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Keywords

tax law

appeal

Related Cases

Daks v. Franchise Tax Bd., 73 Cal.App.4th 31, 85 Cal.Rptr.2d 927, 23 Employee Benefits Cas. 1532, 99 Cal. Daily Op. Serv. 5071, 1999 Daily Journal D.A.R. 6527

Facts

Joseph Daks resided in New York from 1948 to 1982, where he participated in a non-contributory, qualified defined-benefit pension plan. After retiring in January 1982, he moved to California in May of the same year and continued to receive his pension payments. Daks did not report these pension payments as gross income on his California tax returns from 1984 to 1987, leading to the Franchise Tax Board assessing additional taxes for those years, which Daks contested unsuccessfully before filing a claim for refund that was denied.

From 1948 to 1982, Joseph Daks resided in New York, where he was employed by United Merchants and Manufacturers, Inc. or one of its subsidiaries. During his employment, he participated in a non-contributory, qualified defined-benefit pension plan within the meaning of section 401(a) of the Internal Revenue Code. In January 1982, shortly after Daks retired, he elected to receive his pension in the form of '100 monthly payments certain.' Daks received his first pension payment in January 1982, in New York. In May, Daks moved to California, where he continued to receive his monthly pension payments without interruption.

Issue

Whether pension income earned while a taxpayer is a resident of another state but distributed after the taxpayer becomes a resident of California is taxable personal income in California.

The question in this case is whether pension income earned while a taxpayer is a resident of another state but distributed after the taxpayer becomes a resident of California is taxable personal income in California.

Rule

Under California's Personal Income Tax Law, income from a qualified pension plan is taxed as provided by the Internal Revenue Code, specifically that any amount actually distributed to a distributee from such a plan shall be taxable in the year it is distributed.

Our starting point is subdivision (a)(1) of section 17041 of the Revenue and Taxation Code, which provides that taxes at specified rates 'shall be imposed for each taxable year upon the entire taxable income of every resident of this state….'

Analysis

The court determined that the pension income distributed to Daks while he was a California resident was taxable under California law. It noted that the specific provisions regarding pension distributions in the Revenue and Taxation Code took precedence over more general provisions regarding income taxation, thereby affirming the Franchise Tax Board's position that Daks owed taxes on the pension payments received during the years in question.

This is a specific statutory mandate about the manner in which pension distributions are to be taxed in California. Since section 17554 is general in that it does not differentiate between one type of income and any other, the pension-specific provisions of section 17501 trump section 17554.

Conclusion

The court affirmed the judgment of the Superior Court, concluding that the Franchise Tax Board was correct in taxing Daks's pension income as personal income in California.

The judgment is affirmed.

Who won?

Franchise Tax Board; the court ruled in favor of the board, stating that the pension income distributed to Daks while he resided in California was taxable under California law.

The Franchise Tax Board is entitled to its costs of appeal.

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