New York Taxation

So how much of your income might NY tax? Lots more than one couple thought. First a little background then we’ll review a recent case that will send tax shivers up your spine.  You can be domiciled in one state under its tax laws, and simultaneously be deemed a statutory resident in another state under its tax laws. You can be taxed in both. Ouch. While sometimes one state will offer a credit for tax you paid to another state the credits are not always available and the offset is not always perfect. John Barker worked in investments in NYC more than 183 days of every year. The couple owned a vacation pad in the Hamptons and spent a mere 19 days or less each year, what the court called “brief sojourns.” The court found that the house was more than a mere “camp or cottage” under 20 NYCRR 105.20(e) that would exempt it. The court found that the vacation house was useable year-round and the Barkers maintained “dominion and control over the dwelling.” See Matter of Roth, Tax Appeals Tribunal, March 2, 1989. These factors supported the court concluding that the house was a “permanent place of abode.” The combo of work and house proved costly and the Barker’s got a $1M tax bill from the NY! By determining that the Barkers were “resident individuals” for NY tax purposes they were taxable on all income, not just NY source income. The court remanded to an administrative law judge to determine if penalties for filing false tax returns should be assessed too. Matter of Barker, 822324. In New York if you have a permanent place of abode which serves as a living quarters for more than 11 months a year and you’ll be deemed domiciled in NY for tax purposes. Some folks will try to rent the apartment for two months or more in a year to avoid that property or apartment from being characterized as a “permanent place of abode.”  Sate tax auditors will look at what happened to your stuff, whether the tenant was unrelated, whether a real rent was paid, and any other relevant fact to determine if the lease should be respected. If you have a vacation home in NY and have been filing as a non-resident, call your CPA fast.

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