New York Administrative Law Judge Upholds Taxation of Couple as Statutory Residents

On August 22, 2019, a New York Administrative law judge, in In Re Coulson, upheld the New York Division of Taxation’s determination that a couple was a statutory resident on the basis that the husband spent more than 183 days in New York during tax years at issue and maintained a permanent place of abode in New York.

Here, the taxpayers lived in New Jersey, but the husband worked as an investment professional out of a New York office. The taxpayers purchased a home located in Northville, New York, for $290,000.00 prior to the tax years at issue. The home is located more than 200 miles from his office. This home has two stories with five bedrooms and three bathrooms. The home has year-round climate control. In addition to the main house, there is an attached apartment with a separate entrance and key. The apartment is occupied year round by a tenant who had an existing rental agreement with the prior owners of the home. The taxpayers used the home for 2-3 weeks a year for vacation purposes.

There are two bases upon which a taxpayer may be subjected to tax as a resident of New York, namely (A) the domicile basis or (B) the statutory residence basis, i.e., the maintenance of a permanent place of abode in New York and physical presence in New York on more than 183 days during a given taxable year. Since the taxpayers were domiciled in New Jersey during the audit years, the issue was whether the taxpayers were liable for New York State personal income tax on the statutory residence basis.

As there is no dispute that the taxpayer was physically present within New York for more than 183 days, the sole issue in this case involved whether the taxpayers maintained a permanent place of abode in New York during the years under review.

Permanent place of abode is interpreted in the New York Tax Division’s regulations at 20 NYCRR 105.20 (e) (1), in pertinent part, as: “[a] permanent place of abode means a dwelling place of a permanent nature maintained by the taxpayer, whether or not owned by such taxpayer, and will generally include a dwelling place owned or leased by such taxpayer’s spouse. However, a mere camp or cottage, which is suitable and used only for vacations, is not a permanent place of abode. Furthermore, a barracks or any construction which does not contain facilities ordinarily found in a dwelling, such as facilities for cooking, bathing, etc., will generally not be deemed a permanent place of abode (emphasis supplied).”

The taxpayer’s attempted to rely on the New York Court of Appeals decision in Matter of Gaied v New York State Tax Appeals Trib. (22 NY3d 592 [2014]) to emphasize that, since their property was maintained for another’s use, such residence does not qualify as a permanent place of abode for them. Unfortunately, unlike Gaied where the entire property was used and occupied by others, here, only a small portion of the property was used and occupied by others. Consequently, the Administrative Law Judge had little trouble concluding that the taxpayer’s maintained a permanent place of abode in New York.

This case highlights the significance of maintaining ownership or an interest in any house or apartment in New York to the extent it is available for a taxpayer’s use. In that situation, the taxpayer is likely to be found to have a permanent place of abode in New York and thereafter only be able to escape classification as a New York statutory resident by establishing that he or she did not spend more than 183 days during the tax year in New York and be able to produce sufficient evidence and records to establish that. For assistance in tracking tax days in New York and other states, use the Domicile365 app to automatically monitor day counts.

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