Taxation of Out-Of-State Residents

November 27, 2017 | By Charles Botensten

Q: I read an article last week about a case that changed the way out-of-state residents who own an investment property in New York are treated for tax purpose.  What was the decision in that case and how did it change the previous way these individuals were treated?

A: In a previous Legal Line Question of the Week, we answered the question of whether or not someone who resides outside of New York State can be taxed as a New York State resident.  The answer at the time was “yes.”  In John Gaied v. New York State Tax Appeals Tribunal, the appellate court ruled that any non-resident of New York who owns property in the state and spends more than 183 days in New York (even if she never lives there) is a New York State resident for tax purposes.  Entering into New York for any amount of time (e.g. employment) was deemed enough to be considered “in New York” for that day.

Recently, the New York Court of Appeals overturned the appellate court’s decision and ruled that in order to be considered a New York resident for tax purposes, it would have to be shown that an out-of-state resident actually uses their New York property as their dwelling in the course of the tax year.  The decision will shield individuals who reside out of state, but work and own investment property in New York from paying state income tax.

The Legal Line Question by:
Neil B. Garfinkel
REBNY Broker Counsel

Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP