Personal Income Tax Appeal Form - California State Board Of Equalization (Page 4 of 6) in pdf

Appeal of James A. Black

-4-

source income was simply considered in determining the tax rate applicable to appellant’s

California-source income. Thus, respondent utilized appellant’s non-California-source income

(interest, capital gains and pension income) in the computation of the nonresident or part-year

resident income, but the method used to compute the 2001 California tax liability did not impose

a tax on this income.

For purposes of clarification, respondent prepared a corrected return for 2001

showing how appellant’s return should have been filed. The corrected return shows appellant’s

federal AGI as $137,503, California adjustments (subtractions) of $30,453 (state tax refund of

$2,864 and social security benefits of $27,589); thus, appellant’s AGI from all sources is

$107,050. Appellant’s itemized deductions are $29,044, resulting in taxable income of $78,006.

Based on appellant’s California AGI of $94,395, 88.18 percent of his total income came from

California sources ($94,395 California AGI divided by $107,050 total AGI). This ratio is then

multiplied by the tax on the taxable income from all sources; less appellant’s exemption credits.

Appellant’s correct amount of apportioned tax is $2,276 ($2,581 x .8818 = $2,276). Because

appellant paid taxes of $1,540 (as revised by respondent during processing of appellant’s original

return), the amount of additional tax due is $736, plus interest. This is the same amount of

additional tax due as shown on the NOA.

In order for appellant to prevail, the Board would have to determine not to apply

R&TC section 17041, subdivision (b). In essence, this could amount to requiring the Board to

find that subdivision unconstitutional, which the California constitution forbids unless an

appellate court has so found. (Cal. Const. art. III, § 3.5.) This Board is unaware of any such

ruling.

Turning to interest, respondent suspended interest from October 16, 2003,

through March 30, 2004, pursuant to R&TC section 19116.

The assessment of interest on a tax deficiency is mandatory. (Rev. & Tax. Code,

§ 19101, subd. (a); Appeal of Amy M. Yamachi, 77-SBE-095, June 28, 1977.) Interest is not a

penalty but is simply compensation for a taxpayer’s use of money after the due date of the tax.

(Appeal of Audrey C. Jaegle, 76-SBE-070, June 22, 1976.) There is no reasonable cause

exception to the imposition of interest. (Id.) To obtain relief from interest, appellant must fit

under one of three statutes – R&TC sections 19104, 19112 or 21012. R&TC section 21012 is

not applicable because there has been no reliance on any written advice requested of respondent.

R&TC section 19112 requires a showing of extreme financial hardship caused by significant

disability or other catastrophic circumstance, which appellant has not established. We therefore

consider appellant’s interest abatement request under the provisions of R&TC section 19104.

NOT TO BE CITED AS PRECEDENT

Personal Income Tax Appeal Form - California State Board Of Equalization Page 4