Daks v. Franchise Tax Board

California Court of Appeal Jun 24, 1999 No. B119670Published

Before: Miriam A. Vogel

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Holding. Pension income distributed to a California resident from a qualified pension plan is taxable by California in the year of distribution, regardless of whether the right to the income accrued while the taxpayer resided in another state.

Issues

Whether pension income earned while a taxpayer is a resident of another state but distributed after becoming a California resident is taxable in California.
Whether Revenue and Taxation Code section 17554 precludes the taxation of pension income that accrued prior to a taxpayer's change of residency to California.

Disposition. affirmed

Quotations verified verbatim against the opinion

“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. We hold that it is.”

“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.”

Opinion

VOGEL (Miriam A.), J.

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. We hold that it is.

Facts

From 1948 to 1982, Joseph Daks resided in New York, where he was employed by United Merchants and Manufacturers, Inc. or one of its

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subsidiaries. During his employment, he participated in a noncontributory, 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.

When Daks filed his California income tax returns for 1984 through 1987, he did not report his pension payments as gross income.

In 1989 and again in 1990, the Franchise Tax Board notified Daks that the pension payments he received for the years 1984 through 1987 were taxable income, and that additional taxes would be assessed for those years. Ultimately, the Franchise Tax Board demanded $3,889.17 for 1984, $3,432.25 for 1985, $908.04 for 1986, and $976.60 for 1987. Daks filed protests, which were denied after an informal hearing. Daks appealed, unsuccessfully, to the State Board of Equalization, and the Franchise Tax Board thereafter issued a demand for payment for the years in question. Daks timely paid the amount due, then filed a claim for refund, which was denied. This lawsuit was then filed by Daks. The Franchise Tax Board answered and discovery ensued, after which the parties filed cross-motions for summary judgment. The trial court granted the Franchise Tax Board’s motion, and Daks appeals.

Discussion

Daks v. Franchise Tax Board

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