Financial planners can share horror stories about clients who suffered through residency audits conducted by state tax authorities and, in some cases, even failed to pass those tests.

One inventor, Gilbert Hyatt, who received a lucrative patent for a microprocessor and moved from California to Nevada has been engaged in a nearly quarter-century-long legal battle with California auditors about his residency status. The California residency auditors have conducted aggressive investigations, and even rifled through his garbage, the inventor has asserted in court filings.

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