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Sharon & John Askwith



In 1996, taxpayer moved to New Mexico from Illinois and became a New Mexico resident. In 1998, taxpayer received a payment under the terms of a phantom stock agreement. The payment represented deferred compensation for work taxpayer performed for his former employer in Illinois.  Taxpayer filed a 1998 New Mexico personal income tax return allocating only a portion of the phantom stock payment to New Mexico and claiming a refund of income tax withheld by his employer. The Department partially denied the taxpayer’s refund and adjusted taxpayer’s return by allocating the entire phantom stock payment to New Mexico and giving taxpayer credit for tax paid to Illinois on the same income. The taxpayer protested, arguing that only Illinois has the right to tax compensation for work performed in Illinois. Held: New Mexico has the right to tax the entire income of its residents, without regard to the source of that income, and the total amount of the phantom stock payment should have been allocated to New Mexico. Protest denied.