Business News Select | SMPost | Terms

Term: Home (legal definition)

7 Mar 2015

DEFINITION OF ‘HOME’
The legal definition of ‘home’, or ‘domicile, is the place where a person has their permanent primary residence to which they return, or intend to return. This becomes important when determining what state of probate of a deceased person’s estate is filed in, which state can levy income or inheritance taxes, where a party can initiate divorce proceedings, or whether there exists a “diversity of citizenship” between parties which may grant federal courts jurisdiction over a lawsuit. Where a person has several residences it may be a matter of proof as to which is the state of domicile. A business has its home in the state where its headquarters is located, and not necessarily in the state where it was incorporated or where it generates the majority of its sales.

The concept of home also matters for income taxation for ex-patriot or foreign workers. Under source jurisdiction (a.k.a. territorial tax system) a country levies taxes on all income generated within its borders. Wealth transfer taxes are levied on assets located within or transferred within a country. Under residence jurisdiction, a country taxes the global income of its residents, whereby citizens and residents pay wealth transfer taxes, regardless of the world-wide location of the assets.

INVESTOPEDIA EXPLAINS ‘HOME’
The Smith family have a primary residence in New Jersey. Mr. Smith own a business, SmithCo, in New York and owns a small apartment there where he stays if he has to work late. SmithCo sells mainly to customers in California. The Smith’s also have a vacation home in Florida and a number of assets kept in Switzerland. For legal purposes, the state of New Jersey is their home jurisdiction, and New York is the home of SmithCo. The Smiths may also be responsible for paying any taxes owed on their foreign assets.

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