setting up domicile

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bingberg

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I'm sure this topic is discussed ad nauseum but I wasn't able to locate what I needed by doing a search.  We are getting ready to set up a domicile in SD and go full time very soon.  Our house is on the market and we are just waiting for it to sell.  Is there anyone who knows if I can (or even need to) set this up before the first of the year.  Is it legal to set up a domicile before your house sells?  Do I need to have it set up before jan. 1 in order to avoid paying another year of taxes in Minnesota?  Any help is appreciated or if you know of any web sites that I can do further research on my own?  Have a blessed and safe holiday season!  (Hoping to have everything squared away so we can possibly meet some of you at Quartzsite in Jan/Feb.

Beth Ingberg
 

odie1234

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Whether you own a home  in a state has no bearing on your domicile and, if you chose to do so, you could leave Minnesota and make your domicile anywhere you want. We have real estate in states where we do not live and are not residents there. Important considerations are where you actually live, vote, earn income, etc. Simply getting a mail address in SD or elsewhere and continuing to live where you are at now will not change your tax liability, and most state rules would not allow you to keep vehicles garaged there and simply decide to declare another state your domicile. The IRS has rules for where your domicile is, and each state does. You may want to go online and see what the Minnesota regulations are, or call them.

When we were getting ready to full time we started with the domicile, LLC, and other stuff about a month in advance. We did start the mail forwarding earlier, just to make certain that all was working as it should with the forwarding. When our situation changed and we decided on a home base, we started the changes about a month ahead, also (we now travel 1/2 time). Good luck in your adventure.
 

SargeW

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When we set up our residence in SD, what established our residence was moving all of our vehicles there (getting them registered there) going there and getting our SD drivers licenses, changing the addresses on our checking accounts to SD, registering to vote in SD, and notifying our past employer as to our change of address (for financial reasons).  And of course not spending more that 6 months in your previous state of residence  (length of time to establish residence may differ from state to state, so check it out). 

As Odie said, just having a house there doesn't establish residency.  It's also a good idea to pay for some of your expenses as you travel with a Credit card to establish a paper trail and make it easy to prove that you were not spending excessive amounts of time in your old state of residence. 
 

Jeff

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If I read your post correctly you are still in MN living in your home? While SD will allow you to register your vehicles and get a DL until you move out of MN I would bet MN will consider you a resident and subject to their requirements.
 

bingberg

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Thanks for the feedback.  I know that my taxes for this year will be paid for in MN, it's just getting it set up for next year with SD.  If I understand what you are saying correctly, I can set up a new domicile now by getting a mail service, transferring vehicles, getting SD drivers license and as long as I set it up within about 5 months of 2013 I will be okay as far as MN taxes for 2013.  I've been following the forum for a long time, lurking and learning, but I have to say this forums members are so helpful and friendly.  A few other ones I've come across seem a little snarky at times.  I hope my husband and I will have the opportunity to meet some of this crew when we jump in.

Beth Ingberg
 

Jeff

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Beth you really need to check with MN. Most states use the six month rule to allow part time residents a means to avoid becoming classified as a resident. When we left IL and moved to WA we owed IL taxes for income earned during the months we were living in IL.
 

Pierat

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Probably  only know for sure if you check with your (knowledgeable) lawyer, tax advisor, etc., about your personal situation.
 

ArdraF

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I agree with Jeff.  As long as you're still in MN at the end of 2012 and into 2013, I suspect you will be considered as domiciled in MN during 2013.  We left CA in Sept. 2000 and had established our new domicile before 12/31/2000 (all registrations, voting, financial accounts, etc.).  We filed CA taxes for 2000 and then changed to our new domicile in 2001.  We were very careful to avoid any big financial transactions that had state tax implications (such as changing from IRAs to Roth IRAs where deferred taxes came into play) until the following year of 2002.  We wanted one complete year in our new state with all tax implications cleared in 2001.

Beth, these days with all the budget shortfalls states will extract every penny they can from you so just changing domicile might not be enough.  If you're still in your house and it doesn't sell during 2012, then you might have to pay MN taxes on any profit taken when you sell it.  As the others said, do be sure to check with your current home state to avoid any big financial surprises.

ArdraF
 

SargeW

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ArdraF said:
As long as you're still in MN at the end of 2012 and into 2013, I suspect you will be considered as domiciled in MN during 2013. 

Nope. Not as long as you take the aforementioned steps and can show a paper trail outside the MN borders, you will be a resident of whatever state you choose.  Simply being in MN for the beginning of the year means nothing.
 

Gary RV_Wizard

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Simply being in MN for the beginning of the year means nothing.

True enough by itself, but it's not always simple. Minnesota (and every other state) writes their own tax laws and they are the determining factor inside the state. You can be domiciled elsewhere and still considered a "resident" by a state for state tax or other purposes.

Since you have been a resident of and domiciled in Minnesota for an extended period of time, you need to take definitive steps to break that existing relationship  by establishing yourself elsewhere. You should start doing that as soon as possible, and build the paper trail to show that you are not continuing your Minnesota domicile. If you don't, Minnesota will surely consider you to still be subject to all their laws that apply to their domiciled residents.

Note, however, that being domiciled elsewhere doesn't necessarily change things in Minnesota. Any Minnesota property is still subject to property tax. If you physically stay in the state more than a short time (60 consecutive days in Minnesota), you are still required to get driver license and tags in the state. Minnesota state income tax may also apply to non-residents if they have income derived from within the state, e.g. rental property.
 

Clay L

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There is a great article in the forum library on what constitutes a legal domicile HERE

I don't remember the details but sometime during the last few years MN took a full timing couple to court over a residency issue and won. As I recall they went to SD and established residency there but came back into the state for some period of time to visit family.  The way the court ruled seemed totally outrageous to me.
Maybe someone will remember the case and can tell us where we can read about it.
 

Clay L

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Okay I found the case info. You can download it HERE

Or direct download HERE

" E.
Recent Developments
1.
Sanchez v. Commissioner of Revenue, 770 N.W.2d 523 (Minn. 2009)
a) Facts: In May 2004, Geronimo and Kathleen Sanchez obtained a South Dakota mailing address. They obtained the address through a company called ?My Home Address, Inc.? Through that address, they were able to register their vehicles in South Dakota, obtained driver?s licenses in South Dakota, opened accounts and credit cards in South Dakota, and registered to vote in South Dakota.
They also informed their insurance companies of their South Dakota address. On June 18, 2004, Mr. and Mrs. Sanchez sold their Minnesota home. In 2004, Mr. and Mrs. Sanchez spent 10 days in South Dakota, but none after they sold their Minnesota home.
Mr. and Mrs. Sanchez left Minnesota as soon as they sold their house and have not resided in the state since. Instead, they traveled throughout the United States in their motor home.

b) Held: The taxpayers failed to change their residence from Minnesota to South Dakota.

c) Court?s Reasoning: In affirming the Minnesota Tax Court, the Minnesota Supreme Court found no intent on the part of the Sanchezes to change their domicile before they sold their Minnesota house. The court reiterated the standard that to establish or change one?s domicile, the taxpayer needs to have both bodily presence in the new state and the intent to make that new state his or her home. With regards to the Sanchezes, the court stated: ?We need not decide whether presence and intent must be simultaneous under every possible scenario. Suffice it to say that on this record, there is ample support for the tax court's conclusion that the Sanchezes had no physical presence in the State of South Dakota that was sufficient to demonstrate that they intended to make their home there and integrate their lives into the community.?
- 6 - "
 

Gary RV_Wizard

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Thanks, Clay. That's an excellent citation and right to the point.

Note that the court with jurisdiction will usually be the state's own Tax Court, which is kind of like having a panel of wolves decide on the guilty party in a hen house raid. Appeals are expensive and time consuming.
 

bingberg

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WOW!!  Thanks to all who replied to my question.  We have been researching this for close to a year now, and I'm embarrassed to admit that I didn't know this had even occurred in my own state.  We  have always been people who never make big life changes without doing our  due diligence, and once again am finding out the value of group input.  Your knowledge could just have proved to be worth a lot of avoided heartbreak for my husband and I.  We are determined to do this the legal and proper way, while still realizing our rights as Americans to be in charge of our destiny.  Thanks to all and enjoy Thanksgiving.  My Mom has a piece of pumpkin pie with my name on it!! (and 2 pieces with my husbands name on it).

Gratefully,
Beth and Harvey Ingberg
 
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