The California Office of Tax Appeals held that a taxpayer was a California resident and domiciliary when he redeemed shares of his Tennessee-based employer in 2012. Accordingly, the taxpayer was assessed additional state income tax on the value of the redeemed shares.
In 2008, the taxpayer moved from California to Tennessee and purchased a home. From 2008 – 2011, the taxpayer was domiciled in Tennessee and was involved in a Tennessee based business. In 2012, the taxpayer became engaged to a California resident, purchased a home in California to remodel, sold his Tennessee home, and paid a portion of his fiancé’s rent. The taxpayer argued that he was Tennessee resident during all of 2012 and only temporarily in California to visit his fiancé and remodel the California property. The OTA however found that the taxpayer’s strongest ties were to California at the time of the sale of the Tennessee business, based on a number of factors, such as the taxpayer maintained a permanent home in California, his fiancé was located in California and had no intention of moving, and the taxpayer spent more time in California than Tennessee. Additionally, the taxpayer did not file a Tennessee tax return during 2012 to report certain investment income subject to tax in Tennessee.