1 2 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 3 450 N STREET 4 SACRAMENTO, CALIFORNIA 5 6 7 8 9 REPORTER'S TRANSCRIPT 10 NOVEMBER 18, 2010 11 CORPORATE FRANCHISE AND PERSONAL INCOME TAX HEARING 12 APPEAL OF 13 FRANK J. VIGIL 14 NO. 402865 15 AGAINST PROPOSED ASSESSMENT OF 16 ADDITIONAL INCOME TAX 17 18 19 20 21 22 23 24 REPORTED BY: Carole W. Browne 25 CSR NO. 7351 26 27 28 1 1 P R E S E N T 2 3 For The Board Betty T. Yee 4 Of Equalization Chair 5 Jerome E. Horton Vice-Chair 6 Barbara Alby 7 Acting Member 8 Michelle Steel Member 9 Marcy Jo Mandel 10 Appearing for John Chiang State Controller 11 (Per Government Code Section 7.9) 12 Diane G. Olson 13 Chief, Board Proceedings Division 14 For Franchise Tax Board: Ron Hofsdal 15 Tax Counsel 16 Teresa Wignail Tax Counsel 17 For Appellant: Frank J. Vigil 18 19 20 ---o0o--- 21 22 23 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 NOVEMBER 18, 2010 4 ---o0o--- 5 MS. YEE: So, moving to the calendar for today. 6 Our first item. 7 MS. OLSON: Our first item is B4, Frank J. Vigil. 8 Please come forward. 9 Board proceedings have received contribution 10 disclosure forms for this morning's hearings from the 11 parties, agents, and participants. All forms were 12 properly completed and signed. No disqualifying 13 contributions were disclosed. All parties, agents, and 14 participants are on an alpha listing provided to your 15 office. Each person sitting at the table will be asked 16 to introduce themselves and if necessary their 17 affiliation with the taxpayer for the record. 18 Ten minutes -- excuse me. In this particular 19 case, 15 minutes is allocated for the taxpayer's opening 20 presentation, followed by 15 minutes for the Franchise 21 Tax Board's presentation, and five minutes is allocated 22 to the taxpayer for rebuttal. 23 Ms. Yee. 24 MS. YEE: Thank you very much, Ms. Olson. 25 Members, we are on Item B4, Frank J. Vigil. And 26 let me have the Appeals Division introduce the matter 27 this morning. 28 Good morning. 3 1 MR. EPOLITE: Good morning, Madam Chairwoman and 2 Members. Anthony Epolite with the Appeals Division. 3 There are two questions before the Board in this 4 matter: First, whether appellant changed his residency 5 from California to Florida in 2000, and if so, when, and 6 whether the Board has jurisdiction to review the post 7 amnesty policy. 8 MS. YEE: Thank you, Mr. Epolite. 9 Good morning, sir. 10 MR. VIGIL: Good morning. 11 MS. YEE: If you'll -- I'm going to ask you to 12 pull right up to the microphone so we may hear you. 13 Okay? If you'll introduce yourself formally for the 14 record, you have about 15 minutes for your presentation. 15 MR. VIGIL: Thank you. 16 My name is Frank Vigil. I've distributed two 17 handouts. One is a time line of key events, it's eight 18 pages long, and the other one is location of taxpayer, 19 which is two pages long. And I've tried to summarize the 20 main points in this Power Point presentation. 21 MS. YEE: Okay. I'm sorry. We have a 22 Power Point that -- does it comport with any of the 23 documents that we have before us? 24 MR. VIGIL: It is. I'm just trying to pull out 25 the key items of the eight-page document so I can 26 summarize it in the 15 minutes. 27 MS. YEE: Okay. Sorry. I did not anticipate a 28 Power Point, so, members, you want to focus on the screen 4 1 then for the presentation? 2 MR. VIGIL: Thank you. 3 MS. YEE: Okay. 4 MR. VIGIL: So at issue, as it was mentioned, is 5 the date of domicile change from California to Florida, 6 and it's 9/21/2000 versus 12/11/2000. 7 The implication is because of the Intel falling 8 share price and the 2000 dot-com bust I had margin calls, 9 which are loans against my Intel stock holdings, and that 10 forced sales of stock from those two dates, 9/21/2000 to 11 December 2000. 12 This is a little bit complicated. I'll try to 13 summarize it. All this information was shared many times 14 with FTB and went back and forth. 15 So what I've tried to do is show month-end 16 statements from Schwab. Kind of gives you a sense of 17 what my financial picture was with Schwab, what the 18 margin loan position was at that time, the margin 19 percentage of my total assets, which is the critical 20 margin call threshold, and then what the account value 21 actually is. Okay? And this shows the month-end 22 statements. 23 So August 31st, 2000, I have total assets of 24 almost $5.7 million, I have a margin loan of 25 approximately $2.7 million, so my margin percentage is 26 47.6 percent. The account value is actually only worth 27 $2.975 million at that point. 28 The reason this is important is whenever the 5 1 margin percentage of total assets exceeds 50 percent, 2 Schwab does a margin call and it gives me two days to 3 sell enough stock to get that below 50 percent. If I 4 don't, they're going to sell more than enough stock to 5 make sure that that occurs. So that's what -- the 6 scenario. 7 And I show that -- well, the key thing that 8 happens -- and it's a ridiculous coincidence -- the day I 9 start my new job in Florida, Intel stock closes at 10 61.48 per share. That's 9/21. On 9/22 it opens about 11 $14 less. This is the back end of the dot-com bust. It 12 closes that day at 47.94. At the end of September it 13 closes at 41.56. The end of November it closes at 38.06. 14 End of December it closes down 30. So this is just 15 falling like a rock. 16 That's forcing all of these sales to occur, 17 these margin loan sales, and that's what I'm trying to 18 illustrate through this one sheet. 19 So by the end of September my asset value has 20 already dropped more than half. It's down to only 21 $2.6 million. My margin loan is dropped by $1.6 million. 22 And I'm still at a 45 percent margin, percentage of total 23 assets. 24 My account value has dropped in one month from 25 $2.9 million to $1.4 million. But it gets worse, because 26 the stock continues to drop. 27 October 31st, same notion, total assets drops 28 again. Margin loan is $831,000. 6 1 I'm at that moment above 50 percent margin, so 2 I've got to sell more stock. The account value is down 3 to $700,000. 4 At the end of November, same kind of notion. 5 Margin loan is a little bit higher, at nine point -- 6 $944,000. Margin percentage is above. Again, stock has 7 to be sold. 8 I finally pay off that full margin loan, get it 9 to zero. In December total assets have dropped from 10 $5.6 million to $750,000. 11 The account value has dropped from -- which is 12 the part that matters -- almost $3 million down to 13 $750,000. 14 So that's what has happened in this window. 15 It's directly due to Intel stock. 16 Maybe something that wasn't clear is right after 17 college I started working at Intel and I worked with 18 Intel for 14 years, so most of my assets were with Intel 19 stock. And it's because Intel stock started at 61.48 and 20 dropped to 30.06. 21 Now, of course, if I had great vision, I would 22 have sold everything on August 31st and none of us would 23 be here talking about this item because everybody would 24 have had taxes paid in full and everybody would have been 25 happy. That's not what happened. 26 That's -- this is what occurred. It wasn't 27 something that I tried to do. It wasn't something that I 28 said, "Hey, let's leave the state and not pay taxes." 7 1 This is what happened. Right? 2 These are macro external forces. You know, 3 nothing outside of the coincidence of I'm starting a new 4 job in Florida on 9/21, that this happens to occur. 5 So I know it's a complicated concept. We spent 6 many different efforts with FTB to try to explain this, 7 with three different -- or four different people with 8 whom we communicated. And, you know, they're kind of 9 like, "So what?" And this to me matters and matters 10 tremendously, because it speaks to the crux of the issue. 11 Any questions? 12 MS. YEE: We're going to have discussion after 13 this -- 14 MR. VIGIL: Oh, sorry. 15 MS. YEE: -- so you should focus your time on 16 your presentation. 17 MR. VIGIL: Yeah. Thank you. Sorry about that. 18 So now going to general rules of law for 19 domicile. It's a new domicile is acquired by an actual 20 change of residence, coupled with the intent to remain 21 there either permanently or indefinitely, without any 22 fixed or certain purpose to return to the former place of 23 abode. 24 My intention to move to Florida. Okay? In 25 August, when Steve Shamrock comes and talks to me, 26 explains the great opportunity that they have, and I 27 believe he's got a tremendous opportunity, I need to give 28 him a bridge loan and I make a bridge loan by the end of 8 1 August of $500,000 to him. So I'm loaning him $500,000 2 to AxessPoint. 3 September I agree to work for AxessPoint. He 4 understands that I'm going to be on vacation, already a 5 planned vacation, for the first three weeks of October. 6 So we're going back and forth talking about the -- the 7 various pieces. 8 The day before I leave to Florida I receive a 9 home listings fax. Thank goodness I did because it had a 10 date stamp on it that proved to the FTB that I wasn't 11 making this up. 12 I moved from Florida -- moved to Florida from 13 California on 9/21. 14 On 9/23 we dotted the I's and crossed the T's 15 and I signed my final work agreement with them. And on 16 the same day I purchased a home in Eustis, Florida. 17 I happened to purchase a home from one of the 18 executives that worked at AxessPoint: Ron and Anita 19 Young. They had two homes -- one in Eustis and one beach 20 home -- but they couldn't afford to keep both homes and 21 so they were more than happy to sell it to me, we could 22 avoid any realtors' transaction fees, and it came fully 23 furnished. So that worked out really well for me, worked 24 really well for them. Nice. 25 As soon as I get back here, the first thing I do 26 is I contact Santa Clara County to remove my homeowner 27 exemption from California home. Why? Because I now have 28 a home in Florida. That's my primary home. That's the 9 1 key thing to go do. I do that. 2 They generate a letter -- it's a form -- with a 3 date on it, and that is dated 9/27, that they mailed to 4 me. I then fill it out, I sign it and I send it back. 5 So that's, you know, hard, locked in. No problem. And 6 then I take off to Italy for vacation as planned 7 beginning of October. 8 So of the 81 total days that we're arguing about 9 between 9/21 and 12/11, I spent outside of California 10 69 percent of the time, in California for 31 percent of 11 the time. 56 days versus 25 days. 12 What am I doing? I'm wrapping up my consulting 13 work and other business that was prior to accepting 14 work -- the job with AxessPoint. I'm meeting with my CPA 15 and that's what requires some time in California. And, 16 of course, I'm going on vacation to Italy. 17 General rules of law for residency, when it is 18 determined that a taxpayer was domiciled in the state, he 19 will be considered a resident of that state if his 20 absence was for a temporary or transitory purpose. 21 So I'm in Florida, I'm domiciled in that state, 22 when I come back to California, all for temporary and 23 transitory purposes, the five times in that window where 24 I came back from California. 25 The first window, 9/25 to 9/30, I'm going on 26 vacation to Italy. I'm flying out of San Francisco 27 airport. So that's why I came through. 28 While I was here, I contacted the Santa Clara 10 1 County for the homeowner exemption change. 2 I come back from Italy and I met with the CPA 3 and I drove my Honda Civic to Florida so I had my car out 4 in Florida. Great. 5 11/3 to 11/7 I'm wrapping up my consulting 6 business. A couple meetings with that. 7 And then the other trip -- it was really one 8 trip, but it was sandwiched, 11/25 to 11/30, followed by 9 12/4 to 12/8. I'm wrapping up consulting business and 10 I'm working -- taking a trip to New Mexico where I owned 11 some rental property -- that's where I'm from -- for 12 those three days and I also had to meet with the CPA 13 associated with that. 14 In the SBE appeal of Long -- this is an 15 unpublished case -- the taxpayers who moved to Australia 16 because of a job promotion, they were nonresidents of 17 California despite maintaining significant connections to 18 California. 19 They owned a fully furnished Hillsborough home. 20 They maintained their homeowner's property exemption. 21 They had balances in California banks with reasonably 22 sized large balances. They had two vehicles which were 23 registered in California. And they also returned to 24 California frequently on business. 25 The Board held that the taxpayers were 26 nonresidents because the case involved taxpayers who left 27 the state for substantial business purposes, where the 28 decision to leave the state was not based on income tax 11 1 considerations. It was taking a five-year assignment. 2 This mirrors my situation, while not exactly, 3 very similarly, though, because I left for substantial 4 business purposes. Here was a huge opportunity for me to 5 go make a big difference in a small company that was just 6 starting up in -- in going into -- I should say revamping 7 and going into a different business market segment that I 8 knew a lot of, I knew a lot about. 9 I invested heavily into the company. I went -- 10 I was essentially the COO of the company. The CEO was 11 doing the outside work, raising financing. I was doing 12 the inside work, helping to operate and manage the 13 company. 14 As I showed with the margin loans and the 15 rationale for why the stock was sold, it wasn't done 16 based on income tax considerations. Right? I bought a 17 house. I started working over there. I moved 18 physically. My intent was clear. All that happened 19 before the margin loan started to kick in. 20 It was just a very unfortunate coincidence that 21 had nothing to do with me. It had everything to do with 22 Intel stock dropping, which is part of the dot-com bust. 23 So it clearly holds. It's sound, you know, common sense 24 prevailing shows it. 25 My experience with FTB, trying to go and help 26 them with this information didn't occur. I spent over a 27 decade in sales, and once I finally in the appeals 28 process got a hold of all their documentation with a 12 1 couple of cases full of paperwork, then it became clear 2 to me that they were so vested into the case that it 3 didn't matter what I was going to tell them or what I was 4 going to show them, they weren't going to let go of this. 5 And knowing that that's how the sales process 6 works, this is why I'm here appealing it to the Board, 7 before the Board. 8 How am I doing on time? 9 MS. OLSON: You have three minutes left. 10 MR. VIGIL: Great. 11 So what I'd like to do is if I could take the 12 Board to look at the handout, the eight-page handout. 13 When I point out that I'd like common sense to 14 prevail, rather than making up a laundry list of items so 15 that their list can be longer than mine, I tried to do it 16 in a more balanced, objective fashion. 17 So if you look at page five and page six, I did 18 an analysis showing a list of the items that -- the facts 19 that benefit the taxpayer, myself, and a list of items 20 that benefit the FTB. 21 Not only did I show that list, but I did a 22 weighting. Some matter more than others. Like investing 23 into the company, like buying a house over there, like 24 changing the homeowner's exemption, like moving 25 physically, like having a clear intention. Those are 26 heavily weighted. 27 Other things like involvement with defunct 28 companies that never get off the ground bear no 13 1 weighting, yet the FTB would like to make a lot of hay 2 out of that because it lets them put more items on their 3 side of the list. 4 So I would really like the Board to consider 5 these two pages, page five and page six, which does a 6 reasonably objective point of listing one item one time 7 and putting some kind of a weighting towards it, and once 8 this is done, it kind of clearly shows that I've got a 9 lot more facts benefitting the taxpayer than there are 10 facts benefitting the FTB in this case. 11 And then, finally, since everybody typically 12 asked for timing where I was, we created a spreadsheet, 13 which is part of many exhibits. I just tried to 14 highlight it. And that was the final two-page handout 15 that I delivered today. And it just shows you where it 16 was and the timing. 17 There we go. Fifteen minutes. Thank you. 18 MS. YEE: Thank you very much, Mr. Vigil. We'll 19 give you time on rebuttal after hearing from the 20 Franchise Tax Board. Okay. 21 Good morning. 22 MR. HOFSDAL: Good morning. My name is Ron 23 Hofsdal and sitting here with me is Teresa Wignail. 24 Today I hope to do a couple of things. First I 25 want to briefly describe what we consider to be the 26 relevant facts here. Then I want to lay out a time line 27 of what actually was going on about -- in this time. And 28 then I want to show how these facts relate back to the 14 1 FTB's contention that the appellant was a resident and 2 domiciled in the state of California. And then, lastly, 3 if there's time permitting, I'd like to address some of 4 the points made by the appellant. 5 MS. YEE: And I should also note you have 6 15 minutes. 7 MR. HOFSDAL: Yes. Thank you. 8 Between September 21st and December 11th, which 9 is the key time here, and the appellant voted in person 10 in the California election, he renewed his California 11 driver's license, he was the agent for service of process 12 for two California corporations, all of his financial 13 transactions originated in California, he kept his 14 California address for all financial, professional, and 15 personal correspondence, and during this time he only 16 owned and possessed one residence and that was his home 17 in Los Altos, California. 18 In addition, there hasn't been one document, not 19 one piece of evidence anywhere that suggests that the 20 appellant spent any more than perhaps two days in Florida 21 during the relevant time period. 22 And also, Florida has specific requirements as 23 to ascertaining a residence of that state and the 24 appellant didn't meet any of those criteria as well. 25 From a time line perspective -- and I -- I'm 26 going to go off of the one that's provided by the 27 appellant here. We agree -- I think it's generally 28 undisputed the fact that prior to September 21st the 15 1 appellant was a long-term resident of California. 2 On September 21st he alleges he departed for 3 Florida, and then on 9/23 he alleges he entered into a 4 consulting contract with AxessPoint. 5 Now, mind you, it's well briefed in our 6 documents, AxessPoint didn't exist at this time. It 7 didn't exist until later in October. 8 And also on the 23rd he agreed to purchase a 9 home in Florida, but the letter that's documenting that 10 transaction actually has his California address on it. 11 Then from 9/25 to December 8th he enters into a 12 series of seven transactions where he sells Intel stock. 13 And we're not disputing -- and I don't think in the 14 motive that's why he was selling is relevant as much as, 15 you know, was he a resident when the stock was actually 16 sold. 17 Now we're going into a lot of the issues here. 18 He alleges he left on December 1st to go to Italy and 19 that he was there for three weeks. The appellant hasn't 20 provided any documentation at all to support any trip 21 whatsoever. 22 We don't dispute the fact he left. We've 23 questioned whether or not it was for three weeks or not, 24 for a couple of reasons, one being the documentation 25 shows that on October 10th he -- as a result of his 26 margin sale -- now, mind you, he just had said that he 27 had two days after a margin call to sell the stock -- 28 that on September -- on October the 10th he sold stock, 16 1 on October 11th he sold stock, and October 12th he sold 2 stock. 3 Then we also have, if you go to our Exhibit F in 4 our opening brief, we have his bank statements. On 5 October 17 he made a deposit into his California bank 6 account. 7 On November 1st, another day he alleges he was 8 in Florida, he again makes another deposit into his 9 California bank account. And then on November 3rd he 10 hits the ATM here in California and makes a withdrawal. 11 And then we have November 7th, which is a big 12 day, because the appellant appeared in person at a 13 California polling place and actually voted in the 14 election. As we all know, one of the requirements to 15 vote is actually declaring your residence and affirming 16 it under penalty, and that was done in this case here and 17 he voted in the election. 18 Then on the 13th and 15th, on days again he 19 alleges he was in Florida, he makes additional deposits 20 into his California bank account. 21 And then on November 16th, approximately six 22 days before his birthday, which is when your driver's 23 license expires, he renews his California driver's 24 license. 25 Then on November 25th, days he admits he's in 26 California, he hits the ATM machine, hits it again on the 27 30th, hits it again on September 7th, and also makes a 28 deposit at his branch on that date as well. 17 1 Now we get to the dates where he allegedly gets 2 more into Florida, but at this time all of his 3 transactions with Intel are pretty much expired. They 4 all ended on December 9th. 5 But on December 11th he finally closes on his 6 home purchase in Florida and he opens up a California -- 7 excuse me -- he opens up a Florida bank account. 8 But I want to point out that after he closed on 9 the -- after he opened the bank account and closed on his 10 home, he writes another 17 checks to his California bank 11 account, makes another 16 deposits and hits the ATM 12 another time, and that's in December after he closes on 13 his home in Florida. 14 And the key to this whole thing is, if you look 15 at the time line, he's basically filling in the gaps of 16 time where we're unable to articulate a presence in 17 California, and he's saying he's in Florida during that 18 time frame. This may or may not be true, but the bottom 19 line is there's not one ATM transaction, not one credit 20 card transaction, there's not one thing that puts him in 21 Florida on any of those days. 22 And mind you, in -- during this -- in this time 23 frame he's running a consulting business, he's allegedly 24 flying in and out of Florida to California. You would 25 expect at least a credit card transaction for Southwest 26 Airlines or something along those lines at least to 27 document in this move. 28 Going into some of the facts. We talked about 18 1 the voting already. But, you know, it's key, I think, 2 that he actually was present in California to vote and 3 essentially admitted to the Registrar of Voters at the 4 polling place that he was a resident of California. 5 Mind you, during the whole time frame he alleges 6 he was in Florida he didn't register to vote once. You 7 could ask yourself why would he do this? And I think the 8 answer is simple: It was convenient for him. And the 9 reason why it was convenient for him is because he was in 10 California. 11 He talked about his business interests. His 12 businesses he talked about he opened up in May 2nd and 13 July 27th. And he alleges that they were new businesses, 14 they didn't have any business, but look at the date of 15 the last one. It was July 27th, which is a week or two 16 after he allegedly met with the representatives from 17 AxessPoint and decided to go there. 18 If you think about that business, he invested 19 himself, according to the documentation he provided, 20 $50,000 in the startup, but he joined this company or 21 started this company with a college friend, a personal 22 friend of his for many years, and he's alleging now that 23 after a week or two of him and his friend and making this 24 big investment he essentially walked away from the 25 business. 26 Now we go to the driver's license. You know, he 27 took an affirmative act to renew his driver's license 28 prior to its expiration. Again, why did he do that? 19 1 Because it was convenient and it was convenient for him 2 to do that in California versus Florida because he was 3 present here in California. 4 Professional services. Both his 2000 and 2001 5 tax returns were prepared by Pon & Associates in 6 Redwood City. 7 Also one of the key aspects, you know, of this 8 whole thing is during this time frame the appellant was 9 awaiting an award from an arbitration that was taking 10 place against his former employer. And despite the fact 11 that we're talking significant money here, if you look at 12 the documents that the Zatmey (ph) had filed with the 13 Securities and Exchange Commission, and they're concerned 14 about the possible liability being in the millions, he 15 didn't once change that address or contact information to 16 his California attorneys. 17 He talked about his financial accounts. All of 18 his financial accounts during this time frame, whether it 19 be the Schwab accounts, which, according to the testimony 20 we just heard here or the presentation that was just made 21 here, was kind of important, because Intel stock was in a 22 state of flux, the stock price was moving all over the 23 place, he needed to be available to hit those margin 24 calls when they were called, yet he didn't provide a 25 change of address to Schwab in order to get this vital 26 information to him on a timely basis. 27 One of the interesting thing is with the Schwab 28 account he did change the address during this time frame 20 1 but he changed it from one California address to another 2 and then back to his address in Los Altos. 3 Again, he did open up his first account in 4 Florida on December 11th, but that's outside of the range 5 that we're really trying to focus in here. The key thing 6 is he did found the need to open it up on December 11th, 7 but he didn't make any withdrawals or deposits into that 8 account until January of the year. 9 Again, as we talked about, we're going through 10 the time line, all of the financial transactions 11 originated in California. All the checks he drafted 12 which were -- averaged about 15 to 20 a month were from 13 his California bank account. His deposits were made to 14 his California bank account. His withdrawals were made 15 from his California bank account. 16 Also, prior to his trip to Italy, he went to 17 California AAA to purchase $3,000 in traveler's checks. 18 In 2000 he purchased a brand-new vehicle but 19 alleges that he essentially had left that in his garage 20 and drove his 1992 Honda to Florida. However, when you 21 look at the DMV records, the DMV records show that that 22 Honda was smogged in California on January 12th, 2001. 23 How could it be smogged in January of 2001 when it was in 24 his driveway allegedly in Florida? 25 As far as his residential property, the only 26 home he owned and possessed at this time was the property 27 on Noel Drive in Los Altos, California. 28 The property didn't close in Florida until 21 1 December 11th. All 9/23 establishes is the fact that he 2 made an offer on a place. But as we talked about 3 earlier, the documentation shows that that information 4 went to his California home. 5 He also had purchased an investment property in 6 New Mexico at this time. He made the offer on it, oddly 7 enough, another coincidence, on December 11th, and 8 that -- of 2000. That closed on June 8th of 2001. All 9 correspondence with regards to that transaction were in 10 California. 11 Again, when it goes to actually counting the 12 days, the only day we could really attribute to the 13 appellant being in Florida is on that closing date of 14 12/11. 15 Again, Italy, we know the entry point was in and 16 out of California, but we're not sure when he left or 17 when he had come. It would be very easy for him to 18 provide a passport stamp or something along that to show 19 a broader time frame. 20 Just to go to a second, you know, to -- 21 residency is -- is kind of a key issue in Florida as 22 well, and they have a list of guidelines as to determine 23 whether or not a person is a resident of that state. And 24 that includes the place where the appellant is registered 25 to vote, he was registered here in California, the place 26 where the driver's license is issued, that was here in 27 California, the place where the vehicles are registered, 28 that was here in California, and whether or not the 22 1 taxpayer filed an intangible tax return. In this case 2 the appellant did not file an intangible tax return for 3 2001. 4 If you go to bed on December 31st of 2000 and 5 you're a resident of Florida, you have a filing 6 requirement in the next year. He did not file in the 7 requirement. 8 I'd like to talk a little bit about the things 9 he had brought up, you know, and we agree -- and we agree 10 with the appellant here. Common sense needs to prevail. 11 And in this case the only evidence and documentation that 12 we have shows a consistent presence in California and 13 some affirmative acts in furtherance of that, which 14 include voting, which includes getting a driver's license 15 and the like. 16 In conclusion, we firmly believe that the 17 evidence supports the FTB's contention in this case that 18 the appellant received substantial benefits and 19 protections from the state of California and was 20 physically present in California during the time in 21 dispute and should contribute to the support of the 22 state. Thank you. 23 MS. YEE: Thank you very much. 24 Mr. Vigil, you have five minutes in rebuttal. 25 MR. VIGIL: Thank you. 26 So I'm already a little confused with what Ron 27 has testified today. First he alleges that I went to 28 Italy, so he's questioning that yet again. And later in 23 1 the same conversation he points out that I took a trip to 2 Italy because I went to get traveler's checks for $3,000. 3 Right? 4 We did provide him with a passport stamp going 5 into Malpensa Airport in Italy on October 2nd, so they 6 have evidence that I'm in Italy. 7 You know, it's -- makes your blood boil when 8 you've got somebody across from you who makes these 9 allegations, you provide them with evidence that proves 10 that they are untrue, and yet they continue to do that. 11 That's what brings in the emotional part of this and this 12 is what makes it very, very difficult. 13 This is why I ran out of money. I spent 14 $120,000 hiring lawyers to try to defend me. And we had 15 to go and spend a ton of time going through these kind of 16 truly ridiculous assertions, with clear evidence in front 17 of him, and yet today he's still making those same -- I 18 mean, it just -- it boggles my mind how that kind of 19 behavior -- I mean, I think that's borderline if not 20 crossing the borderline of abusive. 21 So piece by piece. AxessPoint didn't exist. As 22 he very well knows, in the documentation it used to be 23 called Cyber Play. It was changed. It was changed in 24 September, not after the point. 25 We provided him with the evidence. We dug in. 26 We had to go get Secretary of State out of Florida 27 information. He knows that that's not the case. Does he 28 bother to go and look at that? Did he bother to look at 24 1 a response? No. He'll make the same allegations. 2 MS. YEE: Mr. Vigil, I'm going to ask you, with 3 your time -- 4 MR. VIGIL: Yes. 5 MS. YEE: -- I think for us to get clear as 6 members of the Board, if you'll focus on what 7 documentation you would like us to focus on. The back 8 and forth is not helpful. And I appreciate it's 9 emotional, but I'm trying to just track everything that 10 you're telling us. 11 MR. VIGIL: Okay. I don't have the evidence 12 here as handouts. 13 MS. YEE: No, that's okay. 14 MR. VIGIL: They've already been provided. 15 MS. YEE: I understand that. But just tick off, 16 you know, in rebuttal -- 17 MR. VIGIL: Okay. 18 MS. YEE: -- to the Franchise Tax Board what 19 you'd like us to focus on. 20 MR. VIGIL: Got it. 21 So he's saying that there's seven transactions 22 selling stock. It's not seven transactions. It's about 23 40 different transactions. 24 He points out that the different transactions 25 happened while I was in Italy. Yes, it did happen when I 26 was in Italy. Why? Because Intel stock is dropping, I'm 27 getting calls, I've got to be able to respond to Schwab. 28 They've got an International number that you dial. Those 25 1 transactions were not done out of California; they were 2 done out of Phoenix, their call center in Phoenix. 3 And they were always on top of me in terms of 4 communicating to me via e-mail, "Here's what's going to 5 happen," and then I go and respond by calling them 6 collect and making those trades. So yes, they did 7 happen. That doesn't mean I'm not in Italy. 8 The business interests. $50,000? It's $500,000 9 I invested in them. 10 College friend? I didn't say anything about a 11 college friend. He was a professional colleague that I 12 started working with at -- when I was at Intel in 1995. 13 I graduated college in 1983 and '84. This was somebody 14 who started the Cyber Play business. This was something 15 that fell into my area of responsibility at Intel and 16 that's how I got to know Mr. Shamrock. And five years 17 later he has this opportunity to spin what was a good 18 concept, but he wasn't successful in that arena, to 19 information technology inside Fortune 500 corporate 20 training. It was a good move. Again, he's wrong on 21 that. 22 When he says we didn't provide any information, 23 affidavits, as I've seen in prior cases before the Board 24 that affidavits matter. We got a declaration from Steve 25 Shamrock explaining where I was, that I was over there, 26 et cetera, et cetera, going through the whole thing, 27 which is all in the attachments. He cleverly chooses to 28 ignore that. 26 1 Traveler's checks. I did buy $3,000 worth of 2 traveler's checks before I went to Italy. I did spend 3 $3,000. So I had a ton of cash. That's what I used to 4 live on for about three or four months. I wasn't having 5 to pay anything on credit card. 6 I don't live lavishly. When I'm working, I'm 7 working really hard. I come from Intel. This is what we 8 do. 9 Running a consulting business? What did he say 10 about July, that my business interests -- he's pointed 11 out on 5/2 and on 7/27, he's referring to Inspired 12 Wellness and Preventive Medicine Associates. 13 . August is when I had the first meeting with 14 Steve Shamrock in Palo Alto. It's in your time line. 15 It's in all the information we've sent. 16 August happens to be after July 27th. He knows 17 that. That doesn't stop him from saying it otherwise. 18 He's trying to say that I changed my address for 19 Schwab from the p. o. box and my Noel address back to my 20 p. o. box. Again, incorrect. He's basing that on where 21 Schwab is sending written communication to me with 22 respect to the margin calls. Yes, they are trying to 23 send it to every single address to make sure that they 24 cover their bases on that. 25 When we provided evidence to him that these 26 are the margin calls and here's what says it, that 27 doesn't ease his concern that we've got the margin calls 28 taken care of; he's saying no, there's a different 27 1 address on this. So we go forward with that. 2 That all the transactions are occurred in 3 California, not true. Those ATMs occurred in California. 4 They're reflected by the time line where I am. 5 MS. OLSON: Your time is expired. 6 MR. VIGIL: In terms of those other 7 transactions, they were mailed and they were mailed from 8 Schwab from -- per my instructions from Arizona. 9 MS. YEE: Okay. I'm going to have you stop 10 there. I -- 11 MR. VIGIL: Sure. 12 MS. YEE: -- know we will have questions for 13 you. Okay. Thank you very much, Mr. Vigil. 14 Questions, members? Ms. Alby, please. 15 MS. ALBY: Thank you, Madam Chairman. 16 I am interested in the back and forth regarding 17 this passport. I would like to ask the FTB, did the 18 taxpayer or not give you the passport demonstrating he 19 was in Italy? 20 MR. HOFSDAL: I reviewed the whole file and I -- 21 before coming here. I don't specifically recall seeing a 22 passport page in there. That doesn't mean that -- that 23 one is not in there. But my issue with regards to -- 24 MS. ALBY: But you stated he did not submit a 25 passport, and it would have been very simple to do that. 26 That's -- that's bothersome to me if he did. 27 MR. HOFSDAL: Oh, no. And I think -- I think 28 it's taken out of context is my -- is what I was trying 28 1 to say was I'm not disputing the fact that he went to 2 Italy. What I'm questioning is how long he went. So 3 while he did provide -- 4 MS. ALBY: I'm sorry. You did indeed. I'm 5 sorry, sir. 6 MR. HOFSDAL: Okay. I'm sorry. The implication 7 I had, whether I said it correctly or incorrectly, was 8 that we're not necessarily disputing the fact that he had 9 gone to Italy. What we're questioning is, is how long he 10 went to Italy for. And there's no documentation to 11 substantiate -- he -- in their documents, in their brief, 12 they say he went for two to three weeks, so they don't 13 even necessarily know themselves. 14 MS. YEE: Okay? 15 MS. ALBY: Yes. 16 MS. YEE: Okay. Thank you, Ms. Alby. 17 Ms. Steel. 18 MS. STEEL: I thought taxpayer made it very 19 clear it was three weeks from the beginning. And I don't 20 think it really matter that three weeks or two weeks and 21 he was gone and he was gone, and he said he gave us the 22 copy of the passport, so, you know, if you look at it 23 and, you know, look through the documents, it should be 24 there, first. 25 And second thing is, if we don't have it, maybe 26 somebody lost it there and it's not the proper thing to 27 do for the taxpayers. 28 And I want to ask taxpayer, that AxessPoint, is 29 1 that the startup company? 2 MR. VIGIL: The name of the company was called 3 Cyber Play, Unlimited. They changed to reconstitute the 4 company with some of the same principal executives as 5 AxessPoint, and they did that through Secretary of State 6 documentation in about September of 2000. Cyber Play -- 7 which is Kids Unlimited was the underlying company -- 8 that had been around since 1995. That's when I got 9 involved in them, when I was working at Intel. 10 MS. STEEL: So while you were traveling, then 11 there is a selling and deposits, how did you do that? Is 12 that by e-mail or -- 13 MR. VIGIL: Yeah. The ATMs, I'm physically in 14 California on the dates that I show. So what happens is 15 I'm calling -- because Schwab is keeping track of me. 16 They send me e-mails, I've got to call them, I've got an 17 International phone number, so I'm in Italy, I call them, 18 I make a sale, and then you can authorize them to mail 19 directly to my bank and make a deposit, and that's what 20 they wind up doing. 21 MS. STEEL: Okay. I want to ask Department, 22 that driver's license -- 23 MR. HOFSDAL: Mm-hmm. 24 MS. STEEL: -- and voting records -- 25 MR. HOFSDAL: Yes. 26 MS. STEEL: -- a lot of times people forget to 27 register. Somebody like me or our Board members, we all 28 got elected, when we forgot to register, then, you know, 30 1 you go to the Board place and vote, you know, so I just 2 don't understand why that really matters, because we have 3 a lot of domicile cases, and every time they change 4 the -- their driver's licenses and then their, you know, 5 voter registration, still that they don't go too far 6 because you keep raising bars for all these taxpayers. 7 And then on September 27th that county tax 8 assessor mails home exemption change, you know, it has 9 been moved, so I don't know why that's not really big 10 deal here that, you know, we are not really counting on 11 it. 12 But at the same time I think last four years we 13 been asking Department to give us the checklist or 14 guideline that, you know, what's really that, you know, 15 count as a domicile, they moved or not. But I really 16 don't see it, because every case is so different, and 17 every time they come and, you know, sometimes they do 18 certain things, but you come out with other ideas that 19 no, because of this then you really are not, you know, 20 you know, move, you really didn't move. 21 So I'm asking that our Department, that, you 22 know, could you put something together, the guidelines 23 that what people has to follow. 24 I go to the public, I always tell them that when 25 I move out of California, what I'm going to do it at the 26 border, I'm going to have big press conference and I 27 never going to step in for whole year, so FTB is not 28 going to come after me. That's the way I always tell 31 1 people, because you have to make it very clear here. 2 But some things here for the taxpayer that he 3 did, he really moved, and then he was traveling, and then 4 now that he voted here and he did some transactions for 5 banking, so it's not, but all these bankings you can do 6 by e-mail and you can do by calling, and that's what I 7 do, too. 8 So, you know, I really don't understand that, 9 you know, how much raise, you know, we raise these bars 10 to make that, you know, all these taxpayers can really go 11 through and prove it. And this is not really fair for 12 the taxpayers. 13 So I'm asking Department to put the guidelines 14 or checklist together that, you know, we really have to 15 go through one by one that, you know, this is right and 16 they really moved outside of California or not, so . . . 17 MR. HOFSDAL: And I could address the issues you 18 brought up earlier. The first is, you know, a lot of 19 times people move in and out of the state and they may 20 forget, you know, to register to vote. We don't see that 21 as a big deal. But when you take the affirmative act of 22 walking into a California polling place, confirming your 23 residence is the state of California, and taking the 24 physical act in California of voting, we're going to put 25 a very high premium on that. 26 With regards to the tax assessor's information, 27 we got a different read of the whole tax -- the tax 28 assessor thing. We attached to Exhibit T to our brief 32 1 the letter from the tax assessor. And what essentially 2 happened in this particular case is the taxpayer had 3 filed a change of address and that change of address from 4 one California address to another is what prompted their 5 inquiry as to whether or not the tax exemption is going 6 to go or not. And that's Exhibit T to our -- our brief. 7 And it's also important, you know, and while 8 we're talking about the, you know, the tax exemption is 9 that when he moved back to California -- he was only in 10 Florida for a year -- essentially a year after, he was 11 back here in California, back in his Los Altos home, 12 driving his 2000 Honda that was in his garage, he didn't 13 request that he not have a tax exemption or have that 14 removed from the state of Florida. So I think that's one 15 of the key areas as well. 16 MS. STEEL: Well, for me I'm glad that he came 17 back. At least he start paying taxes here in California 18 first. And second, that when you go to this kind of 19 dot-com companies that, you know, you -- doesn't work out 20 and you just come back, so I don't think it's a really 21 big deal here. But, you know, we have to really look at 22 that what really counts here. But, you know, we don't 23 have those guidelines, and then, you know, we always 24 ended up voting against taxpayers because they are not 25 really meeting those high bars. That's what I'm asking. 26 MR. HOFSDAL: Yeah. And, you know, and, you 27 know, when we're looking at change of domicile, I mean, 28 you look at the -- the cases, there's always an air of 33 1 permanency. This is my permanent home. 2 Here, the fact that he came back I think is 3 particularly telling, because when he gets a little bit 4 of adversity, where does he go? He goes back to his 5 safety and security that he knows in his home here in 6 California. So, you know, there's a question as to 7 whether or not -- what was truly his intent at that 8 particular time as well. 9 MS. STEEL: Well, if he didn't have intention to 10 move, why he bought the house in Florida? That's another 11 thing that we have to count, too. So thank you. 12 MS. YEE: Mr. Vigil, you want to respond? 13 MR. VIGIL: Yeah. There's two things. And this 14 one item is as iron-clad as it can possibly be. And 15 Mr. Hofsdal continues to insist on craziness here. 16 MS. YEE: What's the one item? 17 MR. VIGIL: This is the homeowner's exemption. 18 Right? I call -- as soon as I'm back in California, I 19 call Santa Clara County. I ask them how to remove the 20 homeowner's exemption. Right? This isn't like paying an 21 extra $71 like other taxpayers do. I call them. 22 "No problem. We'll send you the form to fill 23 out." 24 It's dated then when they print it out of their 25 computer system and they mail it to me, I fill it in and 26 I send it. Right? By the book. 27 He continues to distort -- "Well, he asked for a 28 change of address." It wasn't a change of address. He 34 1 is absolutely off base on this. It's not even close. 2 But he can allege it all he wants to and it's kind of -- 3 MS. YEE: Mr. Vigil -- 4 MR. VIGIL: -- this iron-clad point and it's 5 crazy. 6 MS. YEE: Let me have you stop right there. 7 On the homeowner's exemption, the exhibit, 8 Mr. Hofsdal, you said you were referring to from the 9 assessor's office. 10 MR. HOFSDAL: Exhibit T? 11 MS. YEE: Yes. Would you summarize that for us, 12 please? 13 MR. HOFSDAL: Sure. 14 MS. YEE: I just want to get it clear here. 15 MR. HOFSDAL: It says: 16 "Dear Homeowner: It has recently come 17 to our attention that you are making a 18 change of address. If you are moving and 19 wish to terminate your exemption, or if 20 you are requesting a change in your 21 mailing address, please complete the 22 following information." 23 MS. YEE: And I guess -- 24 MS. MANDEL: Which -- which brief is that in? 25 Exhibit T? 26 MR. HOFSDAL: That is in our opening brief, 27 Respondent's opening brief, Exhibit T. 28 MS. MANDEL: Okay. Thank you. 35 1 MS. YEE: Okay. And that -- okay. All right. 2 And then -- okay. So, Mr. Vigil, when you contacted the 3 assessor's office, what was your specific request of the 4 assessor's office? 5 MR. VIGIL: The second phrase of the three 6 things they put in that sentence: "I moved to 7 California" -- "I moved from California to Florida. I 8 need to remove the homeowner's exemption for Noel Drive." 9 That's the letter they sent me, because you have 10 to fill out this form if you're changing your address 11 or -- Mr. Hofsdal, what's the second phrase there? 12 MS. YEE: Mr. Vigil, speak into the microphone. 13 We are not -- 14 MR. VIGIL: I don't have it in front of me. 15 MS. YEE: Please. You're speaking to us. Okay? 16 Please. 17 MR. VIGIL: Sorry. 18 Will you repeat that second phrase there? "If 19 you change an address," comma . . . 20 MR. HORTON: Madam Chair? 21 MS. YEE: Mr. Horton. 22 MR. HORTON: Just to make sure that we don't end 23 up with a colloquy, I would venture to ask the 24 question -- sir, could you reread that statement? 25 MR. HOFSDAL: Yes. Thank you. 26 The top of the letter says the location. It has 27 1900 Noel Drive, Los Altos. And then it has a -- his 28 name, has a date of September 27th, and then has a p. o. 36 1 box, P. O. Box 16451, Stanford, California, which this is 2 presumably sent to. 3 And then it says: 4 "Dear Homeowner: It has recently come 5 to our attention that you are making a 6 change of address. If you are moving and 7 wish to terminate your exemption or if you 8 are requesting a change in your mailing 9 address, please complete the following." 10 And then it just has a bunch of information: "I 11 still own the property but moved," "The property was 12 sold," "Other." 13 And then it has a request for change of address, 14 and the change of address is not to a Florida address, 15 it's to a realtor in Saratoga, California. 16 MS. YEE: Okay. Mr. Vigil. 17 MR. VIGIL: So that realtor happens to also be 18 the same realtor who was managing my rental property in 19 Mountain View, California, at the same point in time. 20 And I will point out that if you do look at the 21 document, the County of Santa Clara does a nice job in 22 bold showing the extra information they add to the 23 standard form letter that they pop in there, so it's 24 really clear that I've requested that. 25 Now, they do a batch process -- turns out they 26 do a batch processing, so once they receive these letters 27 at the end of each month they process it, and that's what 28 then these guys tried to say that it happened at the end 37 1 of October. 2 MS. YEE: Okay. I think -- any other questions 3 on the homeowner's exemption numbers? 4 Okay. Let me pose a question to you, Mr. Vigil. 5 I'm trying to understand your activity in connection in 6 Florida, the consulting contract, the AxessPoint 7 consulting contract. 8 MR. VIGIL: Yes. 9 MS. YEE: Can you speak to what, I guess, the 10 terms of your compensation for carrying out the 11 responsibilities of that contract are? 12 MR. VIGIL: Right. So the contract basically 13 spells out the equivalent of what a COO would do. 14 Mr. Shamrock was -- 15 MS. YEE: I'm interested in any compensation. 16 MR. VIGIL: I'm sorry. So it was $14,000 a 17 month was the compensation. 18 MS. YEE: Okay. 19 MR. VIGIL: And they were expecting to close 20 financing in October. They had a deal lined up for that 21 to happen in October. This is why he needed a bridge 22 loan from me on August 25 -- or in August, and I gave it 23 to him on August 25th. That was to bridge him over to be 24 able to pay payroll and do all that kind of stuff until 25 we got to the -- the round of financing, at which point 26 I'd get my principal back, I'd get some interest and I'd 27 get some stock in the company. And I'm earning $14,000 a 28 month. 38 1 Now, I never got paid $14,000 a month, and so 2 they're saying -- 3 MS. YEE: Just tell us what happened, please. 4 MR. VIGIL: Okay. Well, so I never got paid, so 5 that wound up being an argument against me in that I 6 didn't earn any income while I was in Florida; therefore, 7 I'm not in Florida. That's how the logic goes. Even 8 though I don't earn any income in California, but that 9 doesn't mean I'm not in California. 10 MS. YEE: I'm -- I'm really trying to help you 11 here. I'm trying to understand kind of the specific 12 situation you were in. And when we have this back and 13 forth, I can't get clear -- 14 MR. VIGIL: Fair enough. 15 MS. YEE: -- about what specifically were the 16 conditions and terms under which you were in Florida 17 carrying out the duties outlined in the consulting 18 contract. 19 MR. VIGIL: All right. 20 MS. YEE: So I'm just trying to understand. 21 MR. VIGIL: So specifically get them focused on 22 their quarterly objectives, get them focused on their 23 annual objectives, make sure that they're incentivized to 24 get the right -- I'm talking about the management team 25 and the employees. Right? Focus on the technology 26 piece. Steve wasn't very good on the technology part. I 27 came from Intel. I was very well versed on it. The 28 product had to be developed to move with the next 39 1 generation of the Microsoft operating system. 2 And, in fact, we did provide documents showing 3 them this type of actual work output. But since it was 4 dated prior to -- it was on my computer -- since it was 5 dated prior to 9/21, because I was working on it a little 6 bit before, since I was going to be gone for three weeks 7 to Italy, I was working on it a little bit before, to 8 make it an even trade, you know, they kind of dismissed 9 it. But I had those and I have those if you want to look 10 at them. But that's the kind of work that I did. That's 11 the kind of work that I did at Intel. It was the role of 12 a COO of a company, keeping them focused, helping them 13 migrate the technology forward, helping them be primed 14 while Steve goes and finishes the financing and talks 15 with the customers. 16 MS. YEE: Okay. And you did that -- all of 17 those duties were performed while you were physically in 18 Florida? 19 MR. VIGIL: And then to some degree while I'm 20 not even in Florida yet, right, because I'm trying to do 21 it -- I'm trying to work a little bit in September on 22 that stuff because I'm not going physically -- I'm going 23 on vacation, so to make it fair for them. 24 MS. YEE: No, I understand. 25 MR. VIGIL: And that's why we started the 26 contract as of October 1st was that he wasn't paying me 27 ahead of time and so it seemed like an even trade kind of 28 a thing. 40 1 MS. YEE: Okay. The home that you purchased in 2 Florida, the escrow did not close until December 11th. 3 Where were you residing prior to that? 4 MR. VIGIL: Right. And so I stayed -- it turned 5 out that Ron's house was approximately a block away from 6 Steve's house, and Ron was the person -- he and his wife 7 were the people from whom I bought the house. And that 8 was fully furnished. So I'd stay at Ron's house. And 9 then if they were going to stay in there, I'd go and stay 10 over at Steve's house while I was in Florida. So I was 11 toggling between those two, and it wasn't far away. 12 For me it's not a big deal, because I'm working 13 at the office and I'm working fairly late, so it's just 14 typical how you do it in a -- in a startup environment or 15 in a small company environment. We had 12, 14 employees. 16 It wasn't very large. 17 And I think, to pull back on that point, it's a 18 great opportunity. You know, startups have risk. I 19 moved out there with full intention, everything 20 committed, including my own money, putting my money where 21 my mouth is, investing in the company to help them get to 22 the financing, earn a good income, help set them up for 23 success, and then wind up being a shareholder in the 24 company. I mean, it all makes sense. 25 I mean, it's not just, you know, my intentions 26 were really clear, and they're really clear by 9/21. 27 They're not really clear by 12/11. The only thing that 28 happens on 12/11 for convenience sake is that yes, I 41 1 closed escrow, right, so there's things associated with 2 closing escrow. But that's the only thing that's 3 happening there. 4 It's not like all of a sudden the FTB says, 5 well, your intent is finally clear to us on 12/11. It 6 just happens to be clear because all those Intel stock 7 sales ended. 8 MS. YEE: Okay. I'm going to focus on one other 9 thing: the margin calls. 10 MR. VIGIL: Yes. 11 MS. YEE: Can you just walk us through 12 briefly -- or walk me through briefly what would happen 13 when one of these margin calls would come up? I mean, 14 what were the steps that you took to respond? 15 MR. VIGIL: So -- and -- 16 MS. YEE: And who would you call from where? 17 MR. VIGIL: Got it. Well, it made for not the 18 best vacation, as you might imagine, when this stuff is 19 happening pretty hard and fast while I'm in Italy. 20 So they send me an e-mail, so I've got to go 21 check e-mail every day. And I'm ahead of time because 22 we're eight hours ahead in Europe. So Schwab sends me an 23 e-mail, you're below 50 percent or you're above 24 50 percent, you need to sell stock, so either you've got 25 two days, I either make the trades to get it below 26 50 percent or they're going to sell the stock for me. 27 Now, it's like catching a falling knife, because 28 I'll make enough -- I'll sell just enough stock to cover 42 1 that, but then that day the stock drops again, so I'm 2 back in a margin call. 3 And that's the way this thing works. It's -- 4 it's not a fun process. I mean, you hope that -- if you 5 knew the stock was going to drop, you'd just sell 6 everything right then and there and cover your, you know, 7 at least get out while you're alive as opposed to watch 8 it go all the way down and get burned like I did. But 9 that's how it works. 10 So I get an e-mail, they've got a toll-free 11 number from outside of the country, you call them, you go 12 to their, you know, Executive Services Group, they answer 13 the phone promptly, "Yeah, Frank, here's the situation." 14 Now, at the same time they're mailing stuff to 15 me, they're sending it to my p. o. box, sending it to the 16 Noel address. Yes, all that's true. I happened to grab 17 a couple of those and save them. I provided it to the 18 FTB to show them what a margin call was. And then that's 19 how all of a sudden I get changing my address back and 20 forth. But that's just the way it works. 21 And you could -- you could solve it and then not 22 solve the problem, you could -- the stock could jump up 23 one or two dollars and then all of a sudden you're out of 24 a margin call by yourself without having to sell any 25 stock. That's why you can see at the end of October and 26 end of November my margin percentage is actually above 27 50 percent. So on those last days of the month the stock 28 probably jumped -- you know, I sold stock, but then it 43 1 jumped back up, and I had to clear the margin call 2 through. 3 So, I mean, it's just a lousy situation. I 4 mean, you know, it is what it is. Right? You borrow 5 against your stock and those are the rules and if it gets 6 below 50 percent you've got to sell. And you either sell 7 them or we're going to do it for you. 8 MS. YEE: Okay. Okay. Then let me chime in on 9 the passport issue, if I may. I presume a passport would 10 indicate when you entered Italy and when you left. 11 MR. VIGIL: Well, yes, but as it turns out, the 12 U.S. doesn't do a good job of stamping on your way out, 13 so -- because I looked at it. It has a Malpensa, Italy, 14 stamp, which is really good. 15 And then the other thing is I had one of the 16 checks I wrote, I paid for the airport shuttle to get 17 over there, and obviously, that locks it out in time. 18 And then, you know, I came back. So -- but yeah, the -- 19 MS. YEE: No receipts associated with your 20 travel at all? 21 MR. VIGIL: I've got traveler's checks. I 22 mean -- 23 MS. YEE: Okay. 24 MR. VIGIL: I mean, I was there. I mean, if 25 they had asked me for -- 26 MS. YEE: I understand. Here's -- 27 MR. VIGIL: -- receipts while I was in Italy I 28 could have provided them, but they never asked for that. 44 1 I mean, honestly, nobody ever alleged anything that I 2 wasn't in Italy until Mr. Hofsdal got involved at the 3 tail end of the process. 4 MS. YEE: Okay. We're -- we're trying to fill 5 in gaps, so I don't mean to -- 6 MR. VIGIL: Sure, sure. 7 MS. YEE: -- intend to be invasive. 8 Okay. Any credit card receipts that speak to 9 your duration in Italy? 10 MR. VIGIL: Well, I don't think the -- I -- you 11 know. 12 MS. MANDEL: Doesn't the U.S. stamp when you 13 come back in? 14 MR. VIGIL: Yeah, there should have been a stamp 15 when I come back in. See, it's never been contested 16 again until I got to Mr. Hofsdal -- 17 MS. YEE: That's okay. 18 MR. VIGIL: -- about being there. 19 MS. YEE: Let me do this. I don't want to keep 20 having you contest back and forth. 21 MR. VIGIL: I -- 22 MS. YEE: I want you to help us get clear. 23 MR. VIGIL: I think if I dug into that 24 passport -- 25 MS. YEE: If you have your -- wait a sec. 26 MR. VIGIL: Go ahead. 27 MS. YEE: Please. Do you have your passport 28 still? 45 1 MR. VIGIL: If I did, I'd have it be -- 2 MS. YEE: You don't? 3 MR. VIGIL: I'd be happy to bring it in to show 4 it. Well, it's an old passport. Right? I then have a 5 new passport, so -- 6 MS. YEE: Okay. 7 MR. VIGIL: -- I don't know if I kept it. 8 MS. YEE: Okay. 9 MR. VIGIL: I ask for them because I like my 10 stamps, but . . . 11 MS. YEE: Okay. I mean, that would help. 12 MR. VIGIL: I'm sure I can provide -- if I have 13 it, I'm happy to provide it. Let's put it that way. 14 MS. YEE: All right. All right. Okay. Thank 15 you. 16 Members, other questions? 17 Thank you, Mr. Vigil. That's helpful. 18 Other questions? Mr. Horton? 19 MR. HORTON: Um, let's try. A question of 20 the Department. Can you share with us what the -- what 21 the criteria is to establish residency and whether or not 22 an individual can actually have residency in two 23 different states and how domicile plays into this? 24 MR. HOFSDAL: Sure. I'll be happy to. 25 I went to school in Nashville and I went to 26 school with a lot of people from Texas. And to them the 27 "Big D" was Dallas, but to us, in this arena here, the 28 "Big D" is domicile. That's where it starts off with. 46 1 We have to determine first where the person is 2 domiciled, if he's inside of California or outside of 3 California. 4 Once we come to that conclusion, then we weigh 5 the factors, the brag factors, et cetera, et cetera, to 6 determine whether or not he was inside or outside of the 7 state for a temporary or transitory purpose. 8 So, for example, if somebody is not domiciled in 9 the state of California, right, we question through the 10 brag factors and the numerous factors whether or not he 11 was in California for other than a temporary or 12 transitory purpose. 13 If somebody is domiciled in the state of 14 California, like we assert the appellant is here, then we 15 question whether or not he was outside for other than a 16 temporary or transitory purpose. 17 MR. HORTON: Now, let me interrupt you -- 18 MR. HOFSDAL: Yes. 19 MR. HORTON: -- if I may. And I'm really going 20 through this for clarification. 21 MR. HOFSDAL: Sure. 22 MR. HORTON: I would ask the taxpayer to attempt 23 to -- I'm going to -- I'm going to follow up the question 24 to allow you an opportunity to respond specifically to 25 their explanation. The domicile -- 26 MR. HOFSDAL: Mm-hmm. 27 MR. HORTON: -- in this case is not based on -- 28 or is the domicile based on where he -- his previous 47 1 actions or the actions as of the date of consideration? 2 MR. HOFSDAL: That's a good question, because 3 most of the cases out there really focus in on the brag 4 factors, the temporary or transitory. That's not a whole 5 lot out there with regard to the domicile. In fact, 6 there's one case out there, I have it written down here, 7 that essentially says the key factor to look at for 8 domicile is where is he registered to vote and did he 9 vote. 10 But when you look at cases like Noble and cases 11 like that, there are basically a concurrence that we have 12 kind of this intent on this side and we have kind of this 13 physical presence on this side, and then when you get 14 kind of these two sides to meet here in the middle, 15 that's when you have a new domicile. 16 So you -- and you could have intent but not 17 physical presence; you could have physical presence but 18 not intent. But when those two merge and meet, that's 19 when you have a change in domicile. 20 And -- and then you have all of the, you know, 21 the kind of the fun quotes you get from all the cases, 22 you know, it's the most permanent and settled connections 23 and things like that, but as far as determining domicile, 24 you know -- 25 MR. HORTON: So what you're -- and my 26 apologies -- 27 MR. HOFSDAL: That's okay. 28 MR. HORTON: The action of the party will 48 1 demonstrate the intention. 2 MR. HOFSDAL: True. 3 MR. HORTON: And what actions did the taxpayer 4 take that demonstrated his intention relative to your 5 position and how did you weigh the two? 6 MR. HOFSDAL: Right. In this case here, we're 7 looking at both, again, the intent and the domicile. 8 And I talked about earlier one of the key 9 factors for me in determining intent, you know, it's kind 10 of a retrospective approach, but the key is, did he ever 11 come back to California? Because, you know, it's the 12 most permanent and settled statistics. Here in a year he 13 was back in California. 14 If you have this permanence in the sense of 15 actually easing out of California, when you meet that 16 adversity, right, do you go back to the mother ship or 17 not? Do you go back to the safety and security of 18 California or not? And in this case he came back to his 19 home in California. 20 We also look, in this case here, you know, he 21 filed some specific documents with the state of Florida. 22 He filed an ad valorem tax exemption. He filed a 23 declaration of domicile. 24 When you look at those documents, signed by him 25 under penalty of perjury, he clearly articulates in those 26 documents that he became a domicile of Florida on 27 December 11th, 2000. 28 MR. HORTON: All right. Thank you. 49 1 MR. HOFSDAL: Yes. 2 MR. HORTON: Sir, I don't think anyone has the 3 ability to dispute your intentions, and so I personally 4 would agree with whatever you convey that your intentions 5 are. But to the question of what actions did you take to 6 sever your residency and domicile in California and 7 establish it in Florida and then weighing the two, can 8 you help me understand why you have more of a presence in 9 Florida than you do in California and at what point that 10 occurs? 11 I believe, subsequent to the transaction, it 12 appears that, you know, you gradually or you eventually 13 did make that separation, but at the point in which a 14 transaction took place, weigh the two for me, help me 15 understand that this -- you know, you had established a 16 residency in California. Disregard intent for a second 17 and let's just deal with the actions and the fact 18 pattern. 19 MR. VIGIL: Okay. Let me precursor it with the 20 narrative of how startups go. Right? It's a great 21 opportunity. 22 MR. HORTON: I don't -- I don't -- I don't know 23 that that -- for me -- 24 MR. VIGIL: Okay. 25 MR. HORTON: -- I don't know that that matters. 26 I mean, I'm certainly willing to listen if you want to 27 share that information, but I would suggest that you 28 focus on my specific question. 50 1 MR. VIGIL: Okay. Sorry. 2 So the actions that I affirmatively took. 3 Right? So -- so the intent is clear, but it's more of 4 what actions did I take. Right? So I'm moving out 5 there. I'm buying a house. I get fax listings ahead of 6 time. I buy the house. I change the homeowner's 7 exemption. I'm working out there. Yes, I have to go to 8 Italy, but they know that ahead of time, so I'm, you 9 know, doing the work, I've done the work. 10 MR. HORTON: So did you sell your home here in 11 California? 12 MR. VIGIL: That was not a good time to sell the 13 home. And I -- honestly, I didn't have enough time to do 14 anything at the home to be able to even prepare it. I 15 also had a rental in Mountain View. 16 MR. HORTON: Let's just deal with the home. 17 What did you do to change your residency? You opened 18 escrow. And being mindful you can open escrow all over 19 the world. You can have as many homes as you -- as you 20 want, and that will not alter the tax treatment here in 21 California until, in fact, you change your actual 22 residency. 23 MR. VIGIL: Right. 24 MR. HORTON: You're actually now living and 25 operating and functioning outside of the state of 26 California. 27 MR. VIGIL: I understand. 28 So I move over there and I am working and I am 51 1 functioning, operating out of the state. You're right in 2 that it doesn't close escrow, and, right, and it's going 3 to be more of a -- of a function from the date of the 4 purchase to the date of closing escrow is more of a 5 function of -- 6 MR. HORTON: So you don't -- you don't own a 7 home? 8 MR. VIGIL: Well, I purchased a home but I don't 9 own it because you've got to get the loan and the loan 10 takes a few weeks to process. Correct? Right? 11 MR. HORTON: So for that purpose -- for the 12 purpose of the home, you're still in California because 13 you really -- just the home. We can go on to another 14 factor that you might want to share. You don't own a 15 home at this point. Your intent -- 16 MR. VIGIL: Correct. I purchased it. Right. 17 MR. HORTON: The escrow could not close or it 18 could close or it could be some challenges and you -- and 19 even in closing the escrow, at that point you could 20 decide that that would be a vacation home. I mean, 21 clearly your intent is to establish your residency, but 22 it hasn't occurred yet. The escrow has not closed, you 23 have not taken possession, and you have not transferred 24 your residency for all legal purposes at this point. 25 MR. VIGIL: Well, not quite, though, because as 26 soon as I purchase a home, the first step I take is I 27 remove the homeowner's exemption here in California. 28 That's a very affirmative, positive action that I've 52 1 moved out of the state, not to mention that I'm 2 physically working over there. 3 MR. HORTON: What date? 4 MR. VIGIL: That was 9/25 is when I called the 5 county. And the county responds with a letter dated 6 9/27. So that is absolutely an iron-clad thing, which is 7 why I was really frustrated with -- 8 MR. HORTON: Did you consummate that or -- 9 MR. VIGIL: I did. And I mailed it on -- 10 MR. HORTON: How did you -- 11 MR. VIGIL: This gentleman showed it to me, 12 which is great, because I have it here. I didn't have to 13 ask to see it. And -- and they processed it, because 14 that's what you affirmatively do. Right? I physically 15 moved and I got a -- I'm no longer a resident of 16 California, so -- 17 MR. HORTON: That's not -- that's not enough, 18 but that's certainly one. 19 MR. VIGIL: Okay. 20 MR. HORTON: Keep going. 21 MR. VIGIL: So -- so actions. Right? I've 22 loaned the company -- they kind of beat me up on -- the 23 FTB was beating me up on, "Well, they never paid you, so 24 you didn't earn any income." But it was pointed out to 25 me that the fact that I invested into the company shows a 26 really big commitment over there to the degree I'm 27 getting negative income from them, because it's a 28 positive action that I've moved and I'm committed to this 53 1 company. I've signed a contract agreement with -- 2 contractual agreement to go work for them. 3 MR. HORTON: Now, you could have made that loan 4 from anywhere in the world and still had your residency 5 in California. Did you actually go there in Florida, set 6 up an office, begin to work? 7 MR. VIGIL: Yes, sir. 8 MR. HORTON: You did? 9 MR. VIGIL: Yeah. 10 MR. HORTON: You had a -- 11 MR. VIGIL: We had an office at AxessPoint 12 headquarters. 13 MR. HORTON: And what was in California at the 14 point that you had the office in Florida? 15 MR. VIGIL: The only two things in California is 16 a rental property on Gladys Avenue and an empty home, you 17 know, a vacant home in -- 18 MR. HORTON: Vacant only because you were not 19 there? 20 MR. VIGIL: Correct. And my -- you know, a lot 21 of my personal possessions weren't there, either, because 22 I took them with me. 23 MR. HORTON: Okay. And so there's no other 24 business activity in California at that point? 25 MR. VIGIL: No. I had to close things down, you 26 know, other business arrangements that I had, other 27 consulting engagements with entities, so -- 28 MR. HORTON: You had other consulting 54 1 engagements? When did you close them down? 2 MR. VIGIL: I tried to do as much as I could 3 before I moved to Florida, but there were a couple of 4 meetings that I had to take. One of the companies was 5 Nav 3D. I'd done some marketing work for them. So I met 6 with them to make sure that they had all their pieces 7 done. So there were a couple of things there. 8 MR. HORTON: So you had generating -- 9 income-generating activity in California and Florida? 10 MR. VIGIL: No. There was no income being 11 generated from -- when you're working for equity. Some 12 of these companies wound up not paying anything, so I 13 didn't -- 14 MR. HORTON: But they also wind up paying. 15 MR. VIGIL: No. 16 MR. HORTON: They don't? 17 MR. VIGIL: They don't pay you. 18 MR. HORTON: You just work -- 19 MR. VIGIL: When you work for equity, you're 20 just working -- you're hoping that something good happens 21 to them and then maybe you get paid out at the end. 22 And probably of the ten entities that I worked 23 for, only one wound up paying out at the end. It's 24 speculative. 25 MR. HORTON: But that's -- that's -- 26 MR. VIGIL: Right. But the work was done prior 27 to moving to Florida. None of the work's done during the 28 visit. 55 1 MR. HORTON: Yeah, but it wasn't free. It 2 wasn't pro bono. You just -- 3 MR. VIGIL: No, no. None of this is pro bono. 4 MR. HORTON: Oh, okay. 5 MR. VIGIL: It might turn out to be pro bono, 6 but that wasn't the intention. 7 MR. HORTON: All right. 8 MR. VIGIL: You're trying to help them succeed. 9 MR. HORTON: What's another factor? 10 MR. VIGIL: I'm trying to think of the key 11 positive things that I did here. Bought a house, which I 12 sold at the end of 2003, took a job, physically moved, I 13 think there was a combination of intent and your 14 physicality, and started work. I mean, I'm not sure -- 15 it's not like I belonged to a nonprofit organization or 16 some community organization or something. I worked. All 17 I did was work. 18 MR. HORTON: All right. Thank you, sir. 19 MS. YEE: Thank you, Mr. Horton. 20 Other questions, members? 21 Okay. Hearing none, may I have a motion, 22 please? 23 MS. MANDEL: Take the matter under submission. 24 MS. YEE: Motion by Ms. Mandel to take this 25 matter under submission. Is there a second? 26 MR. HORTON: Second. 27 MS. YEE: Second by Mr. Horton. Without 28 objections? Such will be the order. 56 1 Mr. Vigil, thank you very much -- 2 MR. VIGIL: Thank you. 3 MS. YEE: -- for your patience. 4 Franchise Tax Board, thank you. 5 We will discuss your matter later today and send 6 you written notice of our decision. 7 Thank you. 8 Members, let's take a five-minute recess. 9 ---o0o--- 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 57 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, CAROLE W. BROWNE, Hearing Reporter for the 8 California State Board of Equalization, certify that on 9 November 18, 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 57 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: December 6, 2010 17 18 19 _________________________________ 20 CAROLE W. BROWNE 21 Hearing Reporter 22 23 24 25 26 27 28 58