1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 AUGUST 24, 2010 10 CORPORATE FRANCHISE AND PERSONAL INCOME TAX HEARING 11 APPEAL OF 12 CHRISTOPHER J. HADSELL AND CATHERINE C. HADSELL 13 NO. 477797 14 AGAINST PROPOSED ASSESSMENT OF 15 ADDITIONAL INCOME TAX 16 17 18 19 20 21 22 23 24 Reported by: Juli Price Jackson 25 CSR No. 5214 26 27 28 1 1 P R E S E N T 2 For the Board Betty T. Yee of Equalization: Chair 3 Jerome E. Horton 4 Vice-Chair 5 Barbara Alby Acting Member 6 Michelle Steel 7 Member 8 Marcy Jo Mandel Appearing for John 9 Chiang, State Controller (per Government Code 10 Section 7.9) 11 Diane G. Olson Chief 12 Board Proceedings Division 13 14 For Board of Amy Kelly Equalization Staff: Staff Counsel 15 16 17 For Franchise Tax Chris Haskins 18 Board: Tax Counsel 19 Ron Hofsdal Tax Counsel 20 21 For Appellants: Christopher J. Hadsell Taxpayer 22 Catherine C. Hadsell 23 Taxpayer 24 ---oOo--- 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 AUGUST 24, 2010 4 ---oOo--- 5 MS. YEE: Good morning, I'll call this Board of 6 Equalization meeting to order. 7 Ms. Olson? 8 MS. OLSON: Our first item is B1, Christopher 9 J. Hadsell and Catherine C. Hadsell. 10 Please come forward. 11 Board Proceedings has received contribution 12 disclosure forms for this morning's -- for this 13 morning's hearings from the parties, agents and 14 participants. 15 All forms were properly completed and signed. 16 All parties, agents and participants are on the alpha 17 listing provided to your office. 18 Each person sitting at the table will be asked 19 to introduce themselves and, if necessary, their 20 affiliation with the taxpayer for the record. 21 Ten minutes is allocated for the taxpayer's 22 opening presentation, followed by ten minutes for the 23 Franchise Tax Board presentation and five minutes is 24 allocated to the taxpayer for rebuttal. 25 Ms. Yee? 26 MS. YEE: Thank you very much, Ms. Olson, good 27 morning. 28 Let me have Ms. Kelly introduce the issues in 3 1 the first matter. 2 Good morning. 3 MS. KELLY: Good morning, Madam Chairwoman, 4 Members of the Board. 5 The issue in this appeal is whether Appellants 6 were residents of California during the year 2000 7 through at least July 13th, 2000 or whether Appellants 8 have shown that they changed their domicile from 9 California to Nevada on February 11th, 2000 and that 10 they were no longer California residents as of that 11 date. 12 MS. YEE: Thank you very much, Ms. Kelly. 13 Good morning. 14 MR. HADSELL: Good morning. 15 MS. YEE: If you'll both introduce yourselves 16 for the record, you have ten minutes for your 17 presentation. 18 MS. HADSELL: Catherine Hadsell, taxpayer. 19 MS. YEE: Okay. 20 MR. HADSELL: Christopher Hadsell, taxpayer. 21 MS. YEE: Great, please proceed. 22 MR. HADSELL: We have a slide presentation to 23 show. 24 MS. YEE: Okay. 25 MR. HADSELL: So, I don't mind saying I'm a bit 26 nervous and this is a bit lengthy, but I've tried to 27 answer your questions. 28 So, maybe if we could maybe hold questions 4 1 until the end that would be appreciated. 2 (Slide show presented.) 3 MR. HADSELL: So, this is in September of 1999, 4 setting the stage for our move to Nevada. This was our 5 condominium in Belmont. 6 We decided to -- I was retiring the next month. 7 We decided to go to 999 Lakeshore, Incline Village, a 8 place we'd been a number of times -- where two years 9 prior to this I actually proposed to my lovely bride. 10 So, we had the three of us, mommy, daddy and 11 baby. And we had the beach all to ourselves because in 12 September Incline Village is deserted. It was the three 13 of us. 14 However, we also invited, later during the 15 week, both my parents and my sister and brother-in-law. 16 Then back to the Belmont condo, where we 17 started looking for homes for our growing family. In 18 the Bay area houses had doubled due the dot com bubble 19 and we had just come back from Tahoe and it made sense 20 to say, "Look let's go -- let's see what's up at Lake 21 Tahoe." 22 So, this was the view across the street in 23 Belmont -- not very child friendly. 24 And this is us in late December, early January 25 looking for homes up at Incline Village. And it turned 26 out -- that purple streak simply shows a half mile 27 distance at 999 Lakeshore, where we stayed for vacation, 28 and 920, where we found this home, our dream home. 5 1 On the upper left, above the garage, we 2 couldn't change locations from Belmont to here, but 3 that's our bedroom above the garage. 4 Now, here's where we could have stayed, but we 5 decided to go immediately up to -- on February 11th, the 6 day our house closed escrow -- to go live at Lake Tahoe. 7 We had bare furnishings. You can see my sister and 8 brother-in-law again enjoying some videos. 9 And we also invited for March and spring break 10 my wife's sister and family. So, we had bare 11 furnishings but we were enjoying our time up at Lake 12 Tahoe. We had purchased some outdoor furniture while we 13 were waiting for indoor furniture to be delivered and 14 spent our time there. 15 In addition, we had built-in furniture, like my 16 wife's desk there, with the computer equipment that was 17 there -- brought with us from -- all of our furnishings, 18 other than actual furniture, was brought from Belmont. 19 So, Belmont with a parking lot or Tahoe with 20 Lake Tahoe across the street -- that was our choice. As 21 you can see from that choice, here's our calendar. The 22 orange area is where we were in Nevada. This is my 23 personal calendar. And the light blue is when we were 24 in California. 25 And this is my wife's, same thing -- orange in 26 Nevada, blue in California. And if you take out the 27 time we came back for the birth of our second child, the 28 June and July time frame, it's even more stark. 6 1 Those calendars are supported by 12 pages of 2 individual line item details, 745 separate transactions 3 that support each one of those dates on the calendar. 4 So, what were we doing up there? We were 5 setting up our house. We were buying furnishings, 6 appliance, enjoying family, having visits with our 7 neighbors. We didn't even know our neighbors' names n 8 Belmont after five years, didn't even know who lived 9 next door to us. Within the first month we knew both of 10 our neighbors on each side of us. 11 We were establishing ourselves in Nevada -- 12 opening bank accounts, drivers' licenses, vehicle 13 registration, voter registration -- all in March, except 14 for me when I was -- knew the registration for voter 15 wasn't until November -- I waited all the way to August. 16 So, when we discussed these things with the 17 FTB, they said, "Oh, those things don't seem very 18 important to us." 19 And we said, "Well, that's interesting." And 20 we started looking for it. And there's actually 21 guidelines as of 2000. And those guidelines list 13 22 separate items as to what constitutes residency in 23 Nevada or California -- or in California. 24 After 11 pages of discussion of each of those 25 13 items, one of them didn't apply to us, one of them 26 was neutral, one of them was slightly favorable to us, 27 three were quite favorable and seven were strongly 28 favorable. None of those characteristics were 7 1 unfavorable to our residency. So, it's worth repeating, 2 zero were unfavorable. 3 So, the FTB's response was, 4 "These connections are formalistic and easily 5 controlled, they don't count." 6 In other words, as Obi-Wan Kenobi said in Star 7 Wars, "These aren't the droids you're looking for." 8 So, we looked at the regulations. The 9 regulations -- and I'll spare the detail because you 10 know them, but, essentially, if you have an affidavits, 11 those will be sufficient to overcome any presumption of 12 residency. 13 So, we got sworn affidavits -- one from our 14 friend, one from my parents, one from my wife's parents, 15 who is also a lawyer, and one from our Nevada lawyer. 16 What did the FTB say to that? 17 Three things: 18 "One, please note that your meeting with 19 Mr. Hunsberger, the Nevada lawyer, wasn't until 20 November of 2000. So, not very good." 21 We noted that our first meeting with the FTB 22 was in six years later. So, if relevancy was determined 23 by proximity to when we met in 2000, the FTB's word 24 could never be better than Mr. Hunsberger's word. So, 25 the FTB never mentioned that issue again. 26 Second response, 27 "While these affidavits may comply, they don't 28 prove nonresidency or change of domicile." 8 1 That seemed like a pretty strange response 2 because these are the regulations, either you comply or 3 you don't comply. There may be standards, test elements 4 and what have you, but ultimately, one complies or not. 5 So, what did the FTB say the problem is? They 6 said we didn't comply as well as the Berners complied. 7 Well, again, there is not litmus test here, 8 either you comply or you don't comply. 9 But there's no doubt why the FTB's concerned 10 about this because in the Berner case, this Board found 11 that affidavits are sufficient proof under the 12 regulation that domicile is changed and that their 13 residency was in Nevada. So, you can see where the 14 concern comes from. 15 Okay and now we're not moving forward. Sorry 16 about that. 17 So, what were their concerns? 18 Well, all the affidavits contained similar 19 language. And this is perhaps the strangest objection 20 of all because in matters of legal fact, whenever the 21 evidence more closely and more directly corroborates a 22 fact, it's the better -- that's not according to the 23 FTB. 24 So, there were disagreements back and forth. 25 So, just what is the law? The law is pretty 26 straightforward. If you're in the state -- and I put 27 things in red if it's not -- so, not for temporary or 28 transitory purpose, or if you're outside the state for 9 1 temporary -- and again in green because it's positive -- 2 then you're a resident. 3 And, likewise, if you're a nonresident, you're 4 simply not a resident. 5 So, this may seem a bit complicated, but it's 6 not. Here's a quick chart. You simply show what 7 category you're in, you are a resident, nonresident -- 8 very straightforward, very simple. 9 So, it turns out that's the gold standard. 10 That's what the law says, the taxpayer's purpose 11 determines residency. 12 So, we created a chart -- nice little chart of 13 every single visit we had, details line item for every 14 single visit, what the purpose was and whether it was 15 temporary or non -- temporary and transitory or not. 16 So, we gave the FTB that and said, "What do you 17 think?" 18 They said, "We're not going to say." 19 So, we said, "Okay, fine. We'll give you a 20 blank chart with all this information. You just fill 21 out what you say." 22 So, the purpose on the chart are entirely 23 undisputed. The issue is whether they were temporary or 24 transitory or not, not the purpose itself. The purposes 25 are undisputed. 26 So, instead, the FTB tried to turn lead into 27 gold. They took indirect indicia, which is the norm. I 28 understand that you need those things because purposes 10 1 are hard to divine. Remember, purposes are not disputed 2 in this case, what's disputed is the character of those 3 purposes. 4 So, they took indirect indicia, what we're 5 calling the lead standard, to try and decipher their way 6 to the gold standard -- and details on that a little bit 7 later. 8 But when the FTB uses this lead standard, it 9 leads to absurd results. So, this is the categories, as 10 I said before. Those are the two squares, resident, 11 nonresident. 12 And this is the FTB's position before this is 13 the case where you're a resident and after this is the 14 case, you're a nonresident. 15 That looks pretty straightforward, what's 16 absurd about this? 17 What's absurd about it is the exact same visits 18 in California and Nevada, the exact same purposes get 19 exactly the opposite results based on whether it's 20 simply before July 13th or after 13th -- and, remember, 21 there are no disputes about these purposes. 22 So, here's what the FTB says -- the FTB says 23 that same event is nonresident and resident. It's the 24 exact same event. So, they're using standards 25 improperly. 26 So, we applied the gold standard, which is, 27 again, in the regulations. There is the detail. You 28 are familiar with it. The bottom line is the 11 1 application of the gold standard results in a 2-11 2 residency with not a single inconsistency and no 3 absurdities that result from that determination. 4 So, in the appeal process, the FTB's 5 determination is presumed correct. So, we need to 6 examine that determination. 7 So, it starts with the first of four FTB 8 personnel to handle our case, Miss Kwon. She wrote a 9 letter to her staff in the very beginning of this case, 10 before she had any financial data, any calendar data, 11 any significant discussion with us, and, lo and behold, 12 she's determined before this thing's even got started 13 that we were residents for the entire year. 14 Now what's wrong with that? Jeffrey Toobin, 15 who's the former associate counsel for the Iran-Contra 16 cases and for Oliver North cases, assistant attorney in 17 Brooklyn, he's now a respected legal commentator, says 18 in a New York article that Rob Warden talks about -- 19 where he says, 20 "I've never seen a case where I believe the 21 prosecutor set out to prosecute someone whom 22 they believe to be innocent." 23 So, how you start into a case is important. 24 They just get wedded to a theory, in this case wedded to 25 that we're already residents, and ignore the evidence 26 that doesn't fit. 27 And Barry Scheck, you may have heard of with 28 the O. J. Simpson case, he's now won 150 exonerations 12 1 for convicted defendants, something that's not easy to 2 do. He says, 3 "After a while some veteran prosecutors think 4 they can just trust their gut. Once you're to 5 the point where you believe your instincts 6 might be right, you quickly get to the point 7 where you just deep six inconvenient 8 evidence." 9 So, what's the problem with preconceptions 10 about a case, which was what was going on here, is that 11 you ignore the facts that are contrary to your 12 preconceptions. The case develops and that's extremely 13 dangerous. 14 So, what happened? We complained about this 15 and, without any warning, any explanation, we get our 16 second FTB person. That person committed over 500 17 errors in creating the presence calendars. These are 18 all undisputed by the FTB and purposefully chose 19 methodologies that would inflate our California 20 presence -- and that's statistically within a certainty 21 of 98.44 percent. He created graphs that graphically 22 misrepresented the underlying data and created data from 23 whole cloth -- said that we were doing stock 24 transactions in California when we were in Nevada, 25 mischaracterized two of these expenditures that again 26 were proven with statistics. 27 MS. OLSON: Time has expired. 28 MS. YEE: Please continue, Mr. Hadsell. 13 1 MR. HADSELL: Thank you very much. We're close 2 to being done. 3 MS. YEE: Okay. 4 MR. HADSELL: Thank you. 5 The third person -- there is three and four, 6 so, we're almost done. 7 Mr. Tally agreed that this case was fraught 8 with errors and stated if our presence was less than 9 50 percent in California, then I -- this is the letter 10 from him -- and I'll blow this up a bit -- "I will 11 withdraw the assessment." 12 So, on the one hand if your presence is less 13 than 50 percent -- and he said it, all caps, "I WILL 14 WITHDRAW THE ASSESSMENT." 15 On the other hand, our residence is determined 16 by the lead standard of California connections. Now, of 17 course, these are mutually exclusive events. 18 You can't offer to withdraw your assessment 19 based upon California connections if you say, look, if 20 you're less than 50 percent, I'll withdraw the 21 assessment. Those connections can't hold. You cannot 22 make that offer. 23 So, the genie was let out of the bottle and we 24 got our fourth FTB person, with no warning or 25 explanation, who tried to go back and fit the genie back 26 in that bottle of the problem with our residency being 27 California indicators, not our actual purposes. 28 So, they came up with new language. And that 14 1 new language included, "without any fixed or certain 2 purpose to return to the former place of abode." That's 3 what the FTB said this was the problem, because of the 4 pregnancy of our second child. 5 So, there are two problems with this. One is 6 it didn't come from a BOE case, it came from the Estate 7 of Phillips, which is about a contested will and when 8 the BOE did make that quote, it cut off the fixed or 9 certain purpose language because it doesn't apply, 10 because, again, you get an absurd result that says that 11 no one could ever leave California because if they have 12 relatives behind they have a have fixed or certain 13 purpose to return, they could never lose their 14 California residency. 15 So, if you use that standard, which the BOE 16 doesn't, but the FTB is, you run into this absurdity. 17 So, there is also one regulation about this as 18 well in terms of what are medical reasons for causing 19 residency? And it turns out -- I'll just bore you with 20 the details again -- this regulation shows that a 21 pregnancy simply cannot be in the category of medical 22 issue that establishes California taxpayer residency. 23 So, summing up, it just can't be credibly 24 argued the FTB's termination is correct. They committed 25 hundreds of errors in this case, they've -- by their own 26 admission that the California connections cannot hold, 27 they're using wrong standards that create absurd 28 results. And they've asked that you use common sense to 15 1 determine this case. And we couldn't agree more. 2 If we had wanted to avoid California taxes, 3 this entire case has nothing to do with other than the 4 sale of stocks. We could have just not sold those 5 stocks. We could have taken those profits and rolled 6 them over into deferred investments that would have 7 never created rise to any California income. If that 8 was our goal, we could have done that quite easily. 9 Our goal is to meet California taxes because we 10 feel that's our obligation. Your fair taxes are an 11 obligation to be met, not a game to be played. 12 So, if you moved to raise your family and you 13 had a choice between Incline Village and Belmont, where 14 would you call your residence? 15 Thank you very much. 16 MS. YEE: Thank you, Mr. Hadsell. We'll give 17 you time on rebuttal. 18 Okay, thank you. 19 Franchise Tax Board, good morning. 20 MR. HASKINS: Good morning, Madam Chairwoman, 21 Members of the Board. My name is Christopher Haskins, I 22 represent the FTB. 23 I am just going to go through quickly the facts 24 and circumstances that led us to determine that the 25 Hadsells did not end their residency and domicile until 26 July 13th. 27 On February 11th, the date that Mr. Hadsell and 28 his wife say that they ended their residency and 16 1 domicile in California, they moved into an empty house. 2 The first furniture wasn't delivered until sometime in 3 March. And as you saw in the picture, they slept on 4 blowup mattresses. 5 The home in -- their house in Belmont, their 6 residence for many years prior to this and all of the 7 way up until February 11th, a 2350 square foot house, by 8 the way, was completely furnished. The electricity was 9 always on. The phone service was always on. The cable 10 TV and internet service were always available. It was 11 cleaned on a regular basis and the lawn was cared for. 12 This house was ready for them to come back and live in. 13 The medical professionals used -- Mrs. Hadsell 14 had Dr. Kanita, who was her OB/GYN. Mr. Hadsell used a 15 Dr. Bartman, which is on one of the checks and, 16 actually, a couple of visits in the time frame we're 17 speaking of, between February 11th and July 13th. I am 18 keeping my time frames, hopefully, in that area. 19 They also used a California medical 20 professional to see their child -- their first child, 21 not the newborn -- although the newborn was seen at 22 Mills Peninsula Hospital by a California pediatrician 23 shortly after birth. 24 Other professionals used -- we were in receipt 25 of a check that said, "Price Waterhouse 1999 taxes," 26 written from their personal account. Price Waterhouse 27 is in California. The office is in San Jose on Almaden 28 Street. 17 1 That same office was used to complete the 2 corporate return for one of Mr. Hadsell's California 3 businesses, GD Management, doing business as Alpha 4 Partners. 5 They used the brokerage services of brokerage 6 firms in the Bay area. They actually had their accounts 7 there, opened them there. And they were closed over the 8 years after they moved. 9 They obtained their home insurance for the 10 Incline Village house from ABD, which is the company 11 that Mrs. Hadsell worked for. It's an insurance 12 company. She's an insurance broker. 13 They also had obtained a life insurance policy 14 through Transamerica Life. And the check -- and the 15 address on the check was City of Industry, California. 16 They had a health care -- I'm sorry, they had 17 a health club membership at Pacific Athletic Club all 18 year. 19 We recalculated the days, as asked to. And I 20 agree with the summary that was provided to us and it 21 says that out of the 154 days between February 11th and 22 July 13th, Mr. Hadsell was in California 47 percent of 23 the time, Mrs. Hadsell was in California 42 percent of 24 the time. There was a question about the homeowner's 25 exemption and actually the Revenue and Tax Code requires 26 an individual -- requires an individual to alert the 27 assessor when their house is no longer eligible to be 28 claimed as a primary residence. 18 1 And there is, in fact, in the Revenue and Tax 2 Code Section 500 and beyond, 504, I believe, a penalty 3 that is assessed if you do not notify the assessor of 4 that change. 5 Mrs. Hadsell kept her professional license, her 6 California insurance license all year. And, in fact, 7 did what -- for lawyers it's called CLE, continuing 8 legal education, I imagine it has the same acronym for 9 insurance professionals. It appears as though that was 10 done through a provider of continuing education in 11 Sacramento. I don't know if that was ordered from there 12 and done at their house in Incline or if she actually 13 came to Sacramento. 14 The California business interests in this time 15 frame, GD Management is a California company; Open Book 16 was a California company; benchmark Capital 1, 2 and 3. 17 Mr. Hadsell worked for them and then retained an 18 ownership interest in them. These are all California 19 corporations. 20 And Cardinal Venture Capital, although not -- 21 he invested money in it early, but he was primarily, as 22 he put it, an angel investor and an advisor to that 23 company, eventually going to work for that company, I 24 believe, 2003, 2004 and on the website he was eventually 25 listed as a founder. 26 The Appellants used California addresses on 27 their 1990 federal and State returns. They used a 28 California address on their -- on the address that was 19 1 on the return that was issued by GD, a California 2 form 100. 3 Why does that matter? That was one of the 4 questions. Because your Board pointed out in Bragg that 5 that was one of the factors that would be considered. 6 And in that case, on page 9, your Board said in the 7 published opinion, 8 "Finally, we believe Appellants' claim of 9 Arizona residency on his 1993 tax returns 10 merely reflects his residency status as he 11 believed and intended it to be." 12 They -- the Appellants maintained a post office 13 box and their residence address to receive mail. We 14 were told that the reason -- and there was no forwarding 15 order put on that to the address in Nevada. 16 And the reason we were told that is because 17 they wanted to avoid junk mail. 18 MS. MANDEL: The reason you were told what? 19 I'm sorry. 20 MR. HASKINS: That they had no forwarding 21 address on the Belmont post office box was to avoid junk 22 mail. 23 There was a checking account maintained in 24 California until May of 2000. It was eventually closed. 25 We were informed that the reason that it could not be 26 closed until May was because it continued to accrue 27 interest. When we contacted the bank they informed us 28 that that account does not accrue interest. 20 1 During this period, Mr. Hadsell made several 2 trips on his own to the Bay area. And, as he said in 3 his briefings, to check on his investments and the such. 4 But one of them that he seemed to have focused 5 on quite intensely was Cardinal Venture Capital. And, 6 in fact, in a dispute with the Secretary of State about 7 the filing of the list of officers for GD Management, 8 the notice was sent to the offices of GD Management at 9 the address in California that was listed on their 10 return. That that was then answered by way of fax sent 11 from Cardinal Venture Capital offices under 12 Mr. Hadsell's signature and listing a phone number at 13 that office. 14 The image that -- well, then we get to -- and 15 could I have a time check? 16 MS. OLSON: You have a minute 45 seconds. 17 MR. HASKINS: Thank you. 18 One of the things that we were asked is whether 19 or not we were simply relying on our -- "our 20 determination" that the Appellants could not have 21 intended to change their domicile. 22 We didn't make any determinations about their 23 domicile or their intent. 24 Mr. Hadsell told us in a briefing that they 25 intended from the very beginning to -- to come back to 26 their California residency and stay for the month of 27 June to await the birth of their second son. 28 As in the extensive briefing you've seen, they 21 1 were here quite frequently and they stayed at the 2 Belmont house -- again fully furnished, fully 3 functional, ready to go. It was their house. They 4 simply came home. 5 With that intent in mind and with the 6 instructions from Adding -- Robert Addington -- appeal 7 of Robert Addington, 82SBE001, January 5th, 1982, such 8 an intention defeats any intention to change domicile. 9 As -- again, I won't bore you with the details, 10 you're quite aware that the Appellants are under the 11 burden to show that they changed their domicile. 12 You can't change your domicile if you intend 13 to come back to your current domicile. Their intention 14 was not simply to visit relatives, it was to come back 15 and live at the house. It was to come back here, their 16 home, and have their second child. 17 So, based on that, we were considering the 18 second part of 17014 (b), which says, 19 "If you're a California domicile, are you out 20 of the state for a temporary and transitory 21 purpose?" 22 In this case it appeared that what they were 23 doing was building a home. Mr. Hadsell said he was 24 setting up a house. We agree. They were setting up a 25 house. They didn't have a house, they were setting it 26 up. 27 They were establishing themselves in Nevada. 28 We agree, they were establishing themselves. They had 22 1 not completed that. 2 When the second child was born is when their 3 connection to this state ended -- their intent to 4 return, their intent to live here ended. And even 5 though the other factors didn't necessarily change, that 6 was one of the questions the summary asked us, when you 7 do the weighing process you must do, when that intention 8 was then removed, that is the date that we determined 9 that they no longer had a connection sufficient to call 10 them residents or domiciliaries of California. 11 That was the date they -- 12 MS. OLSON: Time has expired. 13 MR. HASKINS: Thank you. 14 That was the date they got in their car and 15 left to go then occupy their now ready to live in house 16 in Incline Village. 17 I thank you very much. 18 MS. YEE: Okay. Thank you, Mr. Haskins. Let 19 me just ask you one question before I give the 20 Appellants time on rebuttal. 21 As you were enumerating the indicators -- and I 22 don't know and I apologize if I didn't hear this -- 23 homeowner's exemption? 24 MR. HASKINS: Yes. They had a homeowner's 25 exemption in California. And, as I said, there actually 26 is a requirement that when you no longer have -- and 27 it's a legal requirement -- that when you no longer can 28 clam it as your primary residence, you must, under 23 1 penalty, inform the assessor. 2 It was said in some of the briefings that the 3 Hadsells effectively cancelled their homeowner's 4 exemption by adding back the dollar amount they would be 5 credited, which really worked out to about 70 bucks. 6 That could not have been sent to us because if that was 7 sent and it was more than they owed, the FTB simply 8 refunds those things. 9 So, I don't know -- I have no proof that it was 10 sent. 11 MS. YEE: Okay, thank you very much. 12 Mr. and Mrs. Hadsell, you have five minutes on 13 rebuttal. 14 MR. HADSELL: Thank you very much. 15 I know that the FTB's doing their best job to 16 understand this case, but we lived it and they didn't. 17 So, here we are, this is seven years later of 18 pleadings back and forth and Mr. Haskins doing a 19 terrific job. But there are still lots of simple errors 20 in what he just said. 21 We could come back to California any time we 22 wanted. There are lots of hotels that are fully 23 finished with plenty of TVs and swimming pools. If we 24 wanted to come back to California we didn't need our 25 condo to do that. We had ample opportunity to do that. 26 And just as you said, we had our lawn taken 27 care of. You saw the picture. It's a driveway and a 28 sidewalk. There is no lawn. It's just a straight 24 1 simple fact. That's not the case. 2 I have never gone to a Dr. Barton in my life. 3 My wife asked me, "Have you ever been to a doctor?" And 4 I've only been to a doctor probably three times in my 5 whole life. I have no idea where that came from. 6 And we did, in fact, as Mr. Haskins suggested, 7 we alerted the assessor by writing on our assessment 8 bill, "We're not taking this exemption, here's the 9 additional amount." 10 It didn't go to the FTB because it happens to 11 go to the County Assessor. One would think that that's 12 the case. It doesn't go to the FTB, it goes to the 13 County Assessor. It's a property tax, not an income 14 tax. 15 The continuing education, it was, indeed -- 16 I'll clarify the issue, it was a home course that my 17 wife purchased. It was on estate planning. She sells 18 health insurance. We were retired. That's what this 19 was about. And the course was taken in our home at her 20 desk that you just saw right there. 21 So, in California, guilty. We were in 22 California. What's important of those intentions are 23 the purposes. We can come back and intend to come back 24 all we ever wish to. The issue is what was our purpose 25 and was it temporary and transitory or was it not? 26 These purposes were for a pregnancy. They were 27 not permanent. They were for other than -- excuse me, 28 they were for temporary or transitory purposes. This 25 1 was a pregnancy and we were visiting a doctor once a 2 month. We were at this place for the birth of our 3 child. That was it. 4 It was not an intention to return and reside in 5 California, it was to get medical care. 6 Thank you. 7 MS. YEE: Thank you. Mrs. Hadsell, any 8 comments at this point? 9 MR. HADSELL: It was your baby. 10 MS. HADSELL: The only reason we were there for 11 the entire month of June was because my first baby went 12 very, very fast. And we were three weeks early. 13 Incline Village, the nearest hospital is in 14 Reno. I never would have made it to Incline -- to Reno 15 from Incline Village. 16 So, we went back to the condo, where we were 17 close to medical care with good doctors. 18 MR. HADSELL: We were 16 minutes away as 19 opposed to well over an hour and having to go over the 20 top of Mount Rose, which is 8,900 feet. You're not 21 supposed to go over 8,000 feet in the last part of your 22 pregnancy. 23 It was for medical reasons that we did that. 24 We had not intention to return and reside in California. 25 MS. YEE: Okay, very well. Thank you very 26 much. 27 MR. HADSELL: Thank you. 28 MS. YEE: I'm sure the Members will have 26 1 questions. 2 MR. HADSELL: Sure. 3 MS. YEE: Questions or comments, Members? 4 Ms. Steel? 5 MS. STEEL: So, you said send the letter out to 6 County assessors that you are no longer having 7 exemption. When was that? 8 MR. HADSELL: That's not quite right, it wasn't 9 a letter. 10 So, when you get your property tax, which we 11 all get, there's a form on there that says, "Here's your 12 property tax." 13 So, there's a line item and I've looked it up 14 now, it was exactly $79. So, if we're California 15 residents over $79, that's interesting, but we lined it 16 out, we wrote the check for the larger amount and the 17 County assessor cashed that check later on. 18 MS. STEEL: When was that? 19 MR. HADSELL: Whenever they're due, I guess 20 they're due in April and December. My lovely bride -- 21 MS. STEEL: Of 2000? 22 MR. HADSELL: Well, every year the assessments 23 come for property tax. I believe that they're due in 24 April and December of each year. 25 Oh, no, we paid them in December because that 26 way you have a tax deduction for your property taxes in 27 the year that it occurred, so -- 28 MS. STEEL: 2000, April? 27 1 MR. HADSELL: So, April of 2000, then if it -- 2 well, it depends, April of 2000 would have covered the 3 period for like April through December of '99. 4 MS. STEEL: Right. 5 MR. HADSELL: Yes. So, it were in '99 we wold 6 have had a homeowner's exemption because we were 7 homeowners until February of 2000 in Nevada -- 8 MS. HADSELL: You mean in California? 9 MR. HADSELL: We were owners in Nevada in 10 February. 11 So, through December of '99, that tax year, we 12 would have been California residents and deserving of a 13 homeowner's exemption. So -- 14 MS. STEEL: It was 2001, April then -- 15 MR. HADSELL: So, 2001 for sure. 16 MS. STEEL: -- for December? 17 MR. HADSELL: 2001 we got our bill, lined out 18 that we were homeowners, thereby informing the county 19 that we were not homeowners and paid the higher amount. 20 And the County Assessor cashed that check. 21 MS. STEEL: Why did you continue to pay your 22 post office box fees through 2000 and 2000 -- the last 23 payment was December? 24 MR. HADSELL: There the FTB has it correct. 25 We get tons -- because have purchases for 26 catalogues and things, we get tons of junk mail, I mean, 27 literally our box is full every week of junk mail. 28 So, what we decided to do was not forward that. 28 1 And, therefore, we had to continue to tell everyone our 2 new address, which is what we did. 3 So, we kept that box simply because we weren't 4 getting it -- 5 MS. STEEL: Forwarding? 6 MR. HADSELL: -- forwarded. Right, so that 7 we'd get the mail eventually that we needed to get and 8 anyone who needed an address correction, then we gave it 9 to them that way instead because they had the wrong 10 address. 11 So, we kept it long enough to get everybody 12 transitioned over to our new address. 13 MS. STEEL: Thank you. 14 Franchise Tax Board, it seems that, you know, 15 we have a lot of these domicile issues coming up and 16 this is the first time that I heard without that you 17 mentioning about the driver's licenses, address has been 18 changed or registered voter, you know, registered to 19 vote, it's been changed. 20 I didn't hear any of those and you keep talking 21 about the furnitures. Yeah, when you move to the new 22 home it takes for a while to furnishing the house. So, 23 I don't know why that's, you know, makes that they 24 didn't move. 25 And doctor same thing too, especially when 26 you're having babies that you -- you know, try to see 27 old doctors that you feel much more comfortable with. 28 And CPA's tax returns, you use CPAs because you 29 1 just moved to new location, you're not going to change 2 your CPA right away. And, you know, life insurance 3 policy you don't just cut it down the day you move. 4 I mean, I just don't understand why this is 5 related to moving instead of that we used to discuss 6 about, you know, driver's license change and, you know, 7 you registered to vote and you really move out there, 8 bought the home and -- 9 MR. HASKINS: I can address all those. 10 MS. STEEL: Could you? 11 MR. HASKINS: Yes. All those things were 12 addressed in the briefing -- every one of those. 13 The Hadsells were registered to vote -- well, 14 it's a weird thing, they registered to vote in March -- 15 Mrs. Hadsell registered to vote in Washoe County in 16 March and Mr. Hadsell registered to vote in Washoe 17 County in August. 18 Their voter registration wasn't cancelled in 19 the -- well, in the Belmont area, I forget the name of 20 the county -- San Mateo -- until 2001. There was a line 21 through the original saying "Registered to vote at new 22 address." So, they were registered to vote here but 23 they were also registered to vote in Nevada, 24 Mrs. Hadsell from March and Mr. Hadsell from August. 25 The cars were registered here. And then the 26 cars were moved over on May 26th, it appears that most 27 of the cars were transferred over. 28 MS. STEEL: Let me just go back to registered 30 1 to vote. That when you do that that you let your county 2 knows that you are moving so you have to send two 3 forms -- 4 MR. HASKINS: No. 5 MS. STEEL: -- out? 6 MR. HASKINS: No. 7 MS. STEEL: So, that's the government things 8 that you don't know that when -- when they are were 9 registered in Nevada for, you know, whatever, March and 10 August and then it was -- they marked off that they no 11 longer live in California, that's not their 12 responsibility to do that. 13 So, whenever California got the, you know, 14 information that they moved, that's not under their 15 control. 16 So, you -- you know, when they registered on 17 March means they registered on March. 18 MR. HASKINS: Yes, I don't disagree that they 19 might have -- 20 MS. STEEL: So, that has nothing to do with it, 21 that, yeah, what, you know, California got they're no 22 longer living here or not, that has nothing to do with 23 it because it's not under taxpayer's control. 24 MR. HASKINS: What is under the taxpayer's 25 control is when they do it. And what we -- what your 26 Board has told us for years is to consider all of the 27 facts and circumstances. 28 So, voting is one of the facts and 31 1 circumstances that we look at. 2 MS. STEEL: But that's exactly what we look 3 at -- 4 MR. HASKINS: In this -- 5 MS. STEEL: -- and they registered March and 6 August, wife did on March and husband -- 7 MR. HASKINS: Yes, they did. 8 MS. STEEL: -- in August, yes. 9 MR. HASKINS: And in those same time frames 10 they said under penalty of perjury that they actually 11 lived in Belmont on both their federal and State 12 returns. 13 There are in numerous -- 14 MS. STEEL: Is that 2001 that they returned? 15 MR. HASKINS: -- no, they filed their 1999 tax 16 return in April of -- 17 MS. STEEL: Because they lived -- in 1999 they 18 were still residents in California when they did the 19 return. 20 MR. HASKINS: In Bragg this Board pointed out 21 that the address that you put our return is important. 22 And, so, that's why we used it as a factor in our 23 consideration. 24 MS. STEEL: But wasn't that that they lived 25 1999 in California? 26 MS. YEE: But the address of when they filed 27 the return. 28 MR. HASKINS: I understand, that's -- No. 1, 32 1 that's not what it says on the State return and -- 2 MR. HADSELL: It is. 3 MS. YEE: What -- doesn't say what on the State 4 return? 5 MR. HASKINS: What's your address in the year? 6 And most of -- mostly because they're computer 7 generated, you know, the tax software, which I assume 8 was used, or Price Waterhouse performed that. 9 It doesn't have an address, it simply has -- it 10 has your preprinted address on it, much like a tag. 11 But, again, your Board has set out certain 12 factors and we respect that. We have to look at those 13 and we do. 14 In this case the factor of voting 15 registration -- when Mrs. Hadsell registered to vote 16 there was also contradictory evidence that they were 17 still claiming California as their true residence. 18 When they registered their cars, we don't have 19 a dispute that they registered their car in May in 20 Nevada. But that registration continued in California. 21 It wasn't cancelled as far as we could tell. 22 The bottom line was that when we looked at all 23 of the factors and asked our ourselves what was their 24 intent? In this case it is pretty clear, I think, that 25 when Mrs. Hadsell became pregnant with her second child 26 they made a decision to have that child delivered by 27 Dr. Kanita. 28 And when they decided to move and in the 33 1 process of making that plan to move, also planned to 2 stay at the Belmont house until the baby was delivered. 3 With that intent in mind, that means their 4 domiciliaries, in our assessment and under the cases. 5 So, you look at all of the other factors and 6 you weight them. Is this a case where we have an 7 overwhelming evidence that shows they're residents? No. 8 Do they have an overwhelming amount of 9 evidence? Not in our view. 10 I mean, certainly Mr. Hadsell will tell you 11 that he does. 12 We very much dispute the evidence. And, you 13 know, we don't agree that the tables are not disputed. 14 We don't agree that there is no dispute about certain 15 things. 16 So, that's why we -- here at this hearing I 17 didn't want to go just through the brief again. 18 MS. STEEL: So, when second child was born? 19 When? 20 MR. HADSELL: July 7th. 21 MS. STEEL: So, all these factors together, you 22 said that they didn't have intention -- they had 23 intention to come back until second child was born? 24 Is that the reason that you considered on 25 July 12th -- 26 MR. HASKINS: July -- 27 MS. STEEL: -- of 2000? 28 MR. HASKINS: -- yes, because after the child 34 1 was born, they no longer had that intent to return to 2 wait for the child to be born. 3 And when they put the child in the car with 4 their other child and the two of them drove to Nevada, 5 they no longer had an intention to return to their state 6 of domicile. 7 MS. STEEL: That's -- 8 MR. HASKINS: When you weigh everything else 9 that -- that becomes the key date. 10 So, that -- that's what -- when you weigh all 11 this stuff, you have to ask yourself where is the 12 tipping point? 13 That's the tipping point. 14 MS. STEEL: That's really interesting -- 15 MS. YEE: Yeah. 16 MS. STEEL: -- to hear that because they still 17 came back to California after that. 18 So, you said second child is the tipping point, 19 but most of the ladies that when they want to deliver 20 the baby, they want to have some familiar faces, means 21 the same doctors that they delivered the first one. 22 And they -- I didn't understand that you went 23 through so many factors here that this is the reason and 24 then suddenly you cut July 12th because the second baby 25 came. 26 I don't think that's really most important 27 factor, the tipping point's there because for me when 28 they move is more important that they really moved 35 1 physically there to new home, that they are building it. 2 All of the homes, yes, when you move in it's 3 totally bare. I just dropped my daughter off at one of 4 the dorm that it took five days for little dorm, try to 5 fill those. 6 And, so, that -- these factors that, you know, 7 you put it in, we used to look at -- we went through 8 last four years that domicile issues that we -- we used 9 to look at driver's licenses and voter's registrations 10 and some other stuffs because most of these factors that 11 you put here for -- you know, you still have life 12 insurance policy. 13 How you going to cut it off, life insurance 14 policy? You change the address, I mean, that's all you 15 do. 16 Or, you know, CPA, it's middle of the year, you 17 still use your own CPA who knows your financial status 18 the status the most. 19 So, I really don't understand the relation here 20 that what you are saying. And then suddenly you are 21 saying, "Okay, let's just cut it off because second 22 child was born and that was the tipping point." I 23 really -- 24 MR. HASKINS: If I may? 25 MS. YEE: Mr. Haskins? 26 MR. HASKINS: You are correct in the sense that 27 that is what we were looking at. 28 But what I'm talking about is the time frame 36 1 between February 11th, the claimed date of change of 2 domicile and residency, and July 13th. 3 In between those dates are when the life 4 insurance was purchased, when the homeowner's insurance 5 was purchased from California providers. These are 6 factors that the Board looks at. These are connections 7 to the State. 8 When you don't change your address, when you 9 don't have a forwarding address, when you maintain your 10 license, you're projecting an image you are a California 11 resident. 12 MS. STEEL: No, they changed the driver's 13 license. 14 MR. HASKINS: No, no, the professional license, 15 when you maintain a professional insurance license, 16 Mrs. Hadsell -- 17 MS. STEEL: You're not going to just give up 18 because it seems like you're just picking one point to 19 that -- okay, let's make -- we can make a lot of 20 different dates here that you can make, okay, when they 21 moved, that can be the first date on February, moving. 22 Or, okay, she changed her driver's license on 23 March, so, maybe that can be the tipping point. 24 Or you had, you know, the first furniture came 25 in, that can be the -- you know, the point. 26 It seems like you can choose a lot here and 27 that was really odd that you choose second child was 28 born is the tipping point there, still just doesn't 37 1 really cut it here. 2 MR. HASKINS: I can't -- 3 MS. STEEL: It seems like you tried to -- 4 MR. HASKINS: -- I have no answer for you. 5 MS. STEEL: -- you tried to just pick 6 whatever here to -- 7 MR. HASKINS: Well, I take offense at that. We 8 didn't just pick and choose. We looked at all the 9 factors. 10 MS. STEEL: The way you explained -- if you did 11 -- that's the way I felt. 12 MS. YEE: I don't know that we're going to 13 reach agreement here. 14 Let me ask a threshold question that 15 Ms. Steel's question seems to hinge upon. 16 And that is, to the Franchise Tax Board, so, 17 does -- I guess, speak to us about whether any intent to 18 return to one's former domicile trumps the acquisition 19 of any new domicile or has the -- or does that intent 20 have to be coupled with other connections to California, 21 significant connections to California -- which has 22 always been kind of how, I think, we've looked at prior 23 cases, that it's got to be the two. 24 And I'm not so sure that the single intent 25 about Ms. Hadsell wanting to give birth to the second 26 child in California, irrespective of the other 27 connections that the Hadsells had here in California, is 28 how I'm choosing to look at it, based on we've looked at 38 1 prior cases. 2 And if it's the case that the intent has to be 3 coupled with significant California connections, if you 4 could discuss why July 13th? Because there were 5 significant connections that continued beyond July 13th 6 relative to investment interests in real property. 7 So, if you could speak to that? 8 MR. HASKINS: Sure. The first question, 9 domicile, one -- you know, 17014 (b) or (a)(2), I'm 10 sorry, says if you are a domicile and you are out of the 11 state for temporary or transitory purposes, like in the 12 Noble case, you have to ask, "Where are you domiciled?" 13 In this case they were domiciled in California. 14 And in Robert Addington, the appeal of Robert Addington, 15 this Board said if you have an intent to return to your 16 domicile, that defeats of a new domicile. 17 What I looked at was all those factors and that 18 intent. And after saying -- it seems like their plan 19 from the beginning was after the child is born, we are 20 going to then not have a reason to come back to 21 California for this kind of care, for this kind of 22 thing. 23 I guess you could have an intent to have a 24 different kind of operation. There have been cases 25 where that has happened. 26 In this case the Belmont house was kept ready 27 to go at a moment's notice. Mr. Hadsell stayed there 28 when he came here for business visits. They stayed 39 1 there quite frequently when they returned to California 2 to their house. 3 They returned for an OB/GYN visit, which, 4 looking around, I imagine you're aware, might take an 5 hour or two. They would stay for sometime ten days, 6 sometimes four days. 7 They weren't simply coming here for a doctor 8 visit. And the doctor -- 9 MR. HORTON: Are you saying I wouldn't be aware 10 of that? 11 Just kidding. 12 MR. HASKINS: Would you hold up your left hand, 13 please, sir? And I'll be able to determine -- 14 MR. HORTON: Two or three -- two kids. 15 MR. HASKINS: So, if you -- in our situation, 16 in our -- in this case, our auditor looked at all the 17 facts and said, "Where's the point?" 18 Well, we began with the entire year because 19 there were -- you're absolutely right, there were quite 20 a few trips after that point. So, wouldn't it be fair 21 to say that they were residents the entire year? 22 Well, maybe. When did they change their 23 domicile? In my estimation, in my argument, it is when 24 they no longer had a reason to return home -- to return 25 to the Belmont house. And they didn't. They came back. 26 They went and visited relatives that -- there was no 27 plan to come and live at the Belmont house for a month 28 on end. 40 1 And the cases are legion where someone has an 2 intent to return to California, yet they stay in Nevada 3 for four months, five months at a time. So, the time -- 4 the month that they stayed here isn't so much it, the 5 fact that it was a doctor isn't so much it, it's the 6 that they had that plan to return. 7 So, when you -- when you say to me, "What is 8 your -- what's your tipping point? What point did you 9 pick?" That is the point I picked based on the fact 10 that that intention didn't exist any more. 11 So, when you look at 17014 (a)(2), are they 12 domiciliaries? Not any more, they don't have any 13 intention to remain here. 14 Then you look at all the factors and because 15 Mrs. Hadsell didn't return very often and because they 16 didn't have the same sorts of what I would call an empty 17 stage with the Incline Village house, that was the point 18 where they became residents and the domicile ended. 19 I understand that a house can be, you know, 20 without furniture. But what makes a house? Can you 21 just simply what makes a house is an empty building with 22 four walls? 23 VOICE: Oh, man. 24 MR. HASKINS: I don't think that's really what 25 we mean when we say living somewhere, residing 26 somewhere. 27 When you reside somewhere, you live there. You 28 stay there. You eat there. You buy your dog food 41 1 there. You send your kids to school there. You have 2 furniture. You have cable service. 3 When we weigh all those things, that was the 4 point where it seemed to me was a legally sustainable 5 point. 6 MS. YEE: Okay, thank you, Mr. Haskins. 7 I'm going to just pose that last point to the 8 Hadsells and then I want to go to Ms. Alby, Mr. Horton, 9 Ms. Mandel. 10 And for the Hadsells, is the lack of furniture 11 and bedding, is that indicative of a temporary or 12 transitory visit to Incline Village? 13 MR. HADSELL: Well, you saw the pictures. We 14 had family. We had friends. We were living there. We 15 had our children there. They weren't school age yet, 16 but they were in a kids' play group. 17 You know where I spent my time. You said we 18 spent my time in Belmont. There were times when I went 19 to California, but I went to California and came back. 20 I could have easily ended the day in Belmont, 21 but I wanted to get back to my house, my home, my 22 family. 23 All those things he listed -- we had cable. We 24 had bought groceries -- didn't buy dog food, didn't have 25 a pet, but phone service. All those things he says 26 makes up a home, we had every single one of them -- 27 MS. YEE: Furniture? 28 MR. HADSELL: -- furniture and bedding. 42 1 MS. HADSELL: The only reason we didn't have 2 bedding was because -- 3 MR. HADSELL: Longs made a mistake and had to 4 reorder it. 5 MS. HADSELL: -- the company we bought it from, 6 sent it to San Jose for some reason. It was a complete 7 fluke. 8 MR. HADSELL: We had to reorder the bedroom 9 furniture. 10 But you can see the pictures in March, you 11 know, everyone is there, we're having a great time. 12 That's where our family was. It's -- that was home. 13 MS. YEE: Okay, thank you very much. 14 Ms. Alby, please? 15 MS. ALBY: Thank you. I have a question for 16 FTB. 17 And kind of understanding your tipping point 18 was when the baby was born in July and there was no need 19 to come back to California any more, if they had 20 switched early on to a Nevada doctor and a Nevada 21 hospital for the birth of this baby, would you have 22 considered them Nevada residents then? 23 MR. HASKINS: If they had not had an intention 24 to come back, that certainly would have weighed heavily 25 in it. 26 Because then your connections are to Nevada. 27 Where you choose to use professionals is a factor that 28 is considered. 43 1 If they had chosen to use Saint Mary's Regional 2 Hospital with a Level III nursery that can take care of 3 babies who are in trouble, if they had gone and 4 established care with another OB/GYN doctor, who would, 5 hopefully, be at the same level as Dr. Kanita, then, 6 yes, those would be things that we would look at and 7 ask, does this show that they had -- now have all their 8 connections to Nevada or the majority of them? 9 Where is the tipping point? So, yes, it would 10 matter. 11 MS. ALBY: Even though pregnancy care is 12 transitory, we're not pregnant forever and -- 13 MR. HASKINS: It's -- 14 MS. ALBY: -- it's temporary. 15 MR. HASKINS: It's transitory in several 16 different ways and I apologize for -- I don't know 17 revealing this fact, but I'm married to an OB/GYN 18 doctor, so, I have certain knowledge of this. 19 And you can -- you do -- people do change 20 doctors. And the care is transitory, hopefully it's 21 full term and the baby healthy. 22 But changing doctors is not something that's 23 all that odd. If what you care about is the health of 24 your child and you're worried about your wife's 25 pregnancy, you go to a place that's 6,000 feet off the 26 ground, Incline Village, from a place that's at sea 27 level and you are now four hours from the hospital and 28 the doctor that you want to deliver with. 44 1 They could have picked other ones. They 2 didn't. 3 What does that mean? They have a connection to 4 California. 5 MS. ALBY: It's their doctor. I mean, you 6 may -- you seem to me to be going way too far into 7 this -- to read their mind, to decide what's best for 8 their health care. 9 The idea is what they were seeking was periods 10 of time that were temporary and transitory. 11 You had mentioned the voter registration that 12 troubled you, that they were still registered to vote in 13 California. 14 MR. HASKINS: I don't think it troubled me. 15 MS. ALBY: You said that was one -- one idea of 16 -- that's how you established what -- where are you 17 living is where you're registered to vote. 18 And when they moved to Nevada, you're troubled 19 because they didn't inform the California registrar in 20 their county that they had moved and they were no longer 21 residents. 22 You don't ever do that -- most people don't 23 ever inform them. Generally the new registration 24 informs the old county but if they don't, it's really 25 the problem of the County Clerk. And we have lots of 26 problems on voter rolls because of that fact. It isn't 27 up to the voter to decide that they need to inform their 28 old county that they're no longer there. It's actually 45 1 the job of other people. 2 But you did raise a question for me and I 3 wanted to ask the taxpayer that. In June of 2000, we 4 had a presidential primary and I heard the FTB say that 5 you did not register to vote in Nevada until August. 6 So, I would ask you of 2000 -- I would ask you, 7 did you vote in that presidential primary in June of 8 2000? 9 MR. HADSELL: I did not. I voted in -- I vote 10 in all national elections, basically the November 11 elections, which is why I didn't register in March. 12 My wife is very good at those things, I'm a 13 little less good at that. So, I registered well in 14 advance of when I planned to vote. 15 And you're right, if my residence were 16 California, I suppose I could have voted in California, 17 but I didn't vote in California. I wasn't a California 18 resident. 19 MS. ALBY: And your wife voted -- registered to 20 vote when? 21 MS. HADSELL: March. 22 MR. HADSELL: March 17th. 23 MS. ALBY: Okay, thank you. 24 MS. YEE: Thank you, Ms. Alby. 25 Mr. Horton? 26 MR. HORTON: Just a couple of questions of FTB 27 for clarification. 28 Is the intent to return to California the 46 1 dividing line? Or is it the intent to return to a 2 permanent residence? 3 I mean, everyone who ever have lived in 4 California, I would argue, intends to return. And 5 that's a very broad general statement. 6 So, I'm trying to understand where the FTB 7 established whether or not the -- California was a 8 temporary or a transitory residence. 9 So, the activity that occurred -- at some 10 point, the activity that occurred here in California or 11 returning to California was for temporary purposes and 12 the returning to Nevada was for permanent purposes. 13 You've drawn that line at the pregnancy because of an 14 intent to return. 15 But I would think that even if they had 16 permanent residency in Nevada, all the evidence 17 indicated that, but they intended to return to 18 California for temporary purposes, then their residency 19 would be Nevada. 20 So, I'm trying to have a better understanding 21 of at what point did their activity here in California 22 become temporary activity and their activity in Nevada 23 became permanent? 24 Can you help with that? 25 MR. HASKINS: I think I can. 26 When you have a domicile, you're a 27 California -- 28 MR. HORTON: I'm actually interested in the 47 1 objective facts. I mean, I understand the law. You 2 know, I understand the law, I understand domicile and so 3 forth. 4 And I believe that it hinges on whether or not 5 the place in which you're located is -- are you there 6 temporarily or are you there permanently? 7 And what establishes that from the FTB's 8 perspective is what I'm interested in knowing more 9 about. 10 MR. HASKINS: Well, when you read the cases and 11 you read the decisions of the Board, what you -- what 12 you have to ask is, where do you start? Where do you 13 start from this consideration? 14 Do we start in 1998? Obviously, they're 15 residents and domiciliaries. 16 If you start in '99, obviously they're 17 residents and domiciliaries and there's really no 18 argument there. 19 So, when you ask yourself -- from the law, if 20 you start out as a domiciliary, then your trips are 21 temporary and transitory because you have an intent to 22 return. That's what was going on here. 23 In our view the trips to Nevada were temporary 24 and transitory. They were returning home to California 25 each time they came here. They were building a house. 26 They were filling it. They were making the nest. And 27 when the nest was done and the baby was born, they left. 28 That was the end of the intent to return. 48 1 So, you know, when I look at it, I say, they're 2 California domiciliaries and their trips are temporary 3 and transitory because they have that intent. 4 And we don't usually have that. We don't 5 usually know you that, you're absolutely right. We have 6 to look at, you know, cold facts and say, "What -- how 7 do we look into somebody's head?" And that's near 8 impossible. 9 But in this case we knew because they said, 10 "We're coming back. We intend to return." 11 So, given that and given that when you have 12 that -- and this is -- this Noble, this is Bragg -- all 13 the cases tell us that if you are a domiciliary, then 14 your trips out of the state have to be viewed as 15 temporary and transitory if you maintain that intent to 16 return. 17 MR. HORTON: So, on balance the purchase of the 18 home in Nevada, that in and of itself wouldn't do it 19 because you're entitled to have as many homes in as many 20 states, locations as you would like. 21 The changing of their voter registration, well, 22 that seems to be pretty permanent activity. 23 MR. HASKINS: Except that this Board has -- 24 MR. HORTON: -- unless you intend to vote in 25 two different states and one would argue that that's not 26 the case. 27 MR. HADSELL: They're different residents when 28 you do that. 49 1 MR. HORTON: Changing of the driver's licenses 2 and registration indicates that you intend to drive that 3 car in the location where you're now registered. 4 That's pretty permanent, otherwise you subject 5 yourself to driving in another state without being 6 registered -- properly registered in that state. 7 So, location of your spouse in a particular 8 place is pretty permanent, even though she intends to 9 return at some point. 10 The challenge here for me is to -- you've got, 11 on balance, you've got some permanent activity that's 12 occurring and to your argument that it is gradual and 13 there is a buildup, at what point do we do -- at what 14 point does the taxpayer sever their ties with California 15 or establish some permanency outside of California? 16 The objective facts seem to indicate that they 17 have complied with the historical provisions provided by 18 this Board on a number of those -- registration, out of 19 state; driver's license, out of State; voter 20 registration, out of state, and dates and time in which 21 that happened. 22 So, at what point -- and, so, I have a little 23 concern about drawing the line because the intent is to 24 return and how you returned to your doctor who you were 25 comfortable with and delivered your child with the 26 doctor that you've delivered the child with, as the 27 point which the agency establishes that they no longer 28 have permanency. 50 1 I mean, that intent could hold to be the case 2 for an entire nine months. You can move to Switzerland 3 with the intent of coming back and having a medical 4 treatment here in the United States. There are a lot of 5 reasons why people do that. Nevada to California, the 6 same thing. 7 So, I would venture to say that that's -- will 8 ultimately be the deliberation over at what point does 9 that occur? And possibly you can provide some insight 10 into the -- into the Franchise Tax Board's position, in 11 addition to the intent to pregnancy. 12 I mean just the -- in my mind the intent to 13 return to California or disclosing the intent to return 14 to California, I would venture to say that today the 15 taxpayers intend to return to California. 16 Even after the pregnancy, they intended to 17 return to California. She had insurance clients of some 18 sort. Even though she had severed that relationship, at 19 some point she very well may be called upon to provide 20 some information relative to that. 21 So, I share that to just give you some insight 22 into what I'm looking at and, hopefully, you can either 23 yourselves or the taxpayers can bring a little clarity 24 from that perspective. 25 MR. HASKINS: I can only tell you what the 26 thought process was. It was that there is -- there was 27 a point where everything equaled Nevada residency and 28 domicile. And that point, in my mind and in our 51 1 argument, is after the birth of the child. 2 Because the cases and everything I read tells 3 me that domicile is important. So are all those other 4 factors, but in this case a fair number of them were 5 equal. I mean, they were in California 47 -- he was in 6 California 47 percent of the time, Mrs. Hadsell, 42 7 percent of the time. 8 Okay. So, that's -- you know, where -- how 9 does that tip the scale? And, you know -- 10 MR. HORTON: It probably tips the scale for the 11 53 percent and the 58 percent, I mean if you just -- 12 MR. HASKINS: I agree. 13 MR. HORTON: -- look at percentages. 14 MR. HASKINS: And then you ask, okay, what else 15 can you look at? 16 I think it is important that your house has no 17 furniture in it. I think it's important that your house 18 in Belmont has a complete set of furniture. It's plenty 19 big enough, 2350 square feet is large enough to raise a 20 family, lots of people do that. 21 You keep coming back to it. You stay there. 22 You utilize the house. You're furnishing this house. 23 You spend a lot of money in California for furnishings 24 that are shipped to the Incline Village house. You do a 25 lot of shopping here. 26 These are all connections. You use California 27 professionals. What point? Again -- 28 MR. HORTON: So, let me -- if we're taking them 52 1 one at a time, let's take a look at the -- the 2 furnishing. The furnishing had been there probably for 3 the last three or four years? 4 MR. HASKINS: Which -- 5 MR. HORTON: I'm just speculating here. 6 MR. HASKINS: Which one? 7 MR. HORTON: California, the California condo? 8 MR. HASKINS: Oh, right, I agree. 9 MR. HORTON: So, it's not brand new. 10 They are not acquiring new furniture for the 11 California condo. I mean, it seems that they intended 12 to -- to maintain the California residence. I mean, 13 that's clear. Otherwise, just sell it or rent it out. 14 So, that's clear. 15 And if the intent is to maintain the California 16 residence, then you would want to have furniture there, 17 you would want to maintain it at some level for the 18 purpose of returning. 19 But the question becomes is -- is it -- are you 20 returning for temporary purposes or are you returning 21 for permanent purposes because that's your residence? 22 And I -- I mean, if I looked at the past 23 decisions that the Board has considered and the factors, 24 many of these factors seem -- that establishes some 25 permanency seems to weigh in their favor -- registration 26 of an automobile, driver's licenses, as I mentioned 27 earlier, voter registration, state where the taxpayer's 28 employed and no longer employed in California, they 53 1 severed that, employment in California. Clearly they 2 headed towards retirement. 3 I need a little help in understanding the logic 4 of them maintaining furniture or not having furniture 5 even in the new home, because in my mind that's -- 6 that's rather typical. Unfortunately, what happens is 7 is when you buy a new home, your wife has a tendency to 8 want new furniture and all of that seems to go along 9 with the strategy. 10 Now, my strategy is to move the old furniture 11 as quickly as possible to save a little cost, but it 12 never seems to work. 13 MS. HADSELL: And the Belmont furniture was 14 mine from college. So, it was pretty old. 15 MR. HORTON: Yeah. 16 MR. HADSELL: And there wasn't a lot of it. I 17 was going to ask -- 18 MR. HORTON: Is there -- is there other 19 factors? 20 MR. HOFSDAL: If I could just clarify just one 21 thing? 22 And my name is Ron Hofsdal, I'm from the 23 Franchise Tax Board as well. 24 You know, when we look at the -- the statute 25 itself -- and I think we're getting just a little bit -- 26 kinf of confused. 27 When we're looking at domicile, if we determine 28 first that the -- that the taxpayer is domiciled in 54 1 California, we really don't care what his purpose is in 2 California at this time. 3 What's relevant at that point is whether his 4 presence outside of California, i.e., Nevada, is 5 temporary and transitory versus if he was domiciled in 6 Nevada, then we would be -- then we would be concerned 7 as to whether or not his purposes in California are 8 temporary and transitory. 9 So, I just wanted to clarify that because it 10 seems like we're using temporary and transitory in 11 California with him being a domicile in California and 12 that's kind of an inconsistent position. 13 MR. HORTON: I mean, much like the majority of 14 the law, the swords has a tendency to cut both ways. 15 MR. HOFSDAL: Right. 16 MR. HORTON: And, so, conversations about 17 California and the temporary or permanency there applies 18 in Nevada as well. 19 MR. HOFSDAL: Uh-huh. 20 MR. HORTON: And, so, the permanency -- the 21 question -- if you shift the question, you say, well, is 22 there a level of permanency in Nevada? 23 And the question goes to the objective facts. 24 And the objective facts in Nevada are, they've 25 registered to vote in Nevada. They've registered their 26 car in Nevada and that they are physically in Nevada, 27 according to the data, 52 percent of the time and 28 58 percent of the time. So, the majority of their time 55 1 is in California. 2 And then the beauty of -- the beauty of this 3 case is where you say hindsight is 20/20, ultimately 4 they moved to Nevada. 5 MR. HOFSDAL: Right. And we don't argue that 6 at all. 7 Is -- I think our position, the Franchise Tax 8 Board's position in this case is that they were 9 domiciled in California. They were temporary and 10 transitory in Nevada with the intent -- I don't want to 11 use the word "intent" but they were temporary and 12 transitory in Nevada awaiting furniture. And 13 Mr. Hadsell was going back to take care of his business 14 at Cardinal. 15 There's a lot of factors to show that their -- 16 that they had decided or they were -- that they were in 17 the process of -- of working towards the goal of moving 18 to Nevada and have all that complete at the birth of 19 their child. 20 But up until that point in time that their 21 domicile was California and that their presence in 22 Nevada was temporary and transitory. 23 MR. HORTON: What about the taxpayers' argument 24 that the delivering a baby and pregnancy is not a factor 25 to be considered? 26 MR. HOFSDAL: Well, I would say that the status 27 of delivering a baby is probably given more emphasis, 28 but that's just a, you know, a point that the taxpayer 56 1 has raised. 2 We just look at it as another one of the many 3 connections associated with California. 4 And any time you make a choice -- whether it's 5 delivering a baby or continuing to work at Cardinal and 6 have an office at Cardinal or anything along those 7 lines, that choice in itself has some influence on 8 whether or not that determination of residency is going 9 to be truth or false. 10 But, I mean, she certainly has the right to 11 choose whoever she wants to, we're not advocating that 12 people should not feel comfortable having a baby and 13 delivered by whoever they see fit. 14 But that that choice in itself, through Board 15 precedent, has indicia of implying or just showing yet 16 another connection to the State of California. 17 That's all? 18 MR. HORTON: Mr. Hadsell, you indicated that 19 there was some case law? 20 MR. HADSELL: There is indeed, the case law on 21 domicile is two requirements, one is an intention to 22 move and then the second is physically move. 23 MR. HORTON: No, I'm -- relative to the 24 pregnancy. Is there -- 25 MR. HADSELL: No, in that particular instance, 26 looking at the regulations and the regulations define 27 what makes a permanent California resident under medical 28 conditions. 57 1 And the pregnancy does not comply with those 2 regulations. It -- it, in fact, does the opposite. 3 And the regulations go on to further to say, if 4 the facts are opposite of what we just discussed in this 5 regulation, then the finding is the opposite. In other 6 words, you're not a California resident. So, those are 7 the regulations. 8 The other regulation says that you can 9 eliminate your domicile by sworn affidavits from family, 10 friends or professionals and that that provided in there 11 that they show you have changed your domicile and swear 12 to that and attest to that, that changes your domicile. 13 So, those two issues changed our domicile, in 14 addition to the actual fact that we moved and it was our 15 intention to be there and we did move. 16 MS. YEE: Okay. Ms. Kelly, can you speak to 17 that? 18 MS. KELLY: Yes. The regulation is 19 Regulation 17014. And it talks about the meaning of 20 temporary or transitory purpose. 21 And it starts that an individual's here in 22 California for a temporary, transitory purpose if 23 they're here for a brief rest or vacation; to complete a 24 particular transaction or perform a particular contract, 25 fulfill a particular engagement, which will require his 26 presence in the state for but a short period, then he is 27 in the state for temporary, transitory purposes. 28 If, however -- and this goes to the medical 58 1 issue -- an individual's in the state to improve his 2 health and his illness is of such a character as to 3 require relatively long or indefinite period to 4 recuperate or he is here for business purposes which 5 will require a long or indefinite period to accomplish 6 or is employed in a position that may last permanently 7 or indefinitely and on and on, then the individual is 8 here for other than temporary, transitory purpose. 9 So, you're looking at what is a long or 10 indefinite period with respect to illness? 11 MR. HOFSDAL: And, again, that's if somebody's 12 domiciled said outside the State of California. 13 MS. KELLY: That's correct. 14 MR. HOFSDAL: And inside for a temporary or 15 transitory purpose in defining it. 16 But if we decide that it's -- that that person 17 is domiciled in the State of California, then we really 18 don't care what the purpose inside the state is. 19 MR. HORTON: Okay. 20 MR. HASKINS: And just to add to that part of 21 that regulation that has been cited frequently, what -- 22 one of the other factors that I think needs to keep in 23 mind is that if you're here for a business that -- a 24 business transaction that won't be completed quickly, he 25 -- Mr. Hadsell continued to work with Cardinal Venture 26 Capital and eventually became an employee all through 27 2000. 28 MR. HADSELL: I did not work there in 2000. I 59 1 didn't become an employee until 2003. 2 MS. YEE: Let me -- 3 MR. HASKINS: That's what I said. 4 MS. YEE: Yes. 5 MR. HASKINS: That's what I said, he continued 6 to go there and advise them. 7 That is a business interest that he continued 8 to work with all through 2000 and eventually became an 9 employee there. 10 MR. HADSELL: And the FTB's confusing an 11 investment with -- 12 MS. YEE: Mr. Hadsell, let me have them -- 13 MR. HADSELL: -- with employment. 14 MS. YEE: -- finish and then we'll have you 15 clarify. 16 MR. HADSELL: Sorry, thank you. 17 MS. YEE: Okay. 18 MR. HASKINS: Well, when you -- when you look 19 at all of the factors and Mr. Hofsdal is correct, we had 20 to take the view that -- based on their statements -- 21 that they were California domiciliaries and so their 22 trips outside the state were for temporary and 23 transitory purposes. 24 Is that -- is that possible? Yes, it is 'cause 25 they went there to an empty house. They bought 26 furniture, they had it there, then they came back home. 27 Then they would go on another weekend trip, buy 28 furniture, have it delivered and then come home. 60 1 This -- this cycle continued throughout the 2 entire period at issue. And, eventually, they went 3 there and didn't have a reason to come home. 4 And the reason they didn't have a reason was 5 because they had the birth of their second child. 6 MS. YEE: Okay. I'm going to -- 7 MR. HASKINS: They were longer California 8 domiciliaries. 9 MS. YEE: -- okay, let me have you stop there. 10 Mr. Horton, can I get Mr. Hadsell just to 11 clarify the nature -- 12 MR. HORTON: Sure. 13 MS. YEE: -- of his ongoing connection relative 14 to this? 15 MR. HADSELL: Sure. It wasn't an ongoing 16 connection. I was making investments. 17 And investments are -- I mean, if I invested in 18 IBM stock, am I now a New York resident because they're 19 in New York because I happen to visit them? 20 The answer is no. Any involvement with any of 21 the activities that I had businesswise in 2000 in 22 California had something to do with seeking out and 23 interest in investments. 24 I was compensated by no one. These trips were 25 completely temporary in nature. They were for a single 26 meeting, sometimes two or three, but they had nothing to 27 do with employment. I was compensated by no one. 28 They're not employment, they were investments. 61 1 MS. YEE: Okay. Mr. Horton, I'm sorry. 2 MR. HORTON: No, no problem. 3 MR. HADSELL: And with the regard to the FTB's 4 interest in our purposes, we gave them a detailed table. 5 They suggest they are now -- we asked them to 6 comment and it goes to the heart of the case, what were 7 our purposes? 8 We showed that they -- what the purposes were 9 and whether they were temporary, transitory. 10 They couldn't even check a box to say which one 11 it was, they refused to answer the questions. 12 MS. YEE: Okay, let me -- I want to be sure 13 that with the time that we have that we have all of the 14 questions out -- 15 MR. HADSELL: Sure. 16 MS. YEE: -- while we have you before us. 17 Please, Mr. Horton, continue. 18 MR. HORTON: Question of the Franchise Tax 19 Board, what if, hypothetically, they -- the taxpayer 20 sold the condo, sold the furniture, but intended to 21 return to deliver their baby or -- strike that. 22 What if they rented it out or someone else used 23 it, would that be enough to sever their domicile? 24 I mean, that would be sort of clear that they 25 no longer have -- 26 MR. HOFSDAL: Exclusive evidence to show that 27 they severed their -- 28 MR. HORTON: Even though their intent is to 62 1 return -- 2 MR. HOFSDAL: Right. 3 MR. HORTON: -- for a number of reasons, but 4 the residency is no longer here, I mean, the house -- 5 the property is no longer in their name, it's now 6 being -- or it's in their name but it's being rented 7 out, that would be pretty solid evidence and would 8 contradict the presumption that the intent to return to 9 deliver the child is the point in which domicile no 10 longer exists? 11 MR. HASKINS: If those were the facts, that 12 might change the outcome. 13 They aren't the facts. 14 MR. HORTON: So, the fact that they can no 15 longer drive in California -- well, they can drive, but 16 they -- they're driving in California with a Nevada 17 driver's license, that's not enough? 18 MR. HASKINS: No, because as I've read in 19 previous decisions, the Board has said these are 20 formalistic actions that are easily controlled. 21 I could go to today, establish a post office 22 box, write on a piece of paper and get both a license 23 and register to vote. I could drive up to Reno and do 24 it right now. 25 That doesn't mean that I'm a resident or 26 domiciliary of Nevada. 27 MR. HORTON: So, it's your -- 28 MR. HOFSDAL: Now, those are the -- those are 63 1 this Board's decisions. 2 MR. HORTON: -- part of your -- part of your 3 position is is that it's the combination -- 4 MR. HASKINS: Yes. 5 MR. HORTON: -- of all -- of the ongoing 6 existence of a home, establishing -- that establishes 7 the domicile. 8 And the fact that they intended to maintain 9 that home for purposes of residing there, even though it 10 may have been temporary in their mind and that 11 ultimately they would sever that relationship with 12 California and move to Nevada? 13 MR. HASKINS: Couldn't have said it better 14 myself. 15 MR. HORTON: All right. 16 MS. YEE: Thank you, Mr. Horton. 17 Ms. Mandel, please? 18 MS. MANDEL: Thank you. 19 I may have missed it , I'm not sure that we've 20 had formal rebuttal time we've been doing so many 21 questions. 22 But my question really is kind of like the 23 first thing that Mr. Horton asked -- and when -- 24 Franchise Tax Board, when you talked about an intent to 25 return -- the word that came to mind I don't want to use 26 because we're talking about the birth of a baby -- but 27 that the intent to return for the child is -- I can't 28 come up with another word -- fatal to -- to the 64 1 taxpayers saying they had moved their domicile to 2 Nevada? 3 MR. HASKINS: That's not our decision, that's 4 your Board's decision. 5 MS. MANDEL: Well, we haven't made a 6 decision. 7 MR. HASKINS: No, no, in Robert Addington. 8 MS. MANDEL: We haven't made a decision and I 9 am to ask you the question. 10 MR. HASKINS: Okay. 11 MS. MANDEL: And the question -- you said 12 that -- that based on -- now it's been so long I forget 13 what the case was, Haddington (verbatim) -- 14 MR. HASKINS: Addington. 15 MS. MANDEL: -- that the intent to return was 16 all you really -- with everything else being equal, 17 because, as Ms. Yee pointed out, the same stuff is on 18 both sides of this July date -- the only other thing 19 that's going on is this baby and you said based on 20 Haddington, that intent to return is it. 21 And it may be that you would say that intent to 22 return, even if they just meant to come back, even if 23 they promised mom and dad before they went to Nevada, 24 "We will come back and spend the month of June with 25 you," maybe you would have said, "Well, that was a clear 26 intent to come back," and they placated mom and dad and 27 they weren't really going to go 'til after that and they 28 shouldn't have made those plans 'til they hit Nevada and 65 1 then promised to come back. 2 But the baby is it. In this case, that's what 3 I'm hearing is the baby is it. 4 And the first thing that Mr. Horton asked was 5 really about that intent to come back and does the 6 intent to come back have to be intent to come back for 7 a -- something that's permanent or something that's 8 temporary? Because the baby's to come, you know, no 9 matter, and then they're going to be gone. 10 And I wanted to ask you about the facts of 11 Addington and other cases where what has been key is an 12 intent to return because I have a vague recollection of 13 cases where people went, you know, overseas on a job 14 assignment that might have been six months, a year, 18 15 months and that that somehow wasn't long enough because 16 they meant to come back here to their job here, or 17 whatever, that they didn't have -- yeah, these people 18 had an intent to come back here to have this baby born 19 here with these doctors, but they also -- at the same 20 time they were doing that they had an intent to leave. 21 And, so, they weren't -- it's when Mr. Horton 22 asked you about does the intent to return have to be to 23 return for a permanent thing or a temporary thing? 24 And I never really -- or is any intent to 25 return enough, as long as they're maintaining, you know, 26 the house -- the property, the condo? 27 And that's really -- goes back to what are the 28 facts in the cases where an intent to return has been 66 1 significant? 2 Can you address that at all? 3 MR. HASKINS: In this case, yes. 4 Again, we -- we don't normally have the ability 5 to know what was intended. We have to look at some 6 objective facts. 7 In this case we were told that they intended to 8 come back. Yes, I -- I would -- well, I know that a 9 pregnancy is temporary, obviously. 10 But in this case when you combine that with all 11 the other facts, which if you read the briefs and look 12 at all the other evidence, all of the factors are 13 arguably equivalent. 14 MS. MANDEL: Okay, let me stop you because I 15 feel like you're getting repetitive and maybe we're 16 being repetitive in the questions. But I don't fee like 17 I am getting the answer. 18 On all of the factors being equivalent, let's 19 take voter registration, I'm glad to hear that nobody 20 thinks that you didn't think we had to cancel our voter 21 registration because I've been registered in four 22 different states and I never told the other three that I 23 wasn't there any more. 24 You know, one of them's Illinois and Chicago, 25 so, I don't really know about the voter rolls. 26 But when you have -- I mean, you're sort of 27 saying the voter registration is equivalent for both 28 states because they remained registered until they were 67 1 struck from the rolls in California. 2 Those -- that's sort of a formal thing, without 3 regard to the taxpayer's explanation of why they did 4 what they did and when they did it. 5 But on the -- I'm still focused on the birth of 6 the child because that -- you've use the word "tipping 7 point," that's the thing -- I'm sorry, that's the -- 8 that's the factor that's being determinative, it seems, 9 as to whether they are in California or not in 10 California. 11 And you've referred to the Board's cases of an 12 intent to return being critical on domicile. This is 13 not the first case. 14 If this were the first case coming forward, I 15 think you would just be making the argument you're 16 making now. But you have referred to cases. You have 17 said cases are legion and all of this. 18 And, so, what I want to know is in the case law 19 where the Board or a court has said that a taxpayer is 20 still domiciled in the old place because they had an 21 intent to return, what are the facts that made that 22 intent to return something critical? 23 If this were the first case you'd be arguing 24 that just the mere fact that they maintained the doctor 25 relationship and wanted to have the baby here meant that 26 there was no instant change of home on February 11th 27 because it was this whole movement. You'd be making the 28 factual argument you're making here. 68 1 But you've overlaid that factual argument with 2 a legal point, which is they intended to return, they 3 told us they intended to return, we know why they 4 intended to return. We understand pregnancy has an end 5 point. And once that end point came and they got in the 6 car and went to Nevada, that was it. 7 But what I'm saying is, once you put that legal 8 overlay on it, I want to understand what the facts were 9 in those cases because if -- if those cases did not 10 involve -- if somebody was coming back to California, 11 had an intent to come back to California for some -- 12 some kind of permanent reason and that's why the intent 13 was held against them, that might make a difference as 14 opposed to someone intending to come back to California 15 because their grandchildren were here and they come, you 16 know, every winter for -- for three months. And, so, 17 because they maintain some place in the desert so they 18 can see the kids, we're going to say they never really 19 left. 20 I don't -- you know, once you put that overlay, 21 what -- what are the facts? Why is this case with the 22 baby the same as those cases or not? 23 And maybe that was something that Mr. Hadsell 24 was going to address in his reply, but that seems to be 25 the question that was being asked about is having the 26 baby coming back for something permanent or not and does 27 that make a difference? 28 MR. HASKINS: I guess I could suggest that we 69 1 brief some cases like that. 2 But I think that what's more effective in this 3 case and more appropriate is simply to say that the 4 cases stand for that principle. They don't 5 differentiate. 6 MS. MANDEL: Well, then, can you tell me 7 what -- I'm sorry, you know, we prepared a lot of cases 8 for this week, so maybe you just want to tell me then 9 what the facts were in Hannington (verbatim) when they 10 had an intent to come back? 11 MR. HASKINS: I don't recall them right now, 12 but I can brief that, if you want. 13 I am not sure that would and your question, 14 though. 15 MR. HORTON: Question? 16 MS. YEE: Mr. Horton, please? 17 MR. HORTON: Mr. Hadsell -- 18 MR. HADSELL: Yes, sir? 19 MR. HORTON: -- what happened after delivery of 20 the baby? 21 MR. HADSELL: Life went on. We lived in -- 22 continued in Nevada. 23 MR. HORTON: Did you sell the condo? 24 MR. HADSELL: The condo was sold, yes. 25 MR. HORTON: What point did you sell the 26 condo? 27 MR. HADSELL: Sorry? 28 MR. HORTON: What point did you sell the 70 1 condo? 2 MR. HADSELL: That was in 2003, it was 3 specifically in 2003, in August. 4 Because -- because we had defined our residency 5 change in February of 2000, we no longer had two years 6 of primary residence in the last five years. So, we 7 ended up paying taxes on that. 8 So, as you said, the sword cuts on both sides. 9 All of our tax implications have been made and taxes 10 paid on the basis of a February 11th residency change. 11 So, it was August of 2003. And we paid federal 12 and California taxes as a result of that. 13 MR. HORTON: Did you continue to visit 14 California after the birth of your child? 15 MR. HADSELL: Yes, for temporary and transitory 16 purposes, we visited family and friends. 17 I made some occasional -- again, as you saw my 18 calendar, you know, once or twice a month I would make 19 visits that were a day or two, maybe even three, 20 depending on what was lined up. I would line things up 21 in sequence and get them done. But they were just 22 temporary visits for seeking out and managing the 23 investments. 24 MR. HORTON: Ms. Hadsell? 25 MS. HADSELL: We went in September for two 26 weddings, family members. 27 MR. HADSELL: Oh, right. 28 MS. HADSELL: We had Thanksgiving at our place. 71 1 I had committed to my mother's anniversary. So, we 2 went to Tonia Lodge in December. 3 So, we had -- there were reasons why we came 4 back to California. I didn't go very many places, but 5 when we had family issues. 6 MR. HADSELL: And you said, "What happened?" 7 I mean, you saw some of our family pictures in 8 December of that year, again this was our brand new 9 home. We had 21 people under roof at our house because 10 we had both of our entire families there for Christmas. 11 I have three siblings, she has three siblings, our 12 parents and all of their family and had 21 people at our 13 home for Christmas. 14 MR. HORTON: You indicated that the house was 15 sold in 2003? 16 MR. HADSELL: Yes, sir. 17 MR. HORTON: Did you -- when did you put it up 18 for sale? 19 MR. HADSELL: Oh, gosh, I don't recall how long 20 it took. 21 It wasn't a great real estate time. I could 22 only speculate. I would say months but -- 23 MR. HORTON: Months after the delivery? 24 MR. HADSELL: No, no. I don't know when we 25 actually put it on the market. And I don't know how 26 long it took when we put it on the market to when it 27 sold -- if that's what you're asking? 28 MR. HORTON: I am more than interested in when 72 1 you actually put it on the market? 2 MR. HADSELL: I can't recall. Maybe a real 3 estate agreement would show when we first signed the 4 agreement, I don't recall. 5 MR. HORTON: Okay. 6 MS. YEE: Thank you, Mr. Horton. 7 Other questions, Members? 8 Hearing none, may I have a motion, please? 9 MS. MANDEL: Take under submission. 10 MS. YEE: You need to -- 11 MS. MANDEL: Take it under submission. 12 MR. HORTON: Second. 13 MS. YEE: Okay, motion by Ms. Mandel to take 14 the matter under submission, second by Mr. Horton. 15 Without objection, the motion carries. 16 Thank you both very much. 17 Thank you, Franchise Tax Board, for your 18 indulgence and patience. 19 We will discuss your matter later this 20 afternoon and send you written notice of our decision. 21 MR. HADSELL: Well, we'll wait to hear the 22 discussion. 23 MS. YEE: Okay. 24 MR. HADSELL: Thank you. 25 MS. YEE: Thank you. 26 ---o0o--- 27 28 73 1 REPORTER'S CERTIFICATE. 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, JULI PRICE JACKSON, Hearing Reporter for the 8 California State Board of Equalization certify that on 9 AUGUST 24, 2010 I recorded verbatim, in shorthand, to 10 the best of my ability, the proceedings in the 11 above-entitled hearing; that I transcribed the shorthand 12 writing into typewriting; and that the preceding pages 1 13 through 73 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: October 4, 2010 17 18 19 ____________________________ 20 JULI PRICE JACKSON 21 Hearing Reporter 22 23 24 25 26 27 28 74