A divided Appellate Division has affirmed a controversial Tax Appeals Tribunal decision holding that Staten Island residential property owned by a New Jersey resident and occupied by his parents constituted his “permanent place of abode,” and made him a “statutory resident” of New York. Matter of John Gaied v. Tax App. Trib., 2012 NY Slip Op. 9108 (3d Dep’t, Dec. 27, 2012).
After initially holding that the multifamily residence owned by Mr Gaied and occupied by his parents (and also partially leased to tenants) was not occupied by Mr. Gaied, and therefore was not his permanent place of abode, the Tribunal granted the Department’s motion for reargument. Following reargument, the Tribunal reversed its earlier decision, and held that the Staten Island property was the individual’s permanent place of abode. Matter of John Gaied, DTA No. 821727 (N.Y.S. Tax App. Trib., June 16, 2011). The Tribunal concluded that its earlier decision was in error because “where a taxpayer has a property right to the subject premises, it is neither necessary nor appropriate to look beyond the physical aspects of the dwelling place to inquire into the taxpayer’s subjective use of the premises.” The Tribunal’s decision seemed to hold that as long as the taxpayer owns and maintains the property, it is not necessary to examine any other factors.
The Appellate Division upheld the Tribunal decision, but did not adopt the Tribunal’s conclusion that ownership and maintenance of a dwelling alone is determinative of a permanent place of abode. Citing to Third Department precedent, the Appellate Division held that in determining whether a taxpayer maintains a permanent place of abode, a variety of factors and circumstances may be relevant, including, but not limited to, whether the taxpayer: (i) had free and continuous access to the dwelling; (ii) received visitors there; (iii) kept clothing and other personal belongings there; and (iv) used the premises for convenient access to and from a place of employment. Although the Appellate Division cited a number of factors that the Tribunal did not give weight to, the court nevertheless held that the Tribunal’s findings of fact were supported by substantial evidence in the record. However, even in upholding the Tribunal, the court noted that “a contrary conclusion would have been reasonable based upon the evidence presented.”
Two of the five justices dissented, finding that “the record clearly establishe[d] that petitioner purchased the property . . . as both a place for his parents to live and as an investment” and therefore the Tribunal’s determination was “irrational and unreasonable.” The dissent observed that the case law makes clear that the purpose of the statutory residence rule is to tax those who really and for all intents and purposes are residents of the State, citing Matter of Tamagni v. Tax App. Trib., 91 N.Y.2d 530 (1998), cert. denied, 525 U.S. 931 (1998), and found there was clear and convincing evidence that Mr. Gaied did not live in the dwelling nor have any personal residential interest in the property. The dissent also noted that the court did not need to defer to the Tribunal’s decision because “the statutory language is neither special nor technical.”
Additional Insights. While the Appellate Division decision upheld the Tribunal’s decision, the dissent by two Appellate Division justices is significant. Under C.P.L.R. § 5601(a), the dissent by two justices enables the taxpayer to appeal to the New York Court of Appeals as of right. Assuming the decision is appealed, the Court of Appeals will have the opportunity to address some of the well-known inequities of the permanent place of abode rule and provide more clarity on this issue.