realized those gains before moving to Oregon. This court held that Oregon was prohibited from taxing the gain on the sale of the first California home (in Belmont) under ORS
Pursuant to Rule 29 of this court, plaintiffs petitioned for a rehearing for the purpose of adducing testimony relating to the time of receipt of proceeds from the Palo Alto sale. That petition was approved. On rehearing, plaintiffs produced evidence which established that the proceeds from the sale of their Palo Alto residence were hand delivered to them in Palo Alto on August 30, 1967. Plaintiffs then deposited these proceeds in a California bank. (At the first hearing, it was stipulated that plaintiffs did not become domiciled in Oregon until September 7, 1967.) *528 Plaintiffs requested that the court reconsider its original decision in light of these facts.
The court now finds that the basis of its original decision is incorrect in that plaintiffs in fact were not Oregon domiciliaries at the time they received the proceeds and realized the gain on that sale. However, for reasons set forth below, the court's decision remains unchanged because the State of Oregon had jurisdiction to tax the gain attributable to the Palo Alto sale.
[1.] As this court made clear in Patty v. Dept. of Rev.,
[2.] Plaintiffs also challenge Oregon's power to tax the Palo Alto gain on constitutional grounds. This *529
challenge is without merit. As in Patty, supra, the State of Oregon had, for income tax purposes, the strongest connection with the taxpayers in 1974; i.e., domicile. Plaintiffs were domiciled in Oregon when they "elected," by their noncompliance with IRC (1954), § 1034, to recognize the deferred gain on the Palo Alto sale. The United States Supreme Court has often recognized that domicile alone provides the state with the power to tax its citizens on net income derived wholly from activities carried on outside the state. Miller Bros. Co. v.Maryland,
[3.] Contrary to plaintiffs' contentions, the State of Oregon will not, by taxing the gain on the sale of the Palo Alto residence, be engaging in "double taxation."2 ORS
[5.] Plaintiffs' interpretations of what the legislature intended by adopting the Personal Income Tax Act of 1969 (Or Laws 1969, ch 493, now ORS chapter 316), by which the legislature sought to make the Oregon personal income tax law, so far as possible, identical in effect to the provisions of the federal Internal Revenue Code of 1954, are appealing and not without merit. However, such contentions are more appropriately directed to the legislature. The current statutory provisions are sufficiently clear and unambiguous in this instance. ORS
The court concedes plaintiffs' argument that the Oregon Supreme Court has twice recognized that federal taxable income will not always be synonymous with state taxable income.Smith v. Dept. of Rev.,
The court's former decision herein is modified to conform with this decision. Plaintiffs' deferred gain of the Belmont residence sale is not taxable by Oregon because of ORS
Defendant is awarded its statutory costs.
Obviously, in the present case, no double taxation exists, in its legal sense, since California and Oregon are separate taxing entities.