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FTB and Gilbert Hyatt face off before the Board on residency issue

August 30, 2017

A battle that has been brewing for years finally came to a head yesterday when the Board heard two cases stemming from a decades-old residency audit of Gilbert Hyatt. (Appeal of Gilbert P. Hyatt (August 29, 2017) Cal. St. Bd. of Equal., Case Nos. 435770 and 446509) At issue was approximately $55 million dollars in tax, interest, and penalties.

The Board ruled mostly in Hyatt's favor, finding that he became a resident of Nevada in late 1991, and that he was not liable for fraud penalties. However, the Board did find that the income from Mr. Hyatt's patents in 1991 was business income, and that it was sourced 100% to California.

This case began in 1993, when the FTB began a residency audit questioning Gilbert Hyatt's 1991 change of residence and domicile from California to Nevada. Both the taxpayer and the FTB have accused each other of foot-dragging and many other indiscretions. There have also been allegations of anti-Semitism, scandalous allegations regarding a fired FTB employee, a jury award of $388 million (currently on appeal in Nevada), and destroyed documentation.

Those of us who have been following this case were very interested in yesterday's hearing, and it did not disappoint. The hearing began at 9:30 a.m. and didn't end until after 10:30 p.m., with Hyatt testifying on his own behalf the entire time.

To watch a recording of the hearing, go to:

www.youtube.com/watch?v=ENIginziJYw

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