Haw. Code R. § 18-235-4-04 - Change of residence during taxable year

(a) The following rules are applied if during the taxable year the status of a taxpayer changes from resident to nonresident, or from nonresident to resident.

(1) For the period of residence, the tax is imposed on income from whatever source derived, as provided in section 18-235-4-02.

(2) For the period of nonresidence, the tax is imposed on Hawaii source income, as provided in section 18-235-4-03. Part-year residents shall not be eligible for the election in section 18-235-4-03(c).

(3) If it cannot be determined whether all or part of a taxpayer's income was generated during the period of residence, that amount of income shall be multiplied by the ratio that the period of residence bears to the entire taxable year. The product shall be the portion attributable to Hawaii, unless the taxpayer demonstrates to the satisfaction of the department that the result attributes to Hawaii out-of-state income that was received or derived during the period of nonresidence.

(4) The credit for tax paid to another state under section 235-55, HRS, shall be allowed only for tax paid on out-of-state income allocable to the period of residence.

Example: T, an unmarried cash basis calendar year taxpayer, was a resident of Arizona on January 1, 1993. T moved to Hawaii on April 1, 1993, and continued to work as an insurance agent. T is a Hawaii resident for the remainder of 1993. T received $20,000 as gain from the sale on March 20, 1993, of Arizona real property held for investment. T earned commissions of $25,000 for policies sold after April 1, 1993. T earned initial and renewal commissions of $12,000 for policies sold before that date, $4,000 of which T earned before April 1, 1993. In addition, T had signed a business consulting contract with one Arizona client, for which T was paid an additional $1,200 for services rendered throughout the year. T's Hawaii income is computed as follows:

(1) The $20,000 gain is out-of-state income earned when T was a nonresident. None of it is attributable to Hawaii.

(2) The commissions of $25,000 are from a trade or business carried on in Hawaii, and are Hawaii source income. The commissions were earned when T was a Hawaii resident. All of these commissions are attributable to Hawaii.

(3) The $12,000 in commissions earned before April 1993 is from a trade or business carried on in Arizona, and is thus out-of-state income. However, only $4,000 was earned when T was a nonresident. The remaining $8,000 is attributable to Hawaii.

(4) It cannot be determined whether the remaining $1,200 in commission income was generated while T was a Hawaii resident. Thus, because T was a resident for nine months in 1993, 9/12 x $1,200, or $900, shall be attributable to Hawaii unless T demonstrates otherwise to the satisfaction of the department.

(b) The following rules are applied for joint returns.

(1) If a nonresident or a part-year resident files a joint return with a spouse who is a resident for the full taxable year, the tax is imposed on aggregate income for the full taxable year without regard to source and without regard to either spouse's period of residence.

(2) If a joint return is filed by two individuals neither of whom is a resident for the full taxable year, the tax is imposed on aggregate income without regard to source for the period in which either spouse was a resident.

(3) By filing a joint return, a nonresident spouse does not become a resident, and a part-year resident spouse does not thereby become a resident for any other part of the year, for purposes of chapter 235, HRS.

(c) For deductions of a part-year resident, and rules regarding income from alimony or separate maintenance payments, see section 18-235-5-03.

Notes

Haw. Code R. § 18-235-4-04

[Eff 2/16/82; am and ren § 18-235-4-04 9/3/94] (Auth: HRS §§ 231-3(9), 235-5(d), 235-96, 235-118) (Imp: HRS §§ 235-4, 235-5, 235-7, 235-22, 235-52, 235-55, 235-97, 255-1)
§ 18-235-4-04 is based on § 18-235-4(f). [Eff 2/16/82; am and ren § 18-235-4-04 9/3/94]