(4 minute read)

Written by: David A. Paddock, CPA, M. TAX.

Have you ever considered moving to Nevada to escape California’s high income tax? Gilbert Hyatt not only considered it—he did it!

In the early 1990’s, Gilbert Hyatt invented a computer chip that hit gold. He patented the chip and fled to Nevada to escape California’s income tax. (California’s tax rate is one of the highest in the nation. Nevada does not have an income tax.) In 1993, a state tax auditor read about his lucrative patent in the newspaper and decided to review his 1991 income tax return. The return showed no income from the patent. So the auditor initiated an audit. Let the games begin!

What did the auditor do?