California: Part-Time Residency Using Business

Case No.: 12345
Taxpayer: John Doe
Address: 123 Nowhere Street, San Diego, CA 92111
Tax Year: 2003
Date: November 7, 2013


The issue is whether the appellant was a part-year resident of California for 2003 and if he had any California sourced income that would create a tax liability.

Statement of Facts

Appellant worked as a government contractor in California from 1986 to 2002. For those years he filed California income tax returns. In late 2002, the appellant procured a contract installing closed circuit video systems in the Federal Correctional Institution in Gilmer, West Virginia (Exhibit A) Exhibit A is an excerpt from a 2006 bid to West Virginia, submitted by the appellant in which he lists his 2003 work on the West Virginia Prison. (To see full version see On January 23, 2003, the appellant physically moved from his residence in California to one in Glenville, West Virginia. The woman he was seeing at the time named Sally Jones had a dream to own a coffee shop. In March 2003, in order to make Ms. Jones' dream a reality, they purchased a building in Glenville, West Virginia. (Exhibit B). In that same month, the couple filed articles of organization with the Secretary of State of West Virginia under the name "ACME Coffee." (Exhibit C). The appellant then moved from his apartment into the living space above the coffee shop. He continues to live there presently.

Due to some confusion with his accountant, the appellant filed a full-year resident income tax return to the state of California for 2003. The return erroneously stated that he had earned certain amounts in California, which was not the case. California then proposed additional assessments when the Internal Revenue Service disallowed certain deductions. Without the aid of counsel, the appellant protested the proposed assessment arguing that he was only a resident of California for 23 days. The Franchise Tax Board (FTB) revised his tax liability to account for his part-year residency, but used the date of the filing of the deed of the building used to house the coffee shop (March 3, 2003) and not the date he changed his residency (January 23, 2003). Frustrated, the appellant then contacted the FTB stating that he was suffering financial hardship and he would not be able to pay the amounts demanded by the state.

Taxpayer's Position

Appellant was a part-year resident with no California source income in 2003. California law defines a part-year resident as a taxpayer who meets both of the following conditions during the same taxable year: (1) is a resident of California during a portion of the taxable year; and (2) is a nonresident of California during a portion of the taxable year. (Rev. & Tax. Code, § 17015.5.) California law defines "resident" to include every individual who is in California for other than a temporary or transitory purpose. (Rev. & Tax. Code, § 17014.) Courts have explained that residence is an individual's factual place of abode of some permanency and that it is more than a mere temporary sojourn. (Whittell v. Franchise Tax Bd. (1964) 231 Cal.App.2d 278, 284 [41 Cal.Rptr. 673, 676].) The court there went on to say that this requires both: (1) a physical presence in a particular locality; and (2) an intent to make it the individual's one permanent abode. (Ibid.) Intent is to be determined objectively by examining the facts and circumstances of a particular case. (See Appeals of Stephen D. Bragg, 2003-SBE-002, May 28, 2013.) Finally, California statute simply defines a nonresident as every individual other than a resident. (Rev. & Tax. Code, § 17015.)

In 2003, the appellant lived in California for 23 days and lived in West Virginia for the remainder of the year. The appellant physically moved his residence to West Virginia apartment in order to install a closed circuit video system in a federal correctional institution. On January 23, 2003, the appellant intended to remain in West Virginia as evidenced by the relinquishment of his California residence. Further evidence that he intended to stay was the fact that he planned to start a business in West Virginia. This planning came to fruition in March of 2003 when he purchased a suitable building and filed articles of organization with the Secretary of State of West Virginia. These are the types of objective factors that the Board of Equalization discussed in Bragg that indicate a person's intent to make another state his one permanent abode.

The FTB argues that he did not relinquish his California citizenship until he recorded the deed for the purchased building. However, this ignores the realities of buying a property or starting a business. Buying real property is not like buying a car. It can take months to find a suitable property, to negotiate the details of the purchase, gain financing, title search, insurance, etc. Additionally, starting a business takes even more time. Creating relationships with vendors and suppliers in the region and the myriad of other activities required to start a business does not happen overnight. To believe that the recordation of the deed marks the date when the appellant intended to remain in West Virginia ignores the realities of such a transaction. The reality is that the appellant moved to West Virginia with the intent to remain in West Virginia well before the recordation of the deed.


Appellant was a part year California resident with no California source income. Evidence shows that the appellant physically left California with the intent to remain in another state indefinitely. Due to a misunderstanding with his accountant the appellant has paid taxes to California for which he is not liable. Now California is now asking him to pay even more. Because the appellant was a part year California resident with no California sourced income, he asks that he be treated as such.

Date: November 7, 2013
Respectfully Submitted,

Carl Jones for John Doe
Student Attorney, Tax Appeals Assistance Program
USD Legal Clinics
5998 Alcala Park, Barcelona #305
San Diego, CA 92110-2492