Montana and change of Domicile


W

wolfman

Through my selling some land I still own in Montana I found
out that the state has a notice of tax owed filed against me
for the year 2000 for capital gains. I did not work in the
USA in the year 2000 so the entire tax amount if for capital
gains. At the time I sold my land (in the year 2000) I spoke
with a tax adviser and they said that I did not have to pay
capital gains in Montana if I did not live there. So I did
not pay. I contacted the state revenue department and told
them that i moved to thailand in 1999. They did not argue
with me that I did not have to pay tax because I no longer
lived in Montana. They are maintaining that since I renewed
my drivers license in 1996 and I did not turn it into the
state when I left then I must still pay taxes to the state.
The driver's license was good for 10 years and did not
expire until 2006. By this reasoning then I would have had
to pay tax for all of the years up to 2006 but they are not
pursuing that angle.

For the proof that I have that I moved my domicile is that I
rented a house in thailand in 1998. I married in march of
1999 and spent approximately 7 months in thailand. I was
back and forth trying to move everything to thailand. In the
year 2000 I spent about 3 months in the USA not all of which
was in Montana. One of these months was to handle the sale
of the real estate in question. Another month was for a
vacation to show my wife around the USA and the last month
was for xmas. In the year 2000 I bought land and built a
house in thailand. I also started a business in thailand.
All of this shows that I had no intention of living in
Montana but the Revenue department still claims i owe the
tax because I did not turn my driver's license in to the
state. This seems like a pretty stupid arguement to me since
I bet that 99.9% of the people leaving montana to live in
another state do not turn in their driver's license to the
state. In contrast many states will give you a driver's
license by turning in a valid drivers license from your
previous state. As a matter of fact that is the policy here
in thailand. You show them your valid license from another
country and they give you a license without taking a test in
thailand.

Now I want to sell the land that I am gaining from the
settlement of a lawsuit that I discussed in another thread.
I am told that I can pay the 2000 tax under protest and go
ahead with the sale of the land. What good will this do ???
Once they get their hands on the money how am I going to get
it back ? Is anyone familar enough with this type of
situation to offer any advice ??

Any help is greatly appreciated.

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D

D. Stussy

wolfman said:
Through my selling some land I still own in Montana I found ...
When you renewed your driver's license, I'm assuming that
you did so in Montana in 2006. The State then has a point -
you didn't completely abandon your ties. Had you "renewed"
your license in another state (by obtaining a license from
the other state), that would have helped. What about your
voter's registration?

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M

Mark Bole

wolfman said:
Through my selling some land I still own in Montana I found
out that the state has a notice of tax owed filed against me
for the year 2000 for capital gains.
Any gains from sale of real property in Montana (if it is
like most states) will have its source in Montana and
therefore will be taxable by Montana whether you are a
resident or not, possibly with an offsetting credit from the
state where you are a resident (so you don't have to pay tax
in two different states on the same income).

-Mark Bole

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
H

Harlan Lunsford

wolfman said:
Through my selling some land I still own in Montana I found
out that the state has a notice of tax owed filed against me
for the year 2000 for capital gains. I did not work in the
USA in the year 2000 so the entire tax amount if for capital
gains. At the time I sold my land (in the year 2000) I spoke
with a tax adviser and they said that I did not have to pay
capital gains in Montana if I did not live there. So I did
not pay. I contacted the state revenue department and told
them that i moved to thailand in 1999. They did not argue
with me that I did not have to pay tax because I no longer
lived in Montana. They are maintaining that since I renewed
my drivers license in 1996 and I did not turn it into the
state when I left then I must still pay taxes to the state.
The driver's license was good for 10 years and did not
expire until 2006. By this reasoning then I would have had
to pay tax for all of the years up to 2006 but they are not
pursuing that angle.

For the proof that I have that I moved my domicile is that I
rented a house in thailand in 1998. I married in march of
1999 and spent approximately 7 months in thailand. I was
back and forth trying to move everything to thailand. In the
year 2000 I spent about 3 months in the USA not all of which
was in Montana. One of these months was to handle the sale
of the real estate in question. Another month was for a
vacation to show my wife around the USA and the last month
was for xmas. In the year 2000 I bought land and built a
house in thailand. I also started a business in thailand.
All of this shows that I had no intention of living in
Montana but the Revenue department still claims i owe the
tax because I did not turn my driver's license in to the
state. This seems like a pretty stupid arguement to me since
I bet that 99.9% of the people leaving montana to live in
another state do not turn in their driver's license to the
state. In contrast many states will give you a driver's
license by turning in a valid drivers license from your
previous state. As a matter of fact that is the policy here
in thailand. You show them your valid license from another
country and they give you a license without taking a test in
thailand.

Now I want to sell the land that I am gaining from the
settlement of a lawsuit that I discussed in another thread.
I am told that I can pay the 2000 tax under protest and go
ahead with the sale of the land. What good will this do ???
Once they get their hands on the money how am I going to get
it back ? Is anyone familar enough with this type of
situation to offer any advice ??
I think you've missed the point somewhere. You can forget
about "domicile".

It matters not that you didn't live in Montana, nor even had
other income in Montana, or anywhere for that matter.
What matters is that you sold Montana land and that sale, no
matter who you are, is taxable. I'm a resident of Alabama,
but if and when I sell some of the family land in Georgia, I
will owe Georgia tax on that.

ChEAr$,
Harlan Lunsford, EA n LA

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
W

wolfman

When you renewed your driver's license, I'm assuming that
you did so in Montana in 2006.
I did not renew my drivers license in 2006. At this point in time i
only have a Thailand Driver's license. When i renewed my license in
1996 i had no idea i was going to get married and live in thailand the
rest of my life. I also had no idea that the state was going to try
and use my license as an excuse to try and tax me.
The State then has a point -
you didn't completely abandon your ties. Had you "renewed"
your license in another state (by obtaining a license from
the other state), that would have helped.
The only ties i have in Montana now are my parents live there and i
own land there. I went to the USA a couple of times in 2000, once in
2001, once in 2005. That is it.

What about your voter's registration?
I used Americans Abroad on the internet. They asked for the last state
that i lived in so i gave them montana. I can't see how that means i
live there.

I am pretty sure that if i wanted to get a fising or hunting license
as a resident that they would not give me one. Nor would they allow my
children to get the resident rate at the university there. Both of
these require that you can prove you lived in Montana for the previous
6 months. Shouldn't your residence be where you are actually living
and are physically present ??? I do not have any utilities in my name
in Montana or in the USA at all. If i wanted to try and prove i live
in montana i could not do it. I can prove i live in thailand though.

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
W

wolfman

I think you've missed the point somewhere. You can forget
about "domicile".

It matters not that you didn't live in Montana, nor even had
other income in Montana, or anywhere for that matter.
What matters is that you sold Montana land and that sale, no
matter who you are, is taxable. I'm a resident of Alabama,
but if and when I sell some of the family land in Georgia, I
will owe Georgia tax on that.
As we all know every state has their own laws in regard to
this. That is why i specified Montana in my OP.

I would assume that the State Revenue Department would not
have bothered to tell me that i was a resident because i
kept the driver's license if what you say is correct. They
would simply have said as you did that it did not matter
where i lived. That would have been much easier for them
than to try and come up with the argument about driver's
licenses.

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
W

wolfman

I am confused. Here is the last email from the State
Auditor.

"" I am asking that you provide a copy of your visa and
passport for the years in question. You brother might also
want to check on this to maintain your US citizenship you
must maintain an us state as your home of record. I presume
because I have not been told other wise that your are a us
citizen and carry either a us passport or a visa to
maintained your stay in Thailand. Thank you for your time
""

If i owe the tax simply because the gains were generated in
Montana then why is he bothering with asking for copies of
my passport? Also what is this about losing my citizenship
and maintaining a state of record ?? I thought the only way
you could lose your citizenship is by renouncing it at an
embassy.

Moderator:
This varies from State to State. The typical scenario is
that the State takes the position that you are a resident
of their State unless and until you establish US residence
in another State or Territory.

There were three cases combined and heard before the
Maryland Court of Appeals within the laast 15 years. The
Court ruled that the taxpayer had to demonstrate that
he/she had to conduct themselves in a manner consistent
that they had no intention of returning to the State, I
do bot hace the cite immediately available - Katie may!

While their statment about maintaining US citizebship by
maintaining a State of Record is mistatement of fact,
Texas and Florids seem to be the places to go to avoid
legal entanglements.

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
M

Mark Bole

I think you've missed the point somewhere. You can forget
As we all know every state has their own laws in regard to
this. That is why i specified Montana in my OP.

I would assume that the State Revenue Department would not
have bothered to tell me that i was a resident because i
kept the driver's license if what you say is correct. They
would simply have said as you did that it did not matter
where i lived. That would have been much easier for them
than to try and come up with the argument about driver's
licenses.
There are multiple issues at play here. The simplest one,
as mentioned earlier, is that Montana source income from
selling real property in Montana is going to be taxed by
Montana no matter where in the world you live (subject to
Montana filing requirements and uncommon exceptions, of
course).

The other issue you seem to be running into is residency. Residency is
usually determined by the overall strength of your ties to a particular
location, such as where you live, voter registration, drivers license,
location where you carry out social, professional, and religious
activities, where your family lives, where you earn compensation, etc.

Each state and country defines its own residency rules, in
the case of Montana it is based either on your domicile or
having a permanent place of abode in Montana even if
temporarily absent. Domicile and residency are separate but
related concepts. Your domicile is established at birth and
does not change until you establish a new one. You can only
have one domicile, but may actually be a resident of
multiple states or countries depending on how they each
define their rules (but this is not common).

It sounds like Montana is asking you to prove you are no
longer a Montana resident. Why does it matter? Because
while Montana source income (such as your land sale) will
always be taxable to Montana, the rest of your income would
not be taxable by Montana unless you are a resident. So, if
your residency in Montana never ended, by Montana's rules,
you would actually be liable for Montana tax on ALL your
income during the period in question (subject to statute of
limitations).

If you can demonstrate that you ended your Montana residence
by both establishing a new domicile and abandoning your
permanent place of abode in Montana, then you should be
clear of all issues since that time except, of course, your
sale of real property (and other source income) from
Montana.

While I am not an expert on Montana tax rules, I have
briefly researched their residency rules as the basis of the
above discussion.

In the year you ended your Montana residency, did you file a
part-year resident return? If so, you can probably start
your documentation effort right there. You also mention
talking to a tax advisor in the past -- you might want to
re-consult same, or consider whether they may have been
mistaken. As for what the Montana dept. of revenue tells
you, they are not really on your side, as you may have
guessed. Suggest you get a new tax advisor (Enrolled agent
or CPA in Montana) to help with this.

-Mark Bole

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
K

Katie

wolfman said:
I am confused. Here is the last email from the State
Auditor.

"" I am asking that you provide a copy of your visa and
passport for the years in question. You brother might also
want to check on this to maintain your US citizenship you
must maintain an us state as your home of record. I presume
because I have not been told other wise that your are a us
citizen and carry either a us passport or a visa to
maintained your stay in Thailand. Thank you for your time
""

If i owe the tax simply because the gains were generated in
Montana then why is he bothering with asking for copies of
my passport? Also what is this about losing my citizenship
and maintaining a state of record ?? I thought the only way
you could lose your citizenship is by renouncing it at an
embassy.

Moderator:
This varies from State to State. The typical scenario is
that the State takes the position that you are a resident
of their State unless and until you establish US residence
in another State or Territory.

There were three cases combined and heard before the
Maryland Court of Appeals within the laast 15 years. The
Court ruled that the taxpayer had to demonstrate that
he/she had to conduct themselves in a manner consistent
that they had no intention of returning to the State, I
do bot hace the cite immediately available - Katie may!

While their statment about maintaining US citizebship by
maintaining a State of Record is mistatement of fact,
Texas and Florids seem to be the places to go to avoid
legal entanglements.
First, it appears that the gain you realized in 2000 was
from the sale of Montana land. That gain is subject to
Montana tax, whether or not you were a Montana resident in
2000. I gather the state has filed a lien against any
property you may own in the state, and as a result the sale
of the land you own there will result in payment of the
proceeds to the state to the extent of the amount of the
lien. The lien is valid, since it arises from a tax
liability that you definitely owed. The state presumably
will release the lien if you pay the tax, penalties and
interest, and I suggest you do that as soon as possible,
since the interest clock continues to run. Whether or not
you retained a Montana driver's license has NOTHING TO DO
with this, regardless of what the Montana tax authorities
may have suggested. It was Montana source income and you
owe the tax (plus whatever penalties and interest have
accrued).

I can only surmise that the auditor is asking for other
information (your passport, visa, etc.) in the hope of
establishing that you are (or were, in 2000 and possibly
some subsequent years) a Montana domiciliary and hence a
resident for tax purposes. In that case, all of your
worldwide income would be subject to Montana tax. I presume
you filed a part-year resident return in 1999, when you went
to Thailand, and as a result the statute of limitations on
1999 has expired. However, if you have not filed returns
for 2000 and later years, the statute on those years remains
open. If they determine that you were domiciled in Montana
in 2000 and any subsequent year, they will issue a new
assessment taxing all of your worldwide income in those
years.

You may be able to short-circuit this process by agreeing
with the auditor that you owe the tax on the 2000 land sale
gain and paying up. I'd strongly advise you to do that.
Montana law does not provide any exception to the general
rule that a person who is domiciled in the state is a
resident. In order to change domicile, you must move away
from your previous domicile, move to and reside in a new
location, and intend to remain in the new place permanently
or indefinitely. You certainly could establish a new
domicile in Thailand, and your marriage to a Thai citizen (I
presume), purchase of a home and establishment of a business
there are indications that you have done so. The effective
date of that change may, however, be subject to argument.
I'd get out of this conflict as quickly as possible, if I
were you.

As Dick says, the auditor's statement that in order to
retain your U.S. citizenship you must retain legal residence
in a U.S. state is simply false. In addition, as an
expatriate U.S. citizen you are entitled to retain your
right to vote, and you may retain your voter registration in
the last place where you were registered and vote there as
an absentee. That does not make you a resident or
domiciliary of that state if you have truly established a
domicile in a foreign country. If the auditor argues that
it does, refer him to his own legal department. They'll set
him straight.

Katie in San Diego

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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
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H

Harlan Lunsford

I think you've missed the point somewhere. You can forget
As we all know every state has their own laws in regard to
this. That is why i specified Montana in my OP.

I would assume that the State Revenue Department would not
have bothered to tell me that i was a resident because i
kept the driver's license if what you say is correct. They
would simply have said as you did that it did not matter
where i lived. That would have been much easier for them
than to try and come up with the argument about driver's
licenses.
Every state does not have different laws as to taxability of
land if they have an income tax. The sale is taxable,
period.

However, the issue about your residency is a different
matter, hence they're asking about passport, drivers
license, etc. That is only in order to determine which type
of return you should be filing; either as a resident or non
resident.

ChEAr$,
Harlan Lunsford, EA n LA

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
D

DF2

It matters not that you didn't live in Montana, nor even had
other income in Montana, or anywhere for that matter.
What matters is that you sold Montana land and that sale, no
matter who you are, is taxable. I'm a resident of Alabama,
but if and when I sell some of the family land in Georgia, I
will owe Georgia tax on that.
I suspect that if you earned money in Thailand or sold land in
Nevada, Alabama would want you to declare that, based on your
resident status.

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
K

Katie

DF2 said:
Harlan Lunsford wrote:
I suspect that if you earned money in Thailand or sold land in
Nevada, Alabama would want you to declare that, based on your
resident status.
Yes, if Harlan sells his Georgia land, both Alabama and
Georgia will tax the gain. Alabama (the residence state)
will allow him credit for the tax he pays to Georgia (the
source state), limited to the proportion of his Alabama tax
liability that relates to that item of income. That's the
way it usually works, although some pairs of states stand in
a reverse relationship (where the source state grants the
credit), and some pairs of states have reciprocal agreements
limiting the source state's taxation of income of residents
of the reciprocal state.

If he has income from a foreign country or a state with no
individual income tax (such as Nevada), Alabama will still
tax the income on a residence basis. In that case, of
course, there would be no offsetting credit.

The OP did not state whether he was subject to an individual
income tax as a Thai resident in 2000, or whether he paid
any tax to Thailand on the gain from the sale of the Montana
land. If he did, of course, he would get a foreign tax
credit on his U.S. individual income tax return. States
generally do not allow any credit for taxes paid to foreign
countries, however.

Katie in San Diego

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
W

wolfman

Thanks to every one for the advice. I did not have any other
income for the Year 2000 in the USA or thailand so that is
not an issue for me. I injured my back in 1999 so did not
work in 2000 and I did not get my new factory built until
December 2000 so no income until 2001.

I just sent an email asking what kind of settlement we can
make to resolve this. I hope they come back with a discount.

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
K

Katie

Thanks to every one for the advice. I did not have any other
income for the Year 2000 in the USA or thailand so that is
not an issue for me. I injured my back in 1999 so did not
work in 2000 and I did not get my new factory built until
December 2000 so no income until 2001.

I just sent an email asking what kind of settlement we can
make to resolve this. I hope they come back with a discount.

No income at all? Interest? Dividends? How did you pay your living
expenses in 2000? (That's a rhetorical question <G>.)

There is no reason why Montana should compromise the tax liability.
It sounds to me as though that assessment is long since final and
there is nothing to settle at that level. My guess is that it is a
collector you are talking to, not an auditor, and that person may be
able to abate any penalties that were assessed. It's not likely that
he or she can abate any of the tax or interest on the tax.

Good luck.

Katie
 
S

s_pickle2001

As Dick says, the auditor's statement that in order to
retain your U.S. citizenship you must retain legal residence
in a U.S. state is simply false. In addition, as an
expatriate U.S. citizen you are entitled to retain your
right to vote, and you may retain your voter registration in
the last place where you were registered and vote there as
an absentee. That does not make you a resident or
domiciliary of that state if you have truly established a
domicile in a foreign country. If the auditor argues that
it does, refer him to his own legal department. They'll set
him straight.

Katie in San Diego
I have heard that some (many) states will want to tax you unless you
establish residence/domicile in another state. Moving abroad is not
good enough.
 
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K

Katie

I have heard that some (many) states will want to tax you unless you
establish residence/domicile in another state. Moving abroad is not
good enough.

Yes, many state auditors will take that position. However, it cannot
be sustained if the taxpayer has truly established a new domicile in a
foreign country. Although it is difficult for a U.S. citizen to do
that, it certainly is not impossible.

Katie in San Diego
 

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