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It might now be a bit less taxing to own a vacation home in New York.

For non-residents of New York considering purchasing a vacation home in the state, the decision might have just gotten a bit easier – at least from an income tax point-of-view.

On June 30th in Obus v. New York State Tax Appeals Tribunal, the New York State Appellate Division (NYSAD) found that a vacation dwelling located in Northville in the Southern Adirondacks region of New York, did not constitute an abode for purposes of the state’s law on statutory residency.  That law can apply to nonresidents of New York who have a permanent place of abode in New York and who spend more than 183 days in a calendar year in the state.  Those factors combined can cause the nonresident taxpayer to be taxed as a resident of New York on their worldwide income, often resulting in large and unexpected tax assessments.

Nelson Obus lived in New Jersey and his office was in New York City; however, the New York Department of Taxation and Finance (DTF) determined after an audit that the taxpayer’s Northville home was suitable for year-round use and that he had unfettered access to it (although it was undisputed that he only used it approximately 3 weeks each year). The maintenance of a year-round dwelling in New York State coupled with the fact the taxpayer was present in the state, mostly for work purposes, for a period in excess of 183 days caused the DTF to find that the taxpayer was a statutory resident of the state. 

The finding was upheld by the Tax Appeals Tribunal and then the case was appealed to the NYSAD. In its ruling, the NYSAD held that for a dwelling to be considered a permanent place of abode within the meaning of the tax law, there needs to be a residential interest in the property.  Obus worked in New York City, a 4 hour drive from the Northville property, and therefore did not use it as one would a primary residence. While Obus could have used the Northville property as a permanent place of abode, the NYSAD found that he in fact did not, and as such the DTF’s finding was “inconsistent with the legislative intent underlying the statute,” overturning the Tax Appeals Tribunal finding.

Our experience has long been that the state takes the position that the mere ability to access a dwelling is enough to consider it a permanent place of abode versus actually accessing the dwelling.  As such, this is a major departure from previous findings, and we think New York State income tax auditors will surely have to rethink their approach in the future.

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