The North Carolina Court of Appeals recently decided in Fowler v. North Carolina Department of Revenue, No. COA-14-1302 (August 8, 2015) that the owners of a construction company in Raleigh owed none of the $10.4 million capital gains tax from the sale of their business claimed by the NCDOR, because they changed tax residency to Florida a few weeks before the sale closing. This has been a very highly contested case and the taxpayers have won for the third time, first at trial before an administrative law judge, then before the NC Superior Court, then before the Court of Appeals.
The Fowler case is significant because of the complex nature of the facts and the trial court's findings that they intended to change their domicile to Florida right before selling their business due to the steps they took to achieve the change (including buying a larger new home in Florida, starting a Florida business, changing their address) even though their steps were less than perfect and even though they had continuing contacts with North Carolina by keeping their old home, and continuing to work for the company's buyer after the sale for a temporary period of time.
Our Firm was handled the taxpayer's administrative appeal in the case and served as co-counsel at trial. Our view is that the Court of Appeals decision was a just one when all the change of domicile factors are analyzed, and that it is not necessary for a taxpayer to sever every single tie with the prior state of domicile to change to another state, which is consistent with tax residency decisions in other states, most notably of which is the Allen Page case in Minnesota.
For more information, contact Curtis Elliott at 704-372-6322 or email@example.com