The Varzar case is particularly noteworthy for stressing the importance of oral testimony when documentation is lacking. The ALJ made note of the fact that the taxpayer’s testimony was vague and generalized. Taxpayers should be mindful that they may be expected to provide specific testimony, under oath, as to their activity during the audit period, including key business transactions and business venture specifics. Conclusory statements are rarely enough to prevail, especially if the taxpayer has no supporting documentation. Further, family members’ testimony may also be required when they play a role in a taxpayer’s change of domicile arguments.
The Varzar case also serves as yet another example to taxpayers of the importance of maintaining documentation of their ties to the new domicile during the audit period. See our discussion of Matter of Lieberman, where the taxpayers were held to be NYS residents after failing to provide documentation as to their ties to Florida.
As stated by the ALJ in the Varzar opinion, “a glaring omission in the record is of any single tie to” the Florida residence during the audit period. The ALJ noted that the taxpayer started a business in Florida when she allegedly changed her domicile, but the new business – in Tampa, FL – was more than four hours driving distance away from her alleged new domicile in Pompano Beach. The taxpayer eventually started a new business near her Pompano Beach residence, but this was after the audit period.
As the flaws in the Varzar case teach us, taxpayers who no longer wish to be New York residents for tax purposes should retain counsel to strategize the move and retain records in the event they need to produce documentation and testimony before an ALJ in the future.
Submitted by Federico Saal on