Dotson v. Comm'r of Revenue

• Decision Date: 29 August 2012
• Docket Number: No. 10–P–2181.,10–P–2181.
• Citation: Dotson v. Comm'r of Revenue, 82 Mass.App.Ct. 378, 974 N.E.2d 69 (Mass. App. 2012)
• Parties: Kenneth DOTSON v. COMMISSIONER OF REVENUE.
• Court: Appeals Court of Massachusetts

82 Mass.App.Ct. 378

974 N.E.2d 69

Kenneth DOTSON

v.COMMISSIONER OF REVENUE.

No. 10–P–2181.

Appeals Court of Massachusetts, Suffolk.

Argued Oct. 11, 2011.

Decided Aug. 29, 2012.

J. Thomas Price for the taxpayer.

Christine Baily, Assistant Attorney General, for Commissioner of Revenue.

Present: BERRY, COHEN, & SIKORA, JJ.

SIKORA, J.

Kenneth Dotson, the taxpayer, appeals from a decision of the Appellate Tax Board(board) affirming the denial by the Commissioner of Revenue (commissioner) of an abatement of personal income taxes for the tax year ending on December 31, 1999.G.L. c. 58A, § 13.On January 22, 1999, Dotson exercised certain options for the purchase of stock in the Amazon.com corporation (Amazon) and achieved a gain of $5,317,145.35 for its immediate sale (disputed income).The commissioner determined him to be a domiciliary of the Commonwealth at the time of realization of the stock proceeds, and assessed resulting income taxes in the amount of $320,294 plus interest.On appeal, the board conducted an evidentiary hearing and found Dotson to be domiciled in Massachusetts at the time of his receipt of the disputed income.For the following reasons, we conclude that substantial evidence supports the board's finding of domicil and therefore affirm the decision denying the requested abatement.

Background.1.Facts.The following facts emerged from the evidence at the board as undisputed or as well supported.We defer certain contested points to our analysis of the parties' arguments.

Kenneth Dotson grew up in Tennessee and earned a bachelor's degree, and in 1983 a master's degree in business administration, at the University of Mississippi.During his early career he engaged in financial planning and market analysis.He worked for approximately two years in Tennessee (1983–1985), a year in Florida, and then four years in Connecticut (1986–1990).He returned to Florida, held a series of one-year positions, and in 1994 joined with a local entrepreneur to found a company engaged in the marketing of sports information, entertainment, and merchandise through the Internet.Dotson served from January, 1994, until August, 1998, as the company's vice-president of marketing.CBS (Columbia Broadcasting System) meanwhile acquired the company, then known as “SportsLine.com”(SportsLine).

In late 1997 or early 1998, a Cambridge–based high technology firm contacted him to explore employment.In June, 1998, the company, Sage Enterprises, Inc., d/b/a PlanetAll (PlanetAll), offered him the position of senior vice-president of marketing and business development.PlanetAll forwarded a written offer on July 1, 1998; Dotson executed a written acceptance on July 2.In addition to base salary and bonus opportunities, the terms of employment included options for 337,290 shares of PlanetAll's privately held stock, scheduled to vest over a four-year period and authorized to vest in one year in the event of the acquisition of PlanetAll by another company.The employment contract set a commencement date of August 17, 1998.¹

Also during July of 1998, PlanetAll informed Dotson that the Internet marketing company Amazon was about to acquire PlanetAll.That news disappointed him.He preferred the culture of a smaller, private start-up firm.Amazon was a large, publicly held company.More specifically, he had observed that Amazon had often acquired and relocated start-up companies to its Seattle headquarters, replaced their management teams, and folded them into the larger Amazon management structure.He feared that it would follow that course with PlanetAll.Nor did he want to move to Seattle and become more remote from family and friends in Florida and Tennessee.On or about July 31he withdrew his acceptance of the PlanetAll position.

Within a few days, the chief executive officer of Amazon telephoned Dotson to report that PlanetAll would remain intact in Cambridge with its existing management personnel.He urged Dotson to stay and offered him options for 18,810 shares of Amazon common stock in place of the PlanetAll shares.Most importantly he represented that, if Amazon were to move PlanetAll to Seattle, Dotson would be free to resign and to exercise his Amazon stock options immediately (by accelerated vesting rather than after a usual span of four years of employment).Amazon forwarded a written offer of employment on August 3; Dotson immediately signed it.He would still occupy the position of PlanetAll's senior vice-president for marketing and business development and would begin work on August 17.

Dotson then resigned from SportsLine, did not replace his Florida apartment lease after its expiration in September, and bypassed a friend's offer of a continuing apartment rental in Florida.He did not search for another residence in Florida.

During a visit to Boston on August 9, 1998, Dotson made a deposit toward the purchase of a condominium residence in the Back Bay section of the city.The purchase closed on September 21 at a price of $480,000.He equipped the unit with furniture and household goods from his Florida apartment.He brought one of his two cars from Florida and his two pet dogs.He left his second car and certain other personal property in storage in Florida.He retained his Florida driver's license and voter registration.

Dotson arrived in Boston on August 16, 1998, to begin work.As he awaited final purchase of the condominium, he rented (consecutively, for several weeks each) two furnished apartments during August and September.As scheduled, he began work on August 17.During the following weeks he opened a bank account; established a post office box in Cambridge and received mail at the condominium; acquired a telephone line and a facsimile line at his home; joined a gymnasium in Boston; and subscribed to a Boston newspaper and periodical.

Dotson performed his work at PlanetAll's Cambridge offices through the second half of August and throughout September and October.²In early November, 1998, he learned that Amazon was planningto move PlanetAll's offices to Seattle.He submitted his resignation on or about November 8.During November, Amazon, as successor-in-interest to PlanetAll, and Dotson negotiated a severance agreement designating November 9, 1998, as his date of termination and confirming Amazon's commitment to vest certain of his stock options immediately.The agreement recited that a stock split had drastically increased the number of shares available to him.He signed the agreement on January 11, 1999.On January 22, he exercised the options so as to purchase and then sell his allotted shares for a net gain of $5,317,145.35.³Amazon issued Dotson a Form W–2 for the proceeds as income.

During December, 1998, Dotson had retained a real estate broker to search for a residence in the vicinity of Fort Lauderdale.On or about January 11, 1999, he made an offer on a home in that area.The owner accepted the offer on February 4.Dotson resided in the Boston condominium until March 7.He completed the purchase of the Florida residence on March 10 and moved in.

Dotson subsequently placed the Boston condominium on the market and sold it in August or September of 1999.In December of 1999, Dotson started a new job in Chicago.He moved there “in stages,” beginning in 2000, when he bought a home there.He continued to reside in Chicago as of the time of the evidentiary hearing at the board in March of 2008.

2.Procedural history.Dotson originally filed a nonresident personal income tax return for 1999, and sought and received a refund of the tax upon the disputed income.As a result of an audit, the commissioner issued a notice of intent to assess personal income taxes in the original amount, plus accrued interest.The commissioner denied Dotson's application for an abatement.Dotson's appeal to the board resulted in an evidentiary hearing.G.L. c. 58A, § 8.Dotson and another witness testified in his behalf.Both Dotson and the commissioner submitted voluminous exhibits.The original decision of the board upheld the denial of the application for abatement.

Dotson appealed to this court.By an unpublished memorandum and order pursuant to our Rule 1:28, we vacated the board's decision and remanded the case to the board for a specific determination whether, by a preponderance of the evidence, the commissioner had proved that Dotson had taken residence in Massachusetts in August of 1998“without any certain purpose to return” to Florida.Dotson v. Commissioner of Rev.,77 Mass.App.Ct. 1109, 2010 WL 2696547(2010).By a revised report and findings of fact, the board concluded that the commissioner had carried that burden of proof so as to establish the Massachusetts domicil of Dotson at the time of his receipt of the stock sale proceeds.It reinstated its original decision.Dotson has timely appealed.

Analysis.1.Domicil standards.The parties agree that Dotson's liability for the disputed income hinges entirely upon his domiciliary status on January 22, 1999, the date on which he exercised his stock options and realized the gain upon their sale.⁴“Income ... received by an individual ... domiciled in Massachusetts when he received the income is subject to Massachusetts tax.”Commonwealth v. Moore,44 Mass.App.Ct. 129, 133, 688 N.E.2d 1021(1998).Generally, one's domicil is “the place where a person dwells and which is the center of his domestic, social and civil life.”Reiersen v. Commissioner of Rev.,26 Mass.App.Ct. 124, 125, 524 N.E.2d 857(1988)(quotations and citation omitted).The more specific definition accruing from the case law makes domicil “the place of actual residence with intention to remain permanently or for an indefinite time and without any certain purpose to return to a former place of abode.”Commonwealth v. Davis,284 Mass. 41, 50, 187 N.E. 33(1933).Accord, e.g., Slater v. Munroe,313 Mass. 538, 545–546, 48 N.E.2d 149(1943);Rummel v. Peters,314 Mass. 504, 512–514, 51...