Settling a Dispute over Statutory Residency Leads to More Questions

David A. Shuster, JD, LLM
Published Date:
Apr 1, 2014

In February 2014, the New York Court of Appeals rejected the determination of the New York State Tax Appeals Tribunal (TAT) that there was “no requirement that the taxpayer actually dwell in [an] abode, but simply that he maintain it” when determining whether the taxpayer maintained a permanent place of abode (PPA), a prerequisite to statutory residency for nondomiciliaries (Matter of Gaied v. New York State Tax Appeals Tribunal). The decision settled one longstanding issue, but left another open—and it is likely to cause disputes between taxpayers and the New York State Department of Taxation and Finance (DTF).


Prior to and at the time of the TAT’s ruling, the policy of the DTF, as set forth in its Nonresident Audit Guidelines, was that a taxpayer would not be considered to be maintaining a PPA if the taxpayer never used the property as a residence, such as when the property was used exclusively for investment purposes (e.g., a rental) or was used exclusively by someone other than the taxpayer (e.g., the taxpayer’s child or parent). But the guidelines made clear that these exceptions might not apply in cases “where the taxpayer [used] the residence, however infrequently.”

The taxpayer in Gaied was a New Jersey domiciliary who maintained a residence in New York to care for his elderly parents, staying there only on occasion, at their request, to attend to their medical needs. Evidently, this infrequent use was enough for the DTF to determine that the taxpayer maintained a PPA. Thus, as this commentator noted in “New Residency Case Causes Confusion,” the TAT’s subsequent ruling that there was not even a “requirement that the [taxpayer] actually dwell in the abode, but simply that he maintain it” for the abode to be considered a PPA apparently contradicted even the DTF’s own “exclusive use by others” policy; as mentioned above, this policy would have required at least some use of the dwelling by the taxpayer. Moreover, the cases that the TAT cited in support of its ruling did not, in any event, really provide any such support. (The TAT cited its 1989 decision in Matter of Roth and its 1994 decision in Matter of Boyd. In Roth, however, the taxpayer actually used the dwelling at issue, and the taxpayer in Boyd failed to prove that he did not use the abode at issue in that case.)

DTF Actions Subsequent to the TAT’s Ruling

Approximately one year later, the DTF amended its audit guidelines, seemingly distancing itself from the TAT’s ruling and taking an even less aggressive stance than the one taken in its prior guidelines by stating that a taxpayer would not be considered to be maintaining a PPA if the taxpayer could show that the abode was used primarily by others. The taxpayer’s “extent of use” would now be an important consideration, according to the DTF. In Gaied, the property was used primarily by persons other than the taxpayer, and the extent of the taxpayer’s use was minimal. The DTF, however, continued defending the TAT’s determination in Gaied, citing other factors in the case, such as the taxpayer having his business located within two miles of the residence in question.

Court of Appeals Ruling

In reversing the intermediate appellate court’s decision affirming the TAT, the New York Court of Appeals stated that “for an individual to qualify as a statutory resident, there must be some basis to conclude that the dwelling was utilized as the taxpayer’s residence.” The court noted that the legislative history of the relevant statute, which indicated that the statute was enacted to prevent tax evasion by New York residents, together with the statute’s coordinate regulations, supported the view that, for a taxpayer to have maintained a PPA, the taxpayer “must [have had] a residential interest in the property.” The court thus rejected the TAT’s determination that the “taxpayer need not ‘reside’ in the dwelling, but only maintain it, to qualify as [a] ‘statutory resident.’”

In its ruling, the Court of Appeals did not exactly define what it meant by a “residential interest in the property” but seemed to endorse the view of the appellate court’s dissenting opinion that the inquiry should be whether the taxpayer maintained “living arrangements” at the dwelling. Given the facts in Gaied, the dissent was of the view that the taxpayer “did not live in the dwelling nor did he have any personal residential interest” and that he should therefore not be considered to have been maintaining a PPA.

What to Expect

Going forward, auditors might very well focus on whether taxpayers maintained living arrangements, which is likely to be a fact-intensive inquiry in each case. CPAs should remain abreast of this issue and provide guidance to clients who are unsure as to how their particular facts and circumstances might be viewed.

David A. Shuster, JD, LLMDavid A. Shuster, JD, LLM, is a tax principal at Grassi & Co., serving as its director of Tax Controversy Services. He advises and represents clients in their controversies with the IRS and state taxing authorities, and he also advises corporations, partnerships, private foundations, public charities, and individuals in federal and state planning and compliance. Mr. Shuster received his JD and LLM in taxation from New York University’s School of Law and his Bachelor of Science in electrical engineering from the University of Michigan. He can be reached at

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