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Rogers v. Chilivis, 141 Ga.App. 407, 233 S.E.2d 451

Facts

The appellant-taxpayer earned income while in Greece from 1969-1971. In November 1971, he became a resident of Georgia. The income from these previous earnings was paid to him in 1972 and 1974 while he was a resident, but was excluded by the taxpayer from his taxable income reported in his 1972 and 1974 Georgia tax returns, and no state income tax was paid on these earnings. The taxpayer did, however, report this income on his 1972 and 1974 federal tax returns and pay the taxes due thereon. Upon review of his state tax returns for these years, the state revenue commissioner assessed the taxpayer for the taxes due on these excluded amounts.

The appellant-taxpayer earned income while in Greece from 1969-1971. In November, 1971, he became a resident of Georgia. The income from these previous earnings was paid to him in 1972 and 1974 while he was a resident, but was excluded by the taxpayer from his taxable income reported in his 1972 and 1974 Georgia tax returns, and no state income tax was paid on these earnings. The taxpayer did, however, report this income on his 1972 and 1974 federal tax returns and pay the taxes due thereon.

Issue

Whether income earned by a taxpayer prior to becoming a resident, but received afterwards, is income taxable by the State of Georgia.

The crux of each enumerated error is whether income earned by a taxpayer prior to becoming a resident, but received afterwards, is income taxable by the State of Georgia.

Rule

Code Ann. s 92-3101 imposes a tax upon the 'Georgia taxable net income of the taxpayer,' defined in Code Ann. s 92-3107 as 'the taxpayer's Federal adjusted gross income,' with certain adjustments. A cash basis taxpayer must report all income actually or constructively received during the tax year.

Code Ann. s 92-3101 imposes a tax upon the “Georgia taxable net income of the taxpayer.” This is defined in Code Ann. s 92-3107 as “the taxpayer's Federal adjusted gross income, as defined in the United States Internal Revenue Code of 1954,” with some adjustments not pertinent to this case.

Analysis

The court applied the rule by determining that the taxpayer's income, although earned before residency, was taxable because it was received after he became a resident. The court noted that the taxpayer had elected to use a cash method of accounting, which requires reporting all income received during the tax year. The revenue commissioner correctly inferred from the taxpayer's federal tax returns that the disputed income was received in 1972 and 1974, thus making it subject to Georgia taxation.

Moreover, when this taxpayer filed his first state tax return he therein elected to use a cash method of accounting. Under such method all income which the taxpayer actually or constructively received during the tax year is subject to taxation. “Cash basis taxpayers must report money unconditionally subject to their demand as income, even though they have not reduced it to possession.”

Conclusion

The court affirmed the judgment of the Superior Court, concluding that the taxpayer's income earned in Greece was taxable by Georgia as it was received after he became a resident.

Judgment affirmed.

Who won?

State Revenue Commissioner; the court upheld the assessment, reasoning that the income was taxable as it was received after the taxpayer became a resident of Georgia.

The State Revenue Commissioner; the court upheld the assessment, reasoning that the income was taxable as it was received after the taxpayer became a resident.

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