• New York: Division of Tax Appeals Concludes that Taxpayer is Domiciled in New York, not Florida
  • July 30, 2015 | Authors: David H. Godenswager; David M. Kall; Susan Millradt McGlone
  • Law Firm: McDonald Hopkins LLC - Cleveland Office
  • In 2011, the New York Division of Taxation (NYDOT) issued a notice of deficiency to a taxpayer, asserting that he owed nearly $500,000 of additional personal income taxes for 2007, plus negligence penalties and interest. This stemmed from the NYDOT’s decision that the taxpayer was residing in New York in 2007, and thus was subject to New York state and city income taxes.

    The taxpayer argued that he was a Florida resident, and was not subject to New York tax laws, but in a case that finally concluded last month, he was not able to prove by clear and convincing evidence that he was a non-resident.


    The taxpayer was born in Italy in 1930 and eventually moved to New York. In 1975 the taxpayer started a furniture business in New York. In 1981, he opened a showroom in Miami and also purchased an apartment in Key Biscayne, Florida. He continues to reside there when he is in Florida.

    The taxpayer’s furniture business grew, and he began to invest in rental real estate in New York and Florida. Since 1975, the taxpayer has handled the administrative and bookkeeping functions of his furniture business (as well as his Florida corporations) in New York City. The tax filings for the Florida businesses contain a New York address. The taxpayer had long maintained a travel pattern of flying to Florida on Friday and returning to New York on Tuesday.

    In 2007, the taxpayer sold one of his Florida properties for more than $6.5 million, realizing a long-term capital gain of $5.3 million. Some time after December 2007, the taxpayer filled out a New York state tax form indicating that his address was in Key Biscayne, that his county of residence and school district were in New York—but also that he did not maintain living quarters in New York in 2006.

    For the 2007 tax year, he filled out a non-resident and part-year resident income tax return, on which he indicated his address was in Key Biscayne. Once again, he also checked “No” to the question “Did you or your spouse maintain living quarters in New York State in 2007?”

    The NYDOT's audit

    In 2010, the NYDOT conducted an audit of the taxpayer’s 2007 return. Pursuant to the audit, he declared that he was present in New York for 150 work days and 10 non-work days in 2007. The NYDOT sought documentation to substantiate this claim, which the taxpayer provided but ultimately, the auditor determined it to be insufficient proof to establish his non-residency. The auditor calculated that the taxpayer had actually been present in New York for 169 days in 2007, 150 of which were work days. This, combined with an extensive analysis of the documentation, lead to the conclusion that the taxpayer had failed to show that he had abandoned his New York residence and acquired a new residence in Florida for that year. The NYDOT calculated a total New York tax liability of $488,718, plus interest and negligence penalties of 5 percent plus 50 percent of the interest due.

    Competing positions

    At the hearing, the taxpayer presented various summary documentation intended to verify his claims. The taxpayer also claimed that while his residence was in Key Biscayne, his wife’s residence was in New York, and that he commuted between New York and Florida regularly to spend time with his family in New York.

    The NYDOT contended that the limited facts supporting the taxpayer’s position were offset by the many others that indicated that he retained his New York residence. The factors weighing most heavily against the taxpayer were his:
    1. Retention and continued use of this New York residence;
    2. Unchanged habit of commuting between New York and Florida;
    3. Sustained levels of time spent in New York; and
    4. Active business ties in New York.
    The NYDOT recognized the well-established legal principle that an existing residence continues until a new one is established, the evaluation of which “frequently depends upon a variety of circumstances which differ as widely as the peculiarities of individuals.” The test is “whether the place of habitation is the permanent home of a person, with a wide range of sentiment, feeling and permanent association with it,” ascertained in part by one’s “general habit[s] of life.”

    In light of all of this, the NYDOT did not find the taxpayer’s position to be credible regarding his intent to make Key Biscayne his residence during the relevant years.