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New York State Statutory Residence – What is credible evidence?

This past year, a determination was issued in a New York residency case in the Matter of Carl Ruderman for tax year 2007. The Administrative Law Judge for this case was Dennis M. Galliher. The issue was statutory residence.

A taxpayer can be determined to be a resident of New York by either being domiciled in New York (having your primary residence there) or being a statutory resident, meaning that you have a residence in New York and you spend more than 183 days there in any given year.

The New York State Tax Audit Division accepted that Mr. Ruderman was domiciled in Florida; however they determined that he was a statutory resident of New York State and City for 2007. The audit findings resulted in almost $1 million in additional State and City tax, plus interest and penalty. The case involved whether Mr. Ruderman could prove that he was not in New York for over 183 days. The Division’s review revealed credit card charges in a variety of places, including New York City, on days when petitioner claims to have been elsewhere.

According to the law, the taxpayer has the burden to establish by clear and convincing evidence that he was not present in New York City for more than 183 days during the year. This is a heavy burden that should not be taken lightly. The typical evidence examined in audits of this type would be a personal or business diary, backed up by a record of credit card charges and phone bills, including land line and cell phone. Additional records that can indicate your whereabouts are commonly requested and/or subpoenaed, such as EZ-Pass and utility bills.

In a well-known New York State Tax Tribunal case, Matter of Julian Robertson, the taxpayer had a secretary that maintained a diary to track his whereabouts every day of the year. He was prepared for his audit. He had a day count prepared with the filing of his return, which was supported by his diary and records. Since his recordkeeping was very detailed and accurate, the state auditors only had questions on a few days during the year. This case went to the Tax Tribunal with only two days in question. Due to the level of detail maintained, the taxpayer was found to be credible and Robertson was able to win his case resolving the final two questionable days with credible oral testimony.

The Ruderman case, however, is different. The Audit Division’s review revealed credit card charges in a variety of places, including New York City, on days when petitioner claims to have been elsewhere. Mr. Ruderman claimed that although he only had one credit card (one copy), sometimes his wife, children or even his housekeeper could be using the same card. He also did not try to discern which charges were made by which person. As you can see, this is not a very credible argument.

To try to help his case, Mr. Ruderman was able to get affidavits from business associates and acquaintances. One of which stated that Mr. Ruderman was present in Florida from May through the end of November 2007. This is a block of time of seven months, and the affidavit only mentioned one specific event that he recalled which took place during October. Furthermore, there were many credit card charges that took place in New York during this period, hurting the credibility of this affidavit. Not only is the credibility of the affidavit affected, but the entire case is called into question.

It is possible for affidavits to help your case and be accepted as proof that one was not present in New York, however it has to be more specific as to dates and situations that took place on those dates. And you certainly don’t want those affidavits contradicted by better evidence. According to the ALJ in this case:

“The foregoing review bears out that the evidence in this case fails to provide the degree of specificity necessary to establish petitioner’s whereabouts with certainty so as to conclude that he was present outside of New York State and City on the disputed days. Accordingly, petitioner has not met the burden of establishing by clear and convincing evidence that he was not present in New York City on more than 183 days in the year 2007 within the contemplation of Tax Law…”

In summary, when confronted with credit card charges in his name, Mr. Ruderman claimed that he had not made the charges with no evidence or explanation establishing any of the charges as those made by his children or others. When confronted with phone calls made from his New York residence, again he claimed that it wasn’t him. He submitted general affidavits stating he was in Florida for extended periods of time. This was not convincing. In order to be successful, one has to be consistently accurate with the records that are provided to build a level of confidence in their credibility.

If you have any questions regarding residency, or any other state and local issues, please call 516-938-5219.

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