In Robin Ingle v. N.Y.S. Tax App. Trib., No. 514245, 2013 N.Y. Slip. Op. 7094 (3d Dep’t, Oct. 31, 2013), the Appellate Division affirmed the decision of the New York State Tax Appeals Tribunal that a New York State resident failed to prove that she had changed her domicile to Tennessee on the date she claimed.
Robin Ingle was born and raised in Tennessee. After graduating from the University of Tennessee in the mid-1980s, she moved from Tennessee to Washington, D.C., then to Chicago, and eventually to New York City. Ms. Ingle’s various jobs since college all required her to travel extensively, and thus allowed her to choose the city of her residence, so long as she had access to a nearby airport, a cell phone, and a laptop.
Ms. Ingle became a New York City resident in 2000. In April 2002, she entered into a lease for a two bedroom apartment in New York City that terminated on April 30, 2004. In February 2004, Ms. Ingle became aware that her employer was going to be acquired sometime in late April or May of 2004, and that she stood to realize a substantial gain on the sale of her employer’s stock. After consulting with a law firm, Ms. Ingle decided she would change her domicile from New York City to Tennessee before the sale of her stock in order to minimize her New York tax liability.
Ms. Ingle took various steps to establish a domicile in Tennessee. She entered into a one year lease for an apartment in Tennessee beginning on April 1, 2004. She also registered to vote in Tennessee, obtained a Tennessee driver’s license, and opened a Tennessee bank account, all prior to April 30. On April 30, 2004, Ms. Ingle sold her stock and realized nearly $2 million in capital gains.
Although she entered into a lease in Tennessee beginning on April 1, 2004, Ms. Ingle also extended the lease on her New York City apartment through July 2004. She testified that the extension was necessary because of her heavy travel schedule and because her boyfriend, who lived in California, was not available to help her move. No testimony or documentary evidence was offered on how much time Ms. Ingle spent in New York versus Tennessee during the critical April–July 2004 time period. Ms. Ingle eventually vacated the New York City apartment, and terminated the City lease on July 9, 2004.
The only dispute was over whether Ms. Ingle changed her domicile prior to the stock sale on April 30, 2004, or on July 9, 2004.
A person “domiciled” in New York is considered a resident individual for New York personal income tax purposes. The classification of resident versus nonresident is significant because residents are taxed on all of their income, including gains from the sale of stock, whereas nonresidents are only taxed on their New York source income. The regulations define domicile in relevant part as follows:
Domicile, in general, is the place which an individual intends to be such individual’s permanent home – the place to which such individual intends to return whenever such individual may be absent . . . . A person can have only one domicile. If such person has two or more homes, such person’s domicile is the one which such person regards and used as such person’s permanent home. In determining such person’s intentions in this matter, the length of time customarily spent at each location is important but not necessarily conclusive.
20 NYCRR §105.20(d)
The Tax Appeals Tribunal held, and the Appellate Division has now affirmed, that Ms. Ingle did not meet her burden to establish by clear and convincing evidence her “absolute and fixed intention to abandon [her New York domicile] and acquire another” until July 9, 2004, more than two months after she sold her stock. In affirming the Tribunal decision, the Appellate Division pointed out that Ms. Ingle failed to present evidence regarding how much time she spent in New York versus Tennessee during the April through July 2004 time period. In addition, the court noted that she extended the lease on her New York apartment beyond April 30, and that her rental of the Tennessee apartment did not affect a change in her lifestyle or business interests, which did not occur until she vacated the New York apartment.
Whether an individual has changed her domicile is a question of fact, that can depend on a variety of circumstances “which can differ as widely as the peculiarities of individuals.” The Tribunal and the courts have looked to everything from “the range of sentiment, feeling, and permanent association” with a place, to the location of a taxpayer’s business activities, to informal acts that demonstrate an individual’s “general habit of life.” While there is no fail-proof way to prove a change in one’s domicile, the more actions a taxpayer takes, both formal and informal, that demonstrate a bona fide intent to change his or her domicile, the more likely it is that the change will be upheld. Although there is no prohibition on changing one’s domicile in order to realize a tax savings, a court may subject a person’s actions to more scrutiny, as appears to have been done in this case, when a change in domicile is being undertaken for that purpose.