CPAs Top Questions about New York Residency Audits – Part 1

Many Long Island CPAs have clients who are being audited or are at risk of a New York residency audit. Last month several attorneys from the firm presented at the National Conference of CPA Practitioners, 2015 Long Island Tax Professionals Symposium. Our topic was “Two Castles, One Home: The View from Albany on Residency Audits.” Several issues dominated the discussion and we will be recapping them over the next few weeks. This week we are covering the impact of renting your home on the residency issue.

With the ability to easily rent your home and give up your keys for blocks of time through online sites like Airbnb, there was a lot of buzz at the conference surrounding how that could affect whether a taxpayer was a Statutory Resident of New York. A taxpayer is a Statutory Resident for income tax purposes if he or she maintains a permanent place of abode in New York for substantially all of the year and spends more than 183 days in New York during that year. The courts have construed “substantially all of the year” to mean a period of approximately 11 months.

Questions were raised by the audience regarding whether New York State would consider a taxpayer as maintaining a permanent place of abode if he or she offers their apartment for rent for several months of the year.   It is clear that if a taxpayer came to New York and rented an apartment for six months of the year to live in for the designated six month time period, he or she should not be considered to maintain a permanent place of abode in New York.  If a taxpayer owns or rents an apartment for a full year, lives in the apartment for six months, and then rents it out or subleases it for the remaining six months to an arms-length third party, the taxpayer should also not be considered to maintain a permanent place of abode.  However, the State may take a closer look if the taxpayer’s tenant is a family member.  The State may also raise concerns if the taxpayer continues this same pattern of living in the apartment for a portion of the year and then renting out the apartment for a portion of the year for several years.   In our view, the taxpayer should not be considered to maintain a permanent place of abode in New York if he or she truly does not have access to the apartment for six months out of the year.  However, to date, we have not seen published decisions with respect to this fact pattern.  We expect that this issue will continue to arise and a taxpayer will eventually test the limits.

Concerned about a New York residency audit? Contact us to schedule a consultation.

Submitted by Jaime Linder on Thu, 12/17/2015 – 13:03