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Home Front: Politix

Court: NY Can Tax All Income of Owner of NY Vacation Home Used 17 Days/Year

2011-02-11

Connecticut and New Jersey residents with a Hamptons summer cottage or a Manhattan pied-a-terre are about to get a nasty surprise: New York state wants more taxes from them.

A New York court ruled last month that all income earned by a New Canaan, Conn., couple is subject to New York state taxes because they own a summer home on Long Island they used only a few times a year. They have been hit with an additional tax bill of $1.06 million. [In re Barker, No. 822324 (NY Tax App. Jan. 13, 2011).] ....

For years, New York law stated that residents of another state who spend more than 183 days a year in New York have to pay taxes on any income they make in this state. But they generally haven't had to pay New York taxes on income they make outside of the state or on their spouses' income if they work elsewhere.

Under the recent ruling, this might change for many out-of-state residents who own vacation homes or apartments here. In effect, it reinterprets what counts as a permanent residence.

In defining a "permanent place of abode," New York tax code specifically excludes "a mere camp or cottage, which is suitable and used only for vacations." New York tax experts say the new ruling is the first they recall that counts summer homes as permanent residences. ....

[The judge] ruled that the couple's Long Island vacation home qualifies under the law as a permanent abode because it was suitable for living year-round--whether or not the couple actually stayed in the home wasn't relevant. Under the ruling, if an owner doesn't spend a single a day in a home it could still count toward a permanent residence.

The Napeague, Long Island, house was purchased by John and Laura Barker for $260,000 in 1997, according to court documents. From 2002 to 2004, the period that was assessed for back taxes, the Barkers said they spent only [17] days a year at the home, usually during the summer.
So much for the NY vacation housing market. Watch more capital take flight from the state as people walk away or sell these homes. Makes me wonder how the small businesses that depend on the tourist money will take this?

Posted by:DarthVader

#20 I'd like to see if this ruling applies to foreign nationals. Imagine if NY state revenue people start heading out to China to audit Chinese owners of NY apartments.

Posted by: Zhang Fei 2011-02-11 23:58

#19 So if I miss my flight and sleep overnight in the airport terminal, does that make me a NY resident?

Posted by: James 2011-02-11 22:39

#18 Time to sell the vacation home and "Escape from New York." New York's not going to get any better until all the taxpayers move out.

Posted by: JohnQC 2011-02-11 21:06

#17 I suspect the bloodsuckerers of NY Tax boards have NO idea what the end result will be. Widespread sales of corporate apartments, second homes, condos at loss will drive down property values and tax revenue. Suck it, bitches. You just upended a workable social/living situation to squeeze some more $ and now you lose. Mass firings should be in order, starting with the judge that made this ruling

Posted by: Frank G 2011-02-11 20:51

#16 Interstate commerce is the sole venue of the federal government. It could authorize the levying of such a tax, but I suspect that it, the federal government, would hose most of the proceeds rather than equitably share with the states.

Posted by: Procopius2k 2011-02-11 20:39

#15 "All those e-tailers have been skating on thin legal ice for years by not charging & remitting local sales taxes for their customers."

They collect and remit them to the states where they have a physical location, AH.

We have a couple of websites where we sell things we make. I record, collect, and remit sales taxes from customers in my state, just as I do at craft fairs I attend. If I had to collect and remit sales taxes to the other 56 49 states too, I'd give up the websites. The extra work wouldn't be worth it. I suspect the same is true of other small e-retailers.

So the states still wouldn't get the money and the states' citizens would be deprived the chance to buy hand-crafted items at reasonable prices (which I think is the ultimate goal of these clowns).

Posted by: Barbara Skolaut 2011-02-11 20:35

#14 Does this mean they get to vote in New York? No taxation without representation ya know.

Posted by: Deacon Blues 2011-02-11 20:24

#13 I'm not faulting Amazon or Texas. All those e-tailers have been skating on thin legal ice for years by not charging & remitting local sales taxes for their customers.

Posted by: Anguper Hupomosing9418 2011-02-11 20:01

#12 Anguper: What made the Texas deal intolerable was that, out of the blue, Texas demanded years of back sales taxes from Amazon, to the amount of about a quarter billion dollars. There's no way any corporation could stand for that.

Posted by: Anonymoose 2011-02-11 19:43

#11 By the same logic wouldn't an apartment complex be a possible home so nobody from outside NY should own property you might be able to live in?

Posted by: Water Modem 2011-02-11 19:20

#10 tax men

I'd say 2/3 are women at the IRS. I have no evidence to back that up except when the IRS said I made six figures in 2008 and actually halving that would be more in the ballpark, every IRS person I spoke to was female. Women can be some of the fattest, pettiest bureau-bitches out there.

Posted by: Fire and Ice 2011-02-11 18:45

#9 Pretty much every US state has plunging tax revenues, and their tax men are every bit as motivated and creative as those in NY state, for example, Texas: Will Amazon run out of states to operate from?
Amazon.com (NASDAQ: AMZN) will close a distribution center in Texas and will almost certainly not have any employees in the state ever again. Texas will need to provide unemployment benefits to some of these people.
Texas presented the worlds largest e-commerce company with a tax bill for $269 million last year.
Amazon can evade this issue by limiting its operations to states which don't charge sales tax: Oregon, Montana, New Hampshire & Delaware. But those states probably charge other taxes.

Posted by: Anguper Hupomosing9418 2011-02-11 18:19

#8 Is the tax pro-rated according to the amount of time spent in NY or does NY want to tax all the income from whatever state it was earned in? Will CT reciprocate and tax all income earned anywhere by anyone who has any residence in CT?

Posted by: Glenmore 2011-02-11 18:19

#7 Sarcasm.

But what happens to NY coffers won't be funny by the time the dust settles.

Posted by: gorb 2011-02-11 17:40

#6 Sarcasm or fact? Please do tell, because poor me can't.

Posted by: Fire and Ice 2011-02-11 16:55

#5 Illinois is rushing a team of "revenue enhancement specialists" to NY as we read this.
Bad news for Rahm though...

Posted by: Bill Griling5080 2011-02-11 16:49

#4 Too bad the aborigines of North America didn't think to apply this idea of taxation to every European explorer or would-be colonist who first landed on these shores. Levy a penalty tax for not having a visa, collect a user fee (all metal objects must be surrendered on touching land), 90% property tax for anyone staying overnight, 5-year quarantine of imported animals with all charges to paid by the importer, 100% tariff on imported goods, really expensive hunting & fishing licenses, etc. etc.

Posted by: Anguper Hupomosing9418 2011-02-11 16:30

#3 My grandparents used to live in Florida 7 months in order to pay Florida taxes. I bet there's millions of snowbirds that are about to get plucked.

Posted by: BrerRabbit 2011-02-11 16:08

#2 Darth, to sell these homes means that there has to be a market. How many NY residents are there in that market? Somehow I thinik supply will outstrip demand.

Posted by: Alan Cramer 2011-02-11 16:07

#1 Can't wait to see the 'transit tax' based upon your income for people routed through JFK.

Posted by: Procopius2k 2011-02-11 15:31

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