CUNYBC Audit Case for Joseph Pilaro and Joe Gorrie Summary

Please read the attached nonresident audit case for Joseph Pilaro and Joe Gorrie with the tax appeals, and summary the case.

STATE OF NEW YORK
DIVISION OF TAX APPEALS
________________________________________________
In the Matter of the Petition
:
of
:
JOSEPH PILARO AND JOSEPH GORRIE
:
DETERMINATION
DTA NO. 829204
for Redetermination of a Deficiency or for Refund of New :
York State and City Personal Income Tax under Article 22
of the Tax Law and the Administrative Code of the City
:
of New York for the Year 2014.
________________________________________________:
Petitioners, Joseph Pilaro and Joseph Gorrie, filed a petition for redetermination of a
deficiency or for refund of New York State and City personal income taxes under article 22 of
the Tax Law and the Administrative Code of the City of New York for the year 2014.
A hearing was held before Administrative Law Judge Jessica DiFiore, in Albany, New
York, on October 7, 2020, with all briefs to be submitted by March 3, 2021, which date began
the six-month period for issuance of this determination. Petitioners appeared by Rodney T.
Doyle, Esq. The Division of Taxation appeared by Amanda Hiller, Esq. (Peter B. Ostwald, Esq.,
of counsel).
ISSUE
Whether petitioner1 Joseph Pilaro is liable for income tax as a statutory resident of New
York State and City for the year 2014.
This proceeding relates to the residency status of Joseph Pilaro only. Joseph Gorrie was not a statutory
resident of New York State or New York City during tax year 2014. References to petitioner will refer to Joseph
Pilaro.
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FINDINGS OF FACT
1. Petitioners, Joseph Pilaro and Joseph Gorrie, jointly filed form IT-203 (New York
State nonresident and part-year resident income tax return) for 2014 as nonresidents. On form
IT-203, petitioners marked the “no box when asked “Did you or your spouse maintain living
quarters in NYS in 2014?
2. During 2014, petitioner was issued a form W-2 for wages of $10,903.00 from his
employment with the Los Angeles Community College District, where he taught English online
through West Los Angeles College in Los Angeles, California. He was also issued a form W-2
for wages of $76,294.00 from the Nassau County Comptroller s Office for work as an assistant
professor at Nassau Community College in Garden City, New York.
3. For 2014, petitioners also reported capital gains of $581,957.00 from the sale of their
multi-family home located in Venice, California, on March 25, 2014.
4. In 2013 and for most of 2014, petitioner s position at Nassau Community College was
temporary. This position became permanent at the end of 2014.
5. Petitioner testified at the hearing in this matter that from January 1, 2014 through
November 1, 2014, when he was not in California with his husband, he rented an apartment
located at 178 East 7th Street, Apartment 6C, New York City, New York (7th Street apartment)
when working at the Nassau Community College. He testified that this apartment “was an office
with a bed. He described it as a place for him to do his schoolwork, such as grading papers, and
sleep. He testified “[i]t had a small kitchenette and a really tiny bathroom. He also stated “[i]t
was a walk-up in the East Village.
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6. The Division sent petitioner a letter dated September 28, 2018, requesting additional
information regarding this apartment, including the lease agreement and rental payments made.
However, a lease agreement was not provided.
7. In their brief in support of the petition, petitioners concede they became domiciled in
New York City on December 3, 2014, when they purchased an apartment located at 465 West
23rd Street, Apartment 8H, New York City, New York (West 23rd Street apartment). In its brief
in opposition to the petition, the Division also conceded that petitioners were not domiciled in
New York City until December 3, 2014. There is no dispute that this apartment was a permanent
place of abode.
8. The Division requested information regarding where petitioner stayed after the lease
of his 7th Street apartment ended until petitioner purchased the West 23rd Street apartment, but
this information was not provided. At the hearing, petitioner testified that he stayed with friends
but did not state where. He later testified that he had a friend in Harlem who had a threebedroom apartment that allowed him to stay with him and he would take accommodations
depending on what was available to him. It is not clear when he stayed with this person.
9. On September 30, 2015, the Division sent petitioners a letter advising them that their
New York State tax return for tax year 2014 was selected for audit. Included with this letter was
the first of several information document requests (IDR) requesting, among other things, the
completion and return of a nonresident questionnaire, petitioner s form 1040, U.S. individual tax
return, and petitioner s relationship with three New York addresses, including petitioner s 7th
Street apartment and his West 23rd Street apartment.
10. In a subsequent IDR dated October 24, 2017, the Division asked petitioner for
several more documents and more information, including a chronological history of his residence
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and employment, credit card and bank statements, employment contracts, calendars for days
claimed to be spent outside of New York, cellphone number, carrier and monthly bills or
statements, and petitioner s closing statement for the purchase of the property in December of
2014. Petitioner responded to this request on November 27, 2017.
11. Petitioner submitted airline and train documents for 2014, which indicate petitioner s
travel as follows:
Date
From
To
January 15, 2014
Los Angeles, CA
New York, NY – JFK
January 25, 2014
New York, NY – Penn Station Washington, DC
January 27, 2014
Washington, DC
New York, NY – Penn Station
February 15, 2014
New York, NY– JFK
Los Angeles, CA
February 24, 2014
Los Angeles, CA
Newark, NJ
February 28, 2014
New York, NY – JFK
Washington, DC
March 3, 2014
Washington, DC
New York, NY – Penn Station
March 7, 2014
New York, NY– JFK
Los Angeles, CA
March 10, 2014
Los Angeles, CA
New York, NY – JFK
March 28, 2014
New York, NY – JFK
Los Angeles, CA
April 1, 2014
San Francisco, CA
New York, NY – JFK
April 13, 2014
New York, NY – JFK
Los Angeles, CA
April 20, 2014
Los Angeles, CA
Washington, DC
April 21, 2014
Washington, DC
New York, NY – JFK
May 7, 2014
New York, NY – JFK
Los Angeles, CA
May 12, 2014
Los Angeles, CA
New York, NY – JFK
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May 22, 2014
New York, NY – LaGuardia
Los Angeles, CA
August 29, 2014
Los Angeles, CA
New York, NY – JFK
October 2, 2014
New York, NY – JFK
Los Angeles, CA
October 6, 2014
Los Angeles, CA
New York, NY – JFK
October 31, 2014
New York, NY – JFK
Washington, DC
November 2, 2014
Washington, DC
New York, NY – JFK
November 7, 2014
New York, NY – JFK
Los Angeles, CA
November 11, 2014
Los Angeles, CA
New York, NY – JFK
November 26, 2014
New York, NY – JFK
Los Angeles, CA
December 1, 2014
Los Angeles, CA
Newark, NJ
December 12, 2014
New York, NY – Penn Station Washington, DC
December 14, 2014
Washington, DC
New York, NY – Penn Station
December 19, 2014
Newark, NJ
Los Angeles, CA
12. On February 24, 2014, as shown above, petitioner flew into Newark, New Jersey, at
approximately 9:10 p.m. Thereafter, there was a charge for a cab or limo in New York City at
9:42 p.m.
13. Additionally, on October 10, 2014, petitioner drove from New York to Virginia. He
drove back to New York on October 14, 2014.
14. On December 1, 2014, after arriving in Newark, New Jersey, petitioner used an ATM
in New York, New York, at approximately 10:20 p.m. that evening.
15. On December 19, 2014, before leaving for Los Angeles, petitioner used an ATM in
New York, New York, at approximately 9:48 a.m.
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16. The Division determined that petitioner spent 202 days in New York City in 2014.
In reaching this determination, the Division relied on bank statements from Citibank, plane and
train e-tickets, email of flight itineraries, Chase credit card statements, and T-Mobile cell phone
statements.
17. On August 20, 2018, the Division sent petitioner s representative a letter advising
that an audit of petitioner s New York state tax returns for the tax year 2014 has resulted in an
increase of tax liability in the amount of $35,275.00.
18. On November 23, 2018, the Division issued petitioners a notice of deficiency with
assessment ID L-049187917, asserting additional New York State personal income tax due for
the year 2014 in the amount of $22,352.00, plus interest and penalty. This notice was premised
upon the assertion that petitioners were domiciled in New York State and City, were statutory
residents of New York State and City, or, the correct amount of income was not allocated to New
York State and/or New York City.
19. The Division also found that petitioners were entitled to a New York State resident
credit of $36,720.00 for taxes paid to California.
20. Petitioners filed New York State resident income tax returns, forms IT-201, for tax
years 2015 and 2016.
21. At the hearing, the Division submitted the affidavit of Glenda Knox, sworn to on
September 21, 2020. Ms. Knox was the tax auditor 1 that performed an audit of petitioners
return. In her affidavit, Ms. Knox stated that “[u]pon audit, it was determined that Petitioners
maintained a permanent place of abode located at [the 7th Street apartment] from 1/1/2014 thru
11/1/2014. She also stated “[u]pon audit, it was determined that Petitioners purchased a
residence located at [West 23rd Street] on 12/3/2014.
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CONCLUSIONS OF LAW
A. New York State imposes personal income taxes on resident and nonresident
individuals (Tax Law § 601 [a] – [c], [e]). Residents are taxed on their income from all sources
(Tax Law § 611 [a]). Nonresidents are taxed on their New York State source income (Tax Law
§ 631 [a]).
B. Tax Law § 605 (b) (1) (A), former § 605 (b) (1) (B) and New York City
Administrative Code § 11-1705 (b) (1) (a) and (b) set forth the definition of a New York State
and New York City resident individual for income tax purposes as follows:
“A resident individual means an individual:
(A) who is domiciled in this state [city], unless (i) the taxpayer maintains no
permanent place of abode in this state [city], maintains a permanent place of abode
elsewhere, and spends in the aggregate not more than thirty days of the taxable year
in this state [city], or . . . .
(B) who is not domiciled in this state [city] but maintains a permanent place of
abode in this state [city] and spends in the aggregate more than one hundred eightythree days of the taxable year in this state [city], unless such individual is in active
service in the armed forces of the United States.
C. As set forth above, there are two bases upon which a taxpayer may be subjected to tax
as a resident of New York State and City. Since it is uncontested that petitioners were domiciled
in New York City beginning December 3, 2014 (see finding of fact 7), the sole question here is
whether petitioner was a statutory resident of New York State and City for the remainder of
2014.
D. To be a statutory resident, a taxpayer must (1) maintain a permanent place of abode in
the state or city; and (2) be physically present in the state or city on more than 183 days in a
given taxable year (see Tax Law § 605 [b] [1] [B]; Administrative Code of the City of New York
§ 11-1705 [b] [1] [B]). Petitioner asserts both that he did not maintain a permanent place of
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abode in New York City during 2014 and that he was not physically present in New York State
and City on more than 183 days in 2014.
E. It is petitioner s burden to establish that he did not maintain a permanent place of
abode in New York City or that he did not spend more than 183 days in New York City during
2014 (see Tax Law § 689 [e]; El-Tersli v Commr Taxation and Fin, 14 AD3d 808, 810 [3d
Dept 2005]). Petitioner bears the burden of showing by clear and convincing evidence that his
stay at the 7th Street apartment did not qualify as maintaining a permanent place of abode within
the meaning of Tax Law § 605 (b) (1) (B) and that he did not maintain a permanent place of
abode after that time until purchasing the West 23rd Street apartment (see Matter of Mays, Tax
Appeals Tribunal, December 21, 2017).
A permanent place of abode is defined under the Division s regulations as “a dwelling
place of a permanent nature maintained by the taxpayer, whether or not owned by such taxpayer .
. . (20 NYCRR 105.20 [e] [1]). The first question when determining whether a taxpayer
maintained a permanent place of abode is whether the dwelling exhibits the physical
characteristics ordinarily found in a dwelling suitable for year-round habitation (see id.). If the
dwelling is suitable for year-round habitation, the next inquiry is whether the taxpayer has a legal
right to occupy that dwelling as a residence (see id.; see also Matter of Mays). If he has a right
to occupy the dwelling, and he exercised that right by enjoying his residential interest in that
dwelling, he has maintained a permanent place of abode within the meaning of Tax Law § 605
(b) (1) (B) (see Matter of Mays). Maintaining a place of abode involves doing whatever is
necessary to continue one s living arrangements in a particular place (see id.).
Here, petitioner s testimony established that the 7th Street apartment was suitable for
year-round habitation. As he stated, it had a bed, bathroom, allowed for him to do his
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schoolwork, and it had a kitchenette. He also had exclusive access to the 7th Street apartment
from January 1, 2014 through November 1, 2014. Petitioner has not submitted any evidence or
even asserted that he was prevented from using the apartment at any time for the duration of the
lease. Accordingly, petitioner maintained a permanent place of abode when staying in the 7th
Street apartment.
F. Petitioner argues that his place of abode did not qualify as “permanent because his
stay was only temporary due to the temporary nature of his position at the time with Nassau
County Community College. In support of this argument, petitioner relies on regulatory
language that was deleted from the regulation in 2008 (see 20 NYCRR former 105.20 [e]; TSBM-09[2]I). The change was effective for tax years beginning after December 31, 2008, and thus
the temporary stay exception is not available to petitioner for tax year 2014 (see Matter of
Mays).
G. The next question is whether petitioner maintained a permanent place of abode for
substantially all of the year. A “resident individual for purposes of Tax Law § 605 (b) (1)
includes an individual who is not domiciled in New York State or City, but who maintains a
permanent place of abode for substantially all of the taxable year and is present for more than
183 days of the taxable year in New York State and City (20 NYCRR 105.20 [a] [2]; 20 NYCRR
290.2). “Substantially all of the taxable year is not defined under the Tax Law or regulations,
but the Division has, as a matter of policy, interpreted this to mean a period in excess of eleven
months (see 2014 Nonresident Audit Guidelines, State of New York – Department of Taxation
and Finance, Income Franchise Field Audit Bureau
[https://www.tax.ny.gov/pdf/2014/misc/nonresident_audit_guidelines_2014.pdf]; see also
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Matter of Mays). The Guidelines are instructive when determining the duration of a permanent
place of abode (see Matter of Tweed, Tax Appeals Tribunal, May 23, 1996).
Here, as shown by the affidavit of Ms. Knox, petitioner s residency periods at his two
apartments in New York City amount in the aggregate to 11 months exactly, not 11 months one
day as asserted by the Division in its brief. However, petitioner has not submitted any evidence
that he did not maintain a permanent place of abode for the time between his lease ending at the
7th Street apartment on November 1, 2014 and the purchase of his West 23rd Street apartment
on December 3, 2014. The only evidence in the record specific to this time period is petitioner s
travel information, including that petitioner arrived in New York City on November 2, 2014, left
on November 7, 2014, returned on November 11, 2014, and left again on November 26, 2014.
Despite admittedly being present in New York City during this time, petitioner has offered no
evidence, testimony or otherwise, demonstrating he did not maintain a permanent place of abode.
Accordingly, petitioner has failed meet his burden of showing that he did not maintain a
permanent place of abode for substantially all of 2014.
H. Petitioner also bears the burden of proving that during the period at issue, he spent
fewer than 184 days within New York (see Matter of Ruderman, Tax Appeals Tribunal, June
15, 2017 confirmed, Ruderman v Tax Appeals Tribunal, 170 AD3d 1442 [3d Dept 2019];
Matter of Zanetti, Tax Appeals Tribunal, February 13, 2014). Statutory residency cases are fact
intensive and may require specific evidence through contemporaneous records to show where a
taxpayer is at any day and time (see id.). A petitioner may also meet this burden of proof
through testimonial evidence, documentary evidence or a combination of the two (see id.).
I. Petitioner did not meet his burden of showing by clear and convincing evidence that he
was not present in New York City for more than 183 days in 2014. Petitioner asserts he was in
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New York State and City well below the 183-day threshold and that the Division took an
aggressive position in how it counted days he was present in New York State and City.
However, petitioner did not provide any documents or testimony that support his position.
Petitioner also asserts that the Division counted days where he spent more than 23 hours in a
state other than New York, and that the Division should not be permitted to count the days in
such an aggressive manner.
“Days spent within New York is established in 20 NYCRR 105.20 (c) and applied to
New York City pursuant to 20 NYCRR 295.2 (a) (see Matter of Ruderman). This regulation
provides the following:
“In counting the number of days spent within and without New York State,
presence within New York State for any part of a calendar day constitutes a day
spent within New York State, except that such presence within New York State
may be disregarded if such presence is solely for the purpose of boarding a plane,
ship, train or bus for travel to a destination outside New York State, or while
traveling through New York State to a destination outside New York State . . .
(20 NYCRR 105.20 [c]).
The regulations also provide that any New York non-domiciliary who maintains a permanent
place of abode in New York and claims to be a nonresident must keep and have available for
examination adequate records to substantiate the fact that such person did not spend more than
183 days of such taxable year within New York (see 20 NYCRR 105.20 [c]).
Petitioner s travel documents and bank statements make clear that he was present within
New York State and City for 174 days excluding travel days in 2014 (see findings of fact 11, 16).
For 28 additional days in 2014, petitioner was present in New York State and City where New
York City was the destination or origin of travel (see id.). As petitioner s New York City
apartments located at 7th Street and then West 23rd Street served as either the point of origin or
the destination from January 1, 2014 through November 1, 2014 and December 3, 2014 through
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the end of the year, respectively, and petitioner has not provided any evidence regarding where
he stayed in New York City or outside of New York City for the month of November and the
first two days in December, the travel exception does not exempt any day at issue (see Matter of
Zanetti, Tax Appeals Tribunal, February 13, 2014). Accordingly, based on this record,
petitioner spent 202 days in New York State and City in 2014.
J. Petitioner argues that because he was domiciled in New York upon the purchase of
the West 23rd Street apartment, he cannot also be a statutory resident because he cannot be a
statutory resident in the same tax year that he is domiciled in New York. This argument is
without merit (see El Tersli v Commr of Taxation and Fin, 14 AD3d at 810; Matter of Varzar,
Tax Appeals Tribunal, April 2, 2015; Tax Law § 605 [b] [1] [A] and former § 605 [b] [1] [B]).
Tax Law § 605 (b) (1) (A) and former § 605 (b) (1) (B) provide an “either/or disjunctive
definition of “resident. Tax Law § 605 (b) defines a “resident as relevant here, as someone
who is domiciled in this state, or who is not domiciled in this state but maintains a permanent
place of abode in this state and spends in the aggregate more than 183 days of the taxable year in
this state. As petitioner was only domiciled in New York State and City beginning December 3,
2014, he could, and did qualify as a resident of New York State and City for the remainder of the
year as a statutory resident by maintaining a permanent place of abode and spending more than
183 days in New York State and City.
K. Petitioners also argue that they were never afforded the opportunity to determine their
separate New York income and be taxed accordingly pursuant to Tax Law § 611 (b). Assuming
petitioner was found to be a statutory resident for 2014, the regulations provide that if one spouse
is a resident of New York State for the entire taxable year and the other is a nonresident or partyear resident during that year, they must each determine their New York taxable income on
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separate returns unless they filed a joint federal income tax return and they elected to file a joint
New York state personal income tax return determining their joint taxable income as if they were
both residents of New York State for the entire taxable year (see 20 NYCRR 111.2 [d]; see also
Tax Law § 651 [b] [4]). As it is undisputed that petitioners filed joint federal and New York
State income tax returns for 2014, it was proper to tax their income jointly.
L. The petition of Joseph Pilaro and Joseph Gorrie is hereby denied and the notice of
deficiency is sustained.
DATED: Albany, New York
August 26, 2021
__/s/ Jessica DiFiore____________
ADMINISTRATIVE LAW JUDGE