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Was This a Taxing Determination?

New Jersey resident Nelson Obus contested a New York State Department of Taxation and Finance determination which found that he owed taxes for maintaining a residential property in the state.

Obus filed an administrative review proceeding, pursuant CPLR Article 78, challenging the determination, but because the finding was found to be “rational,” and “supported by substantial evidence,” a Tax Appeals Tribunal upheld the finding of liability.

Under Tax Law § 605 (b)(1)(B), a non-domiciliary may be considered a New York resident, for income tax purposes, if s/he maintains a permanent place of abode in this state and spends in excess of 183 days of the year here.

Obus contended that he only spent about three weeks in New York, and argued that the Tax Tribunal’s determination was wrongful, as his use did not meet the “permanent place of abode” test. While the Tax Law doesn't  define that phrase with precision, New York Administrative Code § 105.20(e)(1) cites to “a dwelling place of a permanent nature maintained by the taxpayer… however, a mere camp or cottage, which is suitable and used only for vacations, is not a permanent place of abode.”

On appeal, the Appellate Division, Third Department, was of the view that -- given the limited duration of the occupancy, that Obus maintained no furniture or other personal belongings in the residence, that he did not use it for work, and that it was rented it out for some 49 weeks out of the year -- the tax tribunal’s decision was erroneous, and thus annulled; extinguishing any tax responsibility.

This decision, a victory for “foreign” real-estate investors, will likely spur future investments in New York's residential properties.

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Obus v New York State Tax Appeals Tribunal, No. 533310, 2022 N.Y. Slip Op. 04206, 2022 WL 2346956 (N.Y.A.D. 3 Dept., June 30, 2022)