The New York State Tax Appeals Tribunal has affirmed the decision of an Administrative Law Judge that a publishing executive who was domiciled in Florida was nonetheless a statutory resident of New York. Matter of Carl Ruderman, DTA No. 826242 (N.Y.S. Tax App Trib., June 15, 2017).
Facts and Issues. During the 2007 year in issue, Mr. Ruderman was an executive in the magazine publishing industry, and it was undisputed that he maintained a permanent place of abode in New York City. He filed a New York State and New York City nonresident and part-year resident return for 2007. The Department of Taxation and Finance conducted an audit, which included the review of records such as credit card statements, telephone bills, and air travel records. While agreeing that Mr. Ruderman was outside New York on 137 days, the Department concluded that he was present in New York City on 190 days, relying on credit card charges on days when Mr. Ruderman claimed to be elsewhere, and calls made from his New York City apartment on dates when he claimed to be outside New York. In addition, the Department could not determine Mr. Ruderman's whereabouts on 38 days and therefore treated those as New York State and City days, reaching a conclusion that Mr. Ruderman was present in New York State and City for a total of 228 days during 2007.
Under the law, a non-domiciliary of New York is treated as a "statutory resident" if he or she maintains a permanent place of abode in New York for substantially all of the year and spends more than 183 days in the State and/or City. Tax Law 605(b)(1)(B), Administrative Code 11-1705(b)(1)(A), (B). The Department issued a Notice of Deficiency asserting additional New York State and City personal income tax of nearly $1 million, plus interest and penalties.
At the hearing, Mr. Ruderman asserted that he was outside New York for an additional 78 days, which when combined with the 137 conceded by the Department totaled 215 days outside New York. He testified that he had been married twice, that his younger children from his current marriage live in Florida, and that he spent a significant amount of time in Florida in 2007, looking after his ailing mother who was in her nineties, and that, while he had business interests in New York, those were managed by others. He also testified that he allowed his older children, and his New York City housekeeper, to use his credit cards as needed, and that he believed many of the telephone calls from the New York City apartment were made by them. Mr. Ruderman provided a letter from his Florida dentist about dates of dental treatment in Florida, and seven supporting affidavits from his hairdresser, personal assistant, three concierges and a handyman at his Florida residence, and his current wife.
ALJ Determination. An ALJ had concluded that Mr. Ruderman did not meet his burden of proof to show by clear and convincing evidence that he was not present in New York on the disputed days, finding that the evidence and testimony submitted by Mr. Ruderman "did not provide the level of consistency and detail needed to meet his burden of proof." He noted that the affidavits presented very little detail, that their "repetitive tenor and generality" diminished their reliability, and that at least one affidavit was contradicted by other evidence. He also concluded that Mr. Ruderman's spouse's testimony that she had sole custody of one of his credit cards for a period of time was undermined by his own testimony that he allowed other family members to use his credit cards, and that Mr. Ruderman's testimony, while "forthright and honestly given," lacked specificity and detail. The ALJ also sustained a late filing penalty, since the 2007 return was filed late.
Tribunal Decision. The Tribunal affirmed the ALJ's decision, agreeing that Mr. Ruderman did not meet his burden of proof. The Tribunal noted not only that the petitioner has the burden of demonstrating by clear and convincing evidence that he was not a statutory resident, but that the regulations also require any non-New York domiciliary who maintains a permanent place of abode in New York and files as a nonresident to keep adequate records to establish that he or she did not spend more than 183 days in New York. 20 NYCRR 105.20(c). The Tribunal agreed with the ALJ that the testimony and statements provided by Mr. Ruderman and the affiants were too general, lacked specificity with regard to dates and events, and, when the affidavits were evaluated in light of each other and the testimony given, were insufficient to establish Mr. Ruderman's whereabouts on each of the days in issue.
The Tribunal also upheld the late filing penalty, finding that the only argument offered by Mr. Ruderman--that he believed he was not present in New York for more than 183 days in 2007--did not establish reasonable cause for the late filing of his personal income tax return.
Statutory residency cases are very fact-specific and proof of a non-domiciliary's actual location on every day in question often requires very detailed documentary evidence, but testimony at a hearing can also be critical. While cases involving carefully kept contemporaneous calendars, and those including a clearly established pattern of conduct from which a taxpayer's location could be determined on a day for which there was no documentary evidence, can result in success for taxpayers, see, e.g., Matter of Jack and Helen Armel, DTA No. 811255 (N.Y.S. Tax App. Trib., Aug. 17, 1995), the Tribunal has also held that the regulations do not require, as a matter of law, the production of records, and that credible testimony can be sufficient to meet the taxpayer's burden. Matter of John G. Avildsen, DTA No. 8097225 (N.Y.S. Tax App. Trib., May 19, 1994). Here the fault seemed not to be with the credibility of Mr. Ruderman--which the ALJ acknowledged--but the lack of specific detail, and the general nature of the supporting affidavits. It is always advisable for a non-domiciliary taxpayer claiming to be a nonresident to keep as detailed a set of records as possible, including a contemporaneous diary, very specific travel receipts, and credit card records that could show purchases directly by the taxpayer--as opposed to by other family members--involving physical presence outside New York.