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Income Tax:
Taxpayer Was Not Domiciled In New York
A New York personal income tax deficiency was canceled because the
Division of Taxation failed to prove that the taxpayer was domiciled in New York. It was
the Division's burden to show that the taxpayer had a place of residence
in New York and that he intended to
establish a new permanent home in New York,
displacing his New Jersey
domicile. However, overnight romantic encounters in the home of another
person and occasional stays at a corporate apartment did not meet that
standard. In addition, because the taxpayer did not maintain a permanent
place of abode in New York,
he was not taxable as a statutory resident. Finally, the Division could
not allocate the taxpayer's Schedule C business income to New York. The
consulting work that generated the income was apparently conducted in
several cities in the United
States and abroad. It was not disputed
that desk space was available to the taxpayer at offices in New York, if
needed. In the documents relied on by the Division, however, there was
nothing indicating that the taxpayer actually performed the work in New York. (Knight,
New York
Division of Tax Appeals, Tax Appeals Tribunal, DTA No. 819485, November
9, 2006.)
Income Tax: Out-of-State Individual
Taxable as Resident
A taxpayer domiciled in New Jersey was
subject to New York personal income tax
as a resident because he failed to establish by clear and convincing
evidence that he was not present in New York for more than 183 days during
each of the years at issue. The taxpayer made numerous credit card
purchases in New York on disputed days,
and he employed two people in New
York City. Also, there was a lack of evidence
regarding his day-to-day whereabouts. The taxpayer's case rested mostly
on the probative value of certain personal diaries that he submitted
after the hearing. However, the authenticity of the diaries was
questionable, given the taxpayer's failure to produce them during the
initial audit and the fact that the entries for three years were all
written with the same pen. (Holt,
New York Division of Tax
Appeals, Administrative Law Judge Unit, DTA No. 820283, November 2,
2006.)
Income Tax: Distribution From 529
Plan Not Taxes
A distribution received from a family tuition savings plan (529 Plan)
established under a qualified tuition program of a state other than New
York and operated under Internal Revenue IRC §529 was not subject to New
York state personal income tax. The earnings of a 529 plan are not taxed
in the year earned and distributions from such a plan, including the
earnings, are not included in federal gross income if used for qualified
higher education expenses. In this instance, the entire distribution from
the 529 plan was used for college tuition expenses and no amount of the
distribution was subject to federal income tax. TSB-A- 07(6)I, New York
Commissioner of Taxation and Finance, November 15, 2007
Income Tax: Alternative Stock
Option Allocation Periods Announced
The New York Department of Taxation and Finance has released a personal
income tax memorandum summarizing new rules applicable to stock options,
restricted stock, and stock appreciation rights received by nonresidents
and part-year residents.
The release clarifies that, for a taxable year beginning in 2006 only, nonresident individuals have the option of using
a different allocation period when determining New York source income from
compensation relating to statutory stock options, restricted stock, and
stock appreciation rights for nonresidents. In each instance, nonresident
individuals could elect to use the period of time from the date the
option was granted to the earliest of:
(1) the date that the option was exercised;
(2) the date that the individual's services terminated; or
(3) the date that the compensation was recognized for federal income tax
purposes.
The release also discusses the calculation of part- year residents'
individual federal gross income as it pertains to compensation received
from stock options, restricted stock, or stock appreciation rights in the
taxable year. Finally, the release also addresses the City of Yonkers nonresident
earnings tax imposed on wages. TSB-M-07(7)I, Technical Services Bureau,
Taxpayer Services Division, New York Department of Taxation and Finance,
October 4, 2007
Income Tax: Cost of MBA Program Not
Deductible
A taxpayer was not allowed to deduct the cost of a master in business
administration (MBA) program as deductible educational expenses from his New York personal
income tax return. Under IRC §162, educational expenses can be deducted
if the education maintains or improves skills required by the individual
in his employment or trade or business. However, to qualify for the
deduction, the taxpayer must be actively carrying on a trade or business
while incurring the educational expenses. The taxpayer was found to be
unemployed and was unable to demonstrate that he was actively carrying on
the business of practicing as an attorney or engaged in other employment
for at least two years prior to his MBA coursework as required for the
deductibility of the educational expenses. The taxpayer argued that
because he was a member in good standing of the New York State Bar
Association during this period that he was carrying on a business or
trade as an attorney. This argument was rejected as meritless
because mere membership in good standing in a profession does not
constitute carrying on a business or trade. Armon, New
York Division of Tax Appeals, Small Claims, DTA
No. 820865, September 13, 2007
Income Tax: Military Pay Not
Deductible
A member of the United States Army Reserve called to active service could
not subtract his military pay and other compensation received while on
active duty from his federal adjusted gross income for personal income
tax purposes. The subtraction modification available under Sec. 612(c)(8-b) of the Tax law is only available for
compensation attributable to active service performed within New York by a member of the New York State
militia. In this instance, the member of the United States Army Reserve
was not a member of the New
York State
militia. TSB-A-07(5)I, New York Commissioner of Taxation and Finance,
August 27, 2007
Income Tax:
Various Tax Credit Claim Forms Discussed
New York taxpayers will no longer be able to file several tax credit
forms separately from their original or amended personal income tax
returns, beginning with the 2007 tax year. The following forms will have
to be filed along with the original or amended personal income tax return
to claim the tax credit:
- Form IT-209, Claim for Noncustodial
Parent
New York State Earned Income Credit;
- Form IT-213, Claim for Empire State
Child Credit;
- Form IT-215, Claim for Earned Income Credit;
- Form IT-216, Claim for Child and Dependent Care;
and
- Form IT-217, Claim for Farmer's School Tax
Credit.
Important Notice N-07-22, New
York Department of Taxation and Finance,
November 2007
Income Tax: Filing Requirements for
SMLLCs Changed
The New York Department of Taxation and Finance has issued a notice
announcing that for tax years beginning after December 31, 2006,
single-member limited liability companies (SMLLCs)
that are disregarded entities for federal corporate income tax purposes
are no longer required to file Form IT-204- LL, Limited Liability
Company/Limited Liability Partnership Filing Fee Payment Form, or pay the
$100 filing fee. The Department's notice also noted that the partnership
filing fee on an LLC with more than one member that is a disregarded
entity for federal income tax purposes has also expired. Important Notice
N-07- 23, New York Department of Taxation and Finance, November 2007
Income
Tax: Return Forms Revised for 2007
The New York
Department of Taxation and Finance has revised and amended several
personal income tax forms for 2007. Form IT-201-X, Amended Resident
Income Tax Return, and Form IT-203-X, Amended Nonresident and Part-Year
Resident Income Tax Return, have been revised. The Department has
announced that it believes that these new and revised amended returns
will be easier to complete because they now closely follow resident Forms
IT-150 and IT-201, and nonresident Form IT- 203.
Taxpayers who filed their original return on Form IT- 150, should file
their amended return on Form IT-150- X, unless they are amending the
return to report income, deduction, or credits that cannot be reported on
Form IT-150. In that case, they should file Form IT- 201-X. Taxpayers
that filed their original return on Form IT-201, are being told to file
their amended return of Form IT-201-X. Taxpayers who filed their original
return on Form IT-203 (or taxpayers that are a nonresident or part-year
resident who mistakenly filed resident Form IT-150 or IT-201), are asked
to file their amended return on Form IT-201-X. Important Notice N- 07-21,
New York
Department of Taxation and Finance, November 2007
Income Tax: Division Required to Provide More Specific Bill of Particulars
An administrative law judge (ALJ) directed the New York Division of Taxation
to furnish a further bill of particulars to clarify some of the claims
the Division made in a notice of personal income tax deficiency. The
Division claimed that the taxpayer, who filed nonresident
returns and claimed to be domiciled in Florida,
was actually a New York
resident for the years in question. The Division backed its argument, in
part, by stating that the taxpayer's "community involvement in
jurisdictions other than Florida"
and his "public statements regarding his desire to be in New York" demonstrated that his domicile had
changed to New York.
The taxpayer argued that the phrase "community involvement" is
vague and, because the taxpayer is a public figure, that it would be
reasonable for the Division to specify the public statements to which it
refers to in its notice. The ALJ agreed with the taxpayer and directed
the Division to specify the taxpayer's "community involvement"
and his public statements. The taxpayer's argument that the Division's
reference to holidays being spent in New York,
having business ties in New York, and
keeping "items near and dear" in his New York apartment were also vague was
rejected. Jeter, New York
Division of Tax Appeals, Administrative Law Judge Unit, DTA No. 821646,
November 8, 2007
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