New York State Residency Audits: What Is Credible Testimony?

Brian Gordon, CPA
Published Date:
Sep 1, 2017

There are two different ways a person can be considered a resident of New York State or New York City for tax purposes. The first way is to be deemed “domiciled” in New York. Depending on the circumstances, an analysis to determine domicile can be complex—but generally, you are domiciled in New York City or New York State if it is your place of primary residence. Some of the things considered are the size and value of your residences, the amount of time spent at each location, proximity to business ties, proximity to family, and the location of sentimental possessions.

The other way is referred to as “statutory residency.” Someone that is a statutory resident is not domiciled in New York, but he or she does have a residence in New York and is present in New York for more than 183 days. Substantial use of the residence is not necessary—only presence in New York is required.

A decision recently issued by the New York State Division of Tax Appeals Tribunal involved the issue of statutory residency in New York State and New York City. Although it was agreed that the taxpayer’s primary residence (his domicile) was Florida, an administrative law judge (ALJ) had determined that Carl Ruderman, the taxpayer, was a statutory resident of New York City and New York State for the 2007 tax year. Ruderman filed an exception to be heard by the tribunal.

Ruderman maintained an apartment in New York City—the only issue in doubt was whether he was a New York City and New York State statutory resident by virtue of spending more than 183 days there. The ultimate decision came down to whether Ruderman’s testimony was credible. 

It has long been established that for statutory residency cases, the taxpayer has the burden of proving by clear and convincing evidence that he or she was not in New York for more than 183 days. Diaries, credit card bills, cell phone bills, and E-ZPass records are all often used to prove a person’s location on any particular day.

But what happens if there is no documentary evidence for some days? How does a taxpayer prove that he or she was not in New York? Some auditors have taken the position that if the taxpayer cannot prove his or her location on a particular day, then that day is deemed to have been spent in New York. The justification behind this is that legally, the burden of proof is on the taxpayer. Fortunately, the courts—and ultimately the Tax Department—have followed the “law” of common sense.

For example, if a taxpayer proved by documentary evidence that he was in Florida for each day in January except for January 19, could he have been in New York on that day? Could he have flown to New York and back to Florida the next day? It’s possible. Imagine, however, that there is no evidence of a flight and no phone calls or credit card charges in New York that day. Further, imagine the taxpayer swore in court that he was in Florida on that day and did not take a secret trip to New York and back. This is a simple example of how oral testimony could be considered credible and accepted as clear and convincing evidence of a day outside of New York.

Let’s look at an actual case where oral testimony was given as evidence. In Matter of John G. Avildsen, Avildsen’s secretary submitted a schedule of Avildsen’s days in and out of New York.  She testified that this information was compiled from an actual diary; however, that diary was not produced in order to protect Mr. Avildsen’s (and others’) privacy.  Some airline tickets were also submitted as partial corroboration, which demonstrated that Avildsen was not in New York for more than 183 days. Although the ALJ found the witness credible, he found that the taxpayers were statutory residents of New York City, stating: “The evidence presented by petitioner is not sufficient to sustain his burden. There is no question that a business diary bolstered by credible testimony and other documents may be sufficient to substantiate the number of days spent in New York . . .  [h]owever, in this instance, in order to accept petitioner’s argument, one is forced to accept testimony as to what those diaries show. Such testimony, although credible, is not sufficient to meet the ‘adequate records’ requirement of 20 NYCRR Appendix 20, § 1-2(c).”

The New York State Division of Tax Appeals Tribunal, however, reversed this decision, finding instead that the Avildsens were not statutory residents of New York City. What was the basis for reversal? The basis was in the ALJ’s own words, who had stated, “Such testimony, although credible. . . .” In this case, how could the judge say he believed the witness—but still find that the taxpayer was a New York resident?

The tribunal ruled that if the ALJ believed the witness to be truthful, he must find in the taxpayer’s favor. Documents are not required if the testimony is accepted as credible. This is not to say that one should go into court with testimony alone and expect to win one’s case, bringing us back to the subject case of this article, Matter of Carl Ruderman.

In Ruderman, the tribunal again looked at the ALJ’s evaluation of the witness’s testimony. As taxpayers, or as representatives of clients, all we expect is for oral testimony to be considered fairly. We expect it to be compared to other available information and judged in totality.  Obviously, vague testimony or conflicting testimony by the same witness or other witnesses for the petitioner would create a credibility problem.

Some of the issues that the ALJ pointed out were as follows:

The tribunal’s review revealed credit card charges in a variety of places, including New York City, on days when the petitioner claimed to have been elsewhere. The petitioner explained that he allowed his older children, as well as his housekeeper in New York City, to use his credit cards as needed; however, his wife testified that she had sole possession of Ruderman’s credit card during September and October. The ALJ felt that this was conflicting testimony.

The tribunal’s review of telephone records revealed calls made from the petitioner’s New York City premises on over 200 days, including dates when the petitioner claimed to have been outside of New York. The petitioner noted his belief that many of the telephone calls made from his New York premises could have been made by his housekeeper, his children, or other persons.

The petitioner also submitted seven affidavits in support of the claim that he spent an additional 78 days outside of New York, but they didn’t list specific dates. For example, Ruderman’s haircutter submitted an affidavit that stated Ruderman had his hair cut in early May 2007 and “every other week” in September, October, and November. It also stated that when the petitioner is at his home in Florida, he stops by the salon for a manicure or pedicure on weeks that he does not have his hair cut and that he “frequently” drops in to say hello.

The head concierge at his Florida residence also submitted an affidavit stating that he “frequently saw” Ruderman in and around his home.

The ALJ felt that the testimony explaining the credit card and phone use lacked the specificity and detail necessary to meet the burden of proof as to Ruderman’s whereabouts on the days at issue. Therefore, it could not be accepted over documentary evidence of presence in New York.

The tribunal agreed with the principle previously established in Avildsen: If a substantiating contemporaneous diary or calendar is not maintained, a taxpayer may meet his burden of proof through testimonial evidence, documentary evidence, or a combination of the two. The tribunal, however, felt that the ALJ properly concluded that the evidence in this case was insufficient to establish the petitioner’s whereabouts on each of the days in issue, lacking the detail necessary to rise to the level of clearly convincing evidence.

If you have any questions involving New York residency, please contact the author.

gordon17Brian Gordon, CPA, is a director of state and local taxes at Gettry Marcus CPA, P.C. As a state and local tax specialist (SALT), Brian’s primary function focuses on residency, sales tax and NEXUS issues, and New York State Tax Audit and Controversy representation. Brian was with the New York State Department of Taxation and Finance for over 30 years as a district audit manager of Manhattan and Brooklyn districts, where he worked on many high-profile residency audits, including those of professional athletes, entertainers, and other high-net worth individuals.

Brian is currently serving as president of the NYSSCPA Queens/Brooklyn Chapter and is a member of the New York, Multistate & Local Taxation Committee. He writes and speaks on various state and local tax issues. Brian is a graduate of York College, CUNY, where he earned a BA in Economics. He can be reached at

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