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Double Taxation for New York Statutory Residents

Updated: Feb 21

By: Samantha Levokove and William L. Bricker Jr.


For years, New York (State and City) has been aggressive in seeking to conclude that a person is a New York income tax resident and thus taxable by New York on his or her worldwide income. Repeatedly New York has prevailed in asserting New York tax resident status for poor New York commuters who have virtually any kind of place in New York that could be considered a residence. New York has now “pushed” its tax position further.


The Russekoff Case


In In re Russekoff et al., N.Y. Div. Tax App., No. 827740, 827741, 12/19/19, a New York administrative law judge denied David Russekoff and Amanda Nutile’s petition for a refund of New York State personal income taxes paid in 2010 – 2013 on investment income that was already taxed in Connecticut, their home state.


During the years at issue, Russekoff and Nutile were domiciliaries of Connecticut and maintained a vacation home in Shelter Island, New York. Russekoff was present in the state of New York for more than 183 days in each of the years at issue and derived more than $90 million in capital gains from the sale of securities. Russekoff and Nutile initially filed New York State non-resident tax returns, and Connecticut resident tax returns. Following an audit of Russekoff and Nutile’s New York State nonresident tax returns, the New York Division of Taxation determined that Russekoff was a “statutory resident” (discussed below) of New York and issued a notice of deficiency for the tax due, (primarily on the sale of the securities) plus interest. Russekoff and Nutile had already paid tax on this income to Connecticut.


Russekoff and Nutile promptly paid the amounts set forth in the notices of deficiency and then filed amended New York State resident tax returns claiming credits for the Connecticut taxes they paid on this income, the capital gains on the large securities sales. When the New York Division of Taxation disallowed the claims for refunds, they petitioned the disallowance asserting that this income from the sale of securities could be taxed only at the “domicile of its owner”, relying on Article 16, Section 3 of the New York State Constitution which provides that


“securities and other intangible property within the state not employed in carrying on any business therein by the owner shall be deemed to be located at the domicile of the owner for purposes of taxation”


The administrative law judge rejected that argument, denied the petitions, and stated that Russekoff and Nutile owed New York State taxes on the capital gains income because it is “intangible income” which “has no identifiable situs” and therefore may be taxed by New York. In essence, the judge concluded that investment income that is unrelated to a business in the state can not be sourced to any other state and is subject to New York income tax for statutory residents.


Residence Test


For New York State income tax purposes, a “resident” is defined as an individual (i) domiciled in New York or (ii) a non-domiciliary of New York who maintains a “permanent place of abode” in New York and spends more than 183 days in New York during the tax year (commonly referred to as a “statutory resident”). N.Y. Tax Law § 605. As a result, an individual may be taxed as a New York statutory resident by virtue of maintaining a New York vacation home (e.g. Shelter Island), and spending more than 183 days in the state, even if s/he does not step foot in or near the vacation home. Thus, a person can be taxed as a resident of New York (by virtue of being a statutory resident), and Connecticut by reason of domicile.


New York State generally grants a credit to residents for taxes paid to another jurisdiction, which effectively results in the taxpayer paying the higher tax of the two taxing jurisdictions. However, that credit is only for taxes paid “upon income derived” from the other jurisdiction. N.Y. Tax Law § 620. New York State does not grant a credit for taxes paid to another jurisdiction on income earned from intangible property, such as stocks, because income earned from intangible property is not ‘derived from’ any specific jurisdiction. See N.Y. Tax Law § 620(a); Matter of John S. Tamagni, et. al v. NYS Tax Appeals Tribunal, 91 NY2d 530 [1998]; cert. denied 425 U.S. 931 [1998].


Russekoff illustrates how New York is pursuing double taxation of its residents when it comes to state level taxes despite the fact when it comes to federal taxes its law makers are vehemently seeking the repeal the cap on state and local tax deductions that subjects New Yorkers to double taxation.

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