NYS Residency – The Contoversial Gaied case: What is a Permanent Place of Abode?

You are a resident of New York if you are domiciled there – meaning it is your primary residence.  You are also a resident of NY - generally referred to as a Statutory Resident - if you maintain a permanent place of abode (a residence) and you are present in New York for more than 183 days (a part day equals one day – overnight is not required).

This article will focus on Statutory Residency, and the continuing saga of the controversial  case, Matter of Gaied.  Mr. Gaied recently lost again, this time at the Appelate Division, with three deciding in the majority and two dissenters.

A brief history of events:

On audit, Mr. Gaied was found to be a Statutory Resident of New York State and City for years 2001, 2002 and 2003.                

Taxpayer had a hearing before an Administrative Law Judge (ALJ) who found against the taxpayer, agreeing with NYS that petitioner was a resident.

Petitioner took the case before the Tax Appeals Tribunal who found in favor of the petitioner, determining that he was NOT a resident of NY.

The Division of Taxation filed a motion for reargument which was granted.  After reviewing the entire record, the Tax Appeals Tribunal withdrew its prior decision, and found against the petitioner, with a majority of two, and one dissent.

The petitioner then took the case to the Appellate Division, Article 78 proceeding.  A decision was entered on Dec. 27, 2012 again finding against the petitioner three to two.

This is a summary of these hearings:
In the years in question, 2001 – 2003, petitioner Mr. Gaied was domiciled in New Jersey.  He also owned a three family house in Staten Island, NY.  His parents lived in one of the apartments with the full financial support of Mr. Gaied.   Mr. Gaied acknowledges being in New York more than 183 days as he has a business in Staten Island.  Therefore, the only question in this case is:  Does his parent’s apartment constitute a permanent place of abode for Mr. Gaied?

To qualify as a permanent place of abode, the residence can be owned, rented, or there can also be other informal agreements which allow someone to live in a residence.  The case that has often been cited for this issue is Matter of Evans [Tax Appeals Tribunal, June 18, 1992, confirmed 199 AD2d 840 (1993)].  In that case, Evans was a guest at a rectory in NYC.  He usually spent Monday through Friday there.  He shared in the living expenses and kept personal belongings there. He had a key, and came and went at his own discretion (had unfettered access).  This was determined to be a permanent place of abode for Mr. Evans.

Let’s look at the factors in the case of Mr. Gaied.

Did Mr. Gaied maintain the property?  He financially maintained it for the use of his parents.              

Did Mr. Gaied keep personal belongings here? No.        
Did Mr. Gaied have a key and unfettered access?  This was a primary point of contention. 

Unfettered access is a primary consideration in the determination of permanent place of abode.  In other words, if there is a residence that you can use any time you want (whether you use it or not), you have a key and don’t have to ask anyone’s permission to use that residence, it will probably be considered a permanent place of abode. 

Mr. Gaied testified that he stayed at the apartment only occasionally and only at the request of his parents when his father needed help due to illness.  On these occasions he slept on the couch.  He testified that he did not have unfettered access.  This is a key to the case (no pun intended).  Mr. Gaied was the landlord.  He had keys to the other two tenants’ apartments.  He kept these keys in his parent’s apartment. 

Oral testimony is often a petitioner’s best defense, because if credible, the testimony becomes part of the facts of the case.  In this case however, at the first hearing before an Administrative Law Judge (ALJ), the ALJ determined that petitioner's claim that he did not have unfettered access to any of the individual apartments, including that of his parents, was incredible.  As a result, the ALJ found that Mr. Gaied maintained a permanent place of abode in New York and was therefore a Statutory Resident of New York.
The case went before the Tax Appeals Tribunal.  According to the Tribunal, Mr. Gaied’s parent’s apartment was not a permanent place of abode for him; therefore he was not a Statutory Resident of NY.

The Tribunal stated:    
Even if petitioner held the keys, this would not compel the conclusion that the taxpayer maintained a permanent place of abode at the MacFarland Avenue [Staten Island] property during the years in issue. Unlike the facts in the Evans case, petitioner did not have living quarters at his parents' apartment, nor a bedroom or a bed.

On reargument, The Tribunal reversed their findings.  They found that a bedroom or bed is not required for a finding of permanent place of abode:

A review of our decisions… indicates that where a taxpayer has property rights to the subject premises, it is neither necessary nor appropriate to look beyond the physical aspects of the dwelling place to inquire into the taxpayer’s subjective use of the premises (see People ex rel. Mackall v. Bates et al, 278 AD 724 [1951]; Matter of Boyd, Tax Appeals Tribunal, July 7, 1994; Matter of Roth, Tax Appeals Tribunal, March 2, 1989; Matter of Barker, Tax Appeals Tribunal, January 13, 2011).  For the reasons stated herein, we conclude that our decision of July 8, 2010 was in error and is hereby reversed and withdrawn.

The plain language of the statute and regulations contains no requirement that to be deemed a permanent place of abode, a dwelling place must have a separate bedroom and bed.  One can easily envision a situation where a person maintains a studio apartment, with no separate sleeping area, but with cooking and bathing facilities.  The lack of a bedroom or bed would not preclude such premises from being deemed a permanent place of abode.
Also:                                                                                                                                                                  

It seems incredible that petitioner would not have unfettered access to the first floor apartment [his parents], where he stored the keys for the other apartments, which he might have to enter in case of emergencies.  As such, we find no reason to disturb the ALJ’s assessment of credibility.

The case was then raised to the Appellate Division.  Mr. Gaied was found to be a resident again with three judges in the majority and two dissenting.

The majority found the following:

Significantly, the Tribunal determined that petitioner, in addition to owning the building, maintained a telephone and the utilities in his own name at the apartment, paid those bills as well as all other expenses for the apartment, retained unfettered access to the apartment, occasionally slept at the apartment, failed to establish that he kept the apartment exclusively for his parents, and did not prove that he held the property solely for investment purposes. These factual findings by the Tribunal, some of which were strongly disputed by petitioner, are nonetheless supported by substantial evidence in the record, and such facts are sufficient to support the Tribunal's determination that petitioner maintained a permanent place of abode in New York.
Also:                                                                                                                                                           
Even though a contrary conclusion would have been reasonable based upon the evidence presented, we are constrained to confirm, since our review is limited and the Tribunal's determination is amply supported by the record (see e.g. Matter of Kornblum v Tax Appeals Trib. of State of N.Y., 194 AD2d at 883).

The dissenters agreed with the original Tribunal decision, completely contradicting the second Tribunal decision after reargument, saying that without a bed or place for personal items, it was not Mr. Gaied’s permanent place of abode.  They added: The mere fact that petitioner kept the keys to the other apartment units in the dwelling and listed that address as the address where tenant notices should be sent does not require a different result.

The only two important questions are: 

1. Did Mr. Gaied have unfettered access?

2. Is a bed required?

Many people are concerned with the result in this case.  If a parent pays for an apartment for their child in college in NY, will that be considered a permanent place of abode for the parent? 

That is a real concern based on some of the conclusions reached in this decision, however there were other factors here.  Mr. Gaied actually did stay at his parent’s apartment on occasion.  He did work nearby giving him reason to go there.  He did have utilities in his own name, and received mail there.  Is this enough, considering that it was clearly his parent’s home and he was maintaining it not for his own use, but for theirs?  Maybe this isn’t the last we’ll hear of the Gaied Case?

For a free phone consultation on this or any other tax issue or concern please call
Brian Gordon, CPA at (516) 510-6041 or email at bgord520@gmail.com.

Brian Gordon, CPA, is a state and local tax consultant in private practice. Previously, he was with the NYSDTF for more than 30 years, most recently as a District Audit Manager in Manhattan and Brooklyn. He is a member of the NYSSCPA New York, Multistate & Local Taxation Committee and writes and speaks on various tax issues. He can be reached at bgord520@gmail.com or (516-510-6041).   

He also posts a monthly blog called Brian Gordon's STATEments at http://gordonstate.blogspot.com.