Rosen Seymour Shapss Martin & Company LLP 

Certified Public Accountants & Profitability Consultants
 
State and Local Taxation Services Group

 

 UPDATE

New York Residency Redefined
Dear Clients and Friends of the Firm: 

  

In our SALT Services Group Blast on July 28, 2011, we spoke of the case, Matter of Gaied, where the issue was whether, under the facts thereunder, the taxpayer maintained a permanent place of abode.  The taxpayer lost at an Administrative Law Judge ("ALJ") hearing. The taxpayer filed an exception, whereby the NYS Tax Appeals Tribunal reversed the ALJ's determination. The NYS Department of Taxation then brought a motion for reargument before the NYS Tax Appeals Tribunal, which, despite the taxpayers objection, was granted.  The Tribunal then reversed its own initial decision and held for the NYS Tax Department.  The taxpayer appealed that decision to the New York Supreme Court, Appellate Division Third Department, which on December 27, 2012, issued an opinion in favor of the NYS Tax Department.  The taxpayer then appealed that decision to the New York Court of Appeals, the states highest court.

 

That Court's decision, which was rendered on February 18, 2014, reversed the previous decision and found in favor of the taxpayer. So what does this all mean? The NYS Tax Departments position, which had been sustained by the lower courts, was that the permanent place of abode component of the definition of statutory resident was satisfied so long as the taxpayer maintained the dwelling regardless as to whether the taxpayer used the dwelling as a residence. The Court of Appeals, in holding for the taxpayer, stated "that in order for an individual to qualify as a statutory resident, there must be some basis to concludes that the dwelling was utilized as the taxpayer's residence." The Court further stated, "in order for a taxpayer to have maintained a permanent place of abode in New York, the taxpayer must, himself, have a residential interest in the property."

 

This is an important victory for taxpayers in that it sends a message that the law was meant to tax individuals who really live in New York State. It will be interesting to see how the New York State Tax Department responds to this case and how this decision affects current open cases and future audits.  What is not clear, is how do you determine whether the dwelling was utilized as the taxpayer's residence?  Suppose for example, a taxpayer is snowed in New York State for a few days so they stay in the dwelling?  What about a short stay during a holiday or business trip?  Or, in other words, how many days of a stay in the dwelling would constitute utilizing it as the taxpayer's residence?  The answer is that we all must await further guidance.

 

Should you have any additional questions, please feel free to contact Steven J. Eller, CPA, JD at (212) 303-1051 or via email at seller@rssmcpa.com. 

 

Sincerely,

  

Rosen Seymour Shapss Martin & Company LLP
To ensure compliance with requirements imposed by the IRS, or any state and local taxing authority we wish to inform you that any tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or applicable state or local tax law provisions or (ii) promoting, marketing or recommending to another party any transaction or tax-related matter addressed herein.
 
The publication provides general information.  It does not constitute an opinion of RSSM, it is not a substitute for professional advice and does not create an accountant-client relationship.  You should obtain professional advice before taking or refraining from taking any action based on the information in this publication.
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