A New Trend in New York State Residency Cases

Brian Gordon, CPA
Published Date:
Jul 1, 2014

For former New Yorkers, convincing New York state that a change of domicile occurred is still very difficult. Several recent residency cases have resulted in a loss for taxpayers and a win for New York state. The most recent case, theMatter of Tatiana Varzar (formal hearing held before Administrative Law Judge Donna M. Gardiner), addressed the issues of domicile, statutory residence, and penalty. The decision came a few months after the Matter of Donald and Rose Liberman (also a loss), which this author summarized in a previous Tax Stringer article.


To quickly recap, domicile is the place that an individual intends to be a permanent home; however, the person’s actions must support that claim. In addition, if that person claims to have changed his domicile, clear and convincing evidence must show that he did indeed make the change. This is no easy task; it requires a plan, as well as documentary evidence.

A “statutory resident” is an individual who has a permanent place of abode (i.e., a residence) in New York and is present in New York for more than 183 days (any part of a day equals a day). In recent cases, complications arose due to a failure to understand what may be considered a qualifying residence (a permanent place of abode) and what constitutes a day in New York. With proper planning, these issues could have been avoided.

It is always important to engage a qualified representative if one is contacted for a New York state residency audit; however, the situation could be greatly improved if that engagement started prior to filing a return as a nonresident or, even better, when the individual first considered a change of domicile.

Individuals who acquire a residence in New York state—or even those who have access to the residence of a relative or friend—should contact a New York state residency specialist in order to determine if they could be considered a statutory resident. In both Matter of Barker and Matter of Gaied, the taxpayers’ position as nonresidents could have been greatly enhanced with a good understanding of statutory resident rules and proper planning.

In the former case, Barker was a Connecticut domiciliary who worked in Manhattan and owned a co-op on Long Island that was used just a few weeks per year for vacations. Under New York law, if an abode is suitable for year-round use (Barker’s was) and you spend more than 183 days in New York, you are considered a statutory resident. Even though Barker spent most of his New York time in Manhattan, about 100 miles from his summer co-op, that time still counted as days spent in New York, and he was found to be a resident of New York.

In the latter case, Gaied was domiciled in New Jersey, worked on Staten Island, and owned a multifamily property on Staten Island. His elderly parents lived in one of the apartments, and Gaied paid all expenses. The main issue in this case was whether his parents’ apartment qualified as a permanent place of abode for Gaied, who slept there occasionally (on the couch) at his parents’ request. The state’s position was that because he had paid all expenses and sometimes used the apartment, it qualified as a residence. Gaied lost three times before the case was finally overturned in the Court of Appeals, which held that the apartment was not a residence for Gaied because it was not maintained for his use.

Matter of Knoebel

In another recent case, Matter of Knoebel, the taxpayers lost their case on the issue of New York state statutory residency, but won the lesser issue of New York City residency. The key issue focused on eight days that the taxpayers spent in Utica, New York, to care for Mrs. Knoebel’s ailing mother. The Knoebels relied on the decision in Stranahan v. NYS Tax Commission to claim that these days should not be counted in the statutory resident day count. It was found inStranahan that days spent in New York by a nondomiciliary during confinement in a hospital would not be counted toward the day count for purposes of statutory residency. 

In the current case, the Knoebels were not ill, and they were not confined; they were visiting her mother in the mother’s own home. The days spent in Utica visiting her ill mother were found to be New York days. This position was confirmed in the Matter of Kern in 1997 (where the taxpayer was allowed to exclude inpatient visits at New York City hospitals, but not outpatient hospital or doctor visits) and Matter of Brush in 2001 (where the taxpayer tried unsuccessfully to exclude days spent visiting his wife in a New York hospital). If the Knoebels had engaged in proper planning, they would have known that the days spent in Utica would most likely be counted as New York days—and for example, they could have kept a contemporaneous day-count diary and could have made sure they kept the count below 184 days. In fact, available technology can make this task easier than it would have once been.

The Knoebels also claimed that, due to the distance between Utica and New York City, the days spent in Utica were unrelated to the apartment they maintained in New York City. This issue was present in Barker, where the taxpayer spent the majority of days working in New York City, while his New York residence (vacation home) was about 100 miles away on the eastern end of Long Island.

Matter of Tatiana Varzar

Varzarinvolved audit years 2004 through 2006, during which Varzar (head of her household) had a residence in Brooklyn, New York, and two residences in Florida. She also had a business in Brooklyn and a business in Florida. She filed as a nonresident of New York, claiming she had changed her domicile to Florida.

On the surface, it looks like Varzar might be able to support a claim of change in domicile, but many things must first be considered. A comprehensive analysis of her lifestyle should have taken place prior to filing, as well as a determination as to whether a clear and convincing case can be made for a change of domicile to Florida. Varzar was apparently still very involved in her business in Brooklyn, however, and she spent a lot of time there. In addition, her testimony about her Florida business was vague and unconvincing.

The next matter is one of recordkeeping and documentation. Taxpayers changing their domicile must keep records that will support the position that they are taking. Without corroborating documentation, they will appear to lack credibility. Part of a taxpayer’s planning should include deciding what form of recordkeeping should be maintained and which documents should be kept. This author’s analysis of Varzar indicates that planning was insufficient and the necessary records were not available or did not support the case for change of domicile.

According to the administrative law judge, “Her general testimony was so vague and is found to be unreliable given the lack of documentation used to provide a frame of reference for her conclusory statements as to her whereabouts.” Varzar was found to be a statutory resident.

The Importance of Planning

If you or your clients purchase a home in a new state and file as a nonresident of New York without actually making it a new permanent home, you will be an easy target for the New York State Department of Taxation. If you did actually intend to make the home your new permanent residence, you must maintain the documentary evidence to prove it. Proper planning can help considerably—in fact, with such planning, some of the cases discussed above could very likely have been decided in favor of the taxpayer.

Brian Gordon, CPABrian Gordon, CPA, is a director of state and local taxes at Sanders Thaler Viola & Katz LLP, a CPA and advisory firm with offices in Jericho, N.Y., and New York, N.Y. Previously, Mr. Gordon was with the NYS Department of Taxation and Finance for many years as the district audit manager in Manhattan and Brooklyn, where he worked on many high-profile residency audits. He is a member of the NYSSCPA New York, Multistate & Local Taxation Committee and writes and speaks on various tax issues. He can be reached at 516-704-7130 or 516-510-6041, or by email at bgordon@st-cpas.com. He posts a monthly blog awww.st-cpas.com.

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