i currently live in california. i have a few big cap gain transactions
occuring in April 2004 & April 2005. i am entertaining the idea of
residency in Nevada for a short time to avoid the ~10% cal state
income tax. i have a house in SF, Larkspur (Marin), & Kings Beach (1
mile from the Nevada Border). I'm thinking of selling my Primary
Larkspur house...and purchasing or renting a house in Incline Village,
Nevada (a few miles from my current california vacation home). i want
to know some of the rules about avoiding the cal state tax: could i be
renting a home in nevada? is it 6months+1day in nevada? if audited,
what does the state of california look for? i'm hoping this
information is in some readable format on the web...assistance?

Hello.

I've located two good web pages that discuss this issue:

"A TEMPORARY AND TRANSITORY VISIT WITH CALIFORNIA RESIDENCY" by
Charles P. Rettig, hosted by taxlitigator.com
http://www.taxlitigator.com/articles/161338.htm

"Avoiding California Residency," hosted by buschfirm.com
http://www.buschfirm.com/articles/tpcArt_avoiding_ca.html


Key points from the first article would seem to be:

"There is a rebuttable presumption that individuals physically present
within California for less than six months during the taxable year
(who are domiciled outside California and maintain a personal
residence outside California) will not be considered California
residents provided they do not engage in any activity or conduct
within California other than that of a seasonable visitor, tourist or
guest.(18) Similarly, there is a rebuttable presumption that
individuals physically present within California for more than nine
months during the taxable year are California residents.(19)"
source:
taxlitigator.com
http://www.taxlitigator.com/articles/161338.htm

"Time spent in California is only one factor to be considered as an
indication of the purpose of the visit.(23) For tax purposes, a
residency determination depends upon an overall determination of the
individual's "closest connections" during the taxable year.(24) The
state with which an individual has the closest connections during the
taxable year is typically their state of residence.(25) The
contacts/connections which a taxpayer maintains in California and
other states are important objective indications of whether presence
in or absence from California is a for a "temporary or transitory
purpose." Such connections are important both as a measure of the
benefits and protections which the taxpayer received from the laws and
government of California, and also as an objective indication of
whether the taxpayer entered or left the State for temporary or
transitory purposes.(26) It must be determined whether connections
with a state were maintained in readiness for the taxpayer's
return.(27)"
source:
taxlitigator.com
http://www.taxlitigator.com/articles/161338.htm

search strategy: 
california resident, "income tax", nevada
"corbett v franchise tax"


Be careful on this! 

Do you remember the case of the Rice-A-Roni heir about 10 years ago? I
couldn't find anything on the web, but I remember reading about it.
One of the heirs to the Rice-A-Roni fortune was facing a multimillion
dollar capital gain, so he bought a home Nevada and claimed that as
his residence. California aggressively pursued a case against him,
asserting that he was really spending most of his time in California
and the "move" to Nevada was just an attempt to avoid CA taxes.

If you're serious about becoming a Nevada resident for tax purposes,
it would seem the safest approach is to really establish that state as
your main domicile (e.g., purchase a home there, get a Nevada driver's
license, open banks accounts there, register to vote, etc.).

Good luck!

Thank You for the information

Perhaps you should entertain the idea of residency in Folsom State
Prison. As a citizen, you obtain the benefits of your state's
services. Those services are not without cost, which is why your
government is in a $35 billion deficit. Seeking avoidance of payment
of taxes is morally reprehensible.

Factsman:

It's not against illegal for a California resident to become a Nevada
resident. Boardman27's  question was not seeking advice on how to
break the law, but rather on how to comply with the law (i.e., how to
legally become a Nevada resident).

I wrote:  "It's not against illegal ..."

I meant: "It's not illegal ...

I don't agree. He used the phrase "residency in Nevada for a short
time to avoid the ~10% cal state income tax." This does not comply
with California law.

I am unemployed (i have been for 3 years). I travel ~6 months of the
year to other states & countries. I don't believe in Gray Davis & his
money spending. I have 2 large wall street tax transactions coming
through next year & the year after. I have no committments to
California...especially for 10% of my hard work. I feel that I've
given California enough in taxes. My next company will be HQ's in Las
Vegas. I will not be in Folsom State...I'll be in Nevada.