A taxpayer changing domicile to outside New York faces a daunting task, especially when the New York residence is not abandoned.  The taxpayer must have the intent to make the new location his or her new permanent home and act on this intent.  To determine what is in a taxpayer’s mind is not always an easy task for an auditor, but the auditor generally considers five factors indicating domicile:  homes maintained and used; active business involvement; time in the state; location of near and dear items; and family connections.

In the Matter of the Petition of Stephen C. Patrick[1] shows the importance of fully developing the taxpayer’s facts to successfully establish intent.  Because the extensive and detailed facts were presented, the administrative law judge ruled in favor of the taxpayer, Stephen C. Patrick. These facts detail a Hollywood-style story of a relationship between the taxpayer and his second wife from their high school romance, their separate lives for 40 years, and the rekindling of their romance.

Petitioner and Clara Scurati-Manponi were high school sweethearts.  After graduating, Stephen went off to West Point while Clara’s parents sent her to a boarding school in Italy, where, after a year and half, she informed Steve that she was to marry someone else.  Steve went on to marry and raise a family in Connecticut.  He took a position at Colgate-Palmolive in New York City rising to become Chief Financial Officer.  Following a health scare in 2007, he reevaluated his life, including his unhappy marriage.  He separated from his first wife and in 2008 rented an apartment in Manhattan.  His thoughts soon turned to Clara, whom he located living in Paris.  In April of 2008, she flew to meet Stephen in New York. When they met, she brought with her all the mementos she saved.  On that eventful evening, Stephen proposed and Clara went back to Paris to tell her husband she was leaving him.

Since petitioner’s lease was expiring, in 2008 he purchased an apartment for approximately $3.8 million dollars on the East side of Manhattan.  The apartment was purchased for when Clara visited from Paris and as an investment because Stephen and Clara agreed to make Paris their home as soon as they could.

In October 2010, Stephen and Clara purchased an apartment in Paris for approximately $3.2 million dollars, with a view of the Eiffel Tower.  They spent an additional $210,000 on renovations, took out extensive insurance on the Paris home, and installed a substantial safe for their valuable possessions, including the mementos of their early love. Following another health scare and a deep desire to not be apart from Clara any longer, Stephen retired early from Colgate, forgoing significant incentives and compensation.

Despite Stephen’s efforts, the Division levied a nearly $2.2 million assessment claiming all five primary domicile factors were in its favor, including the Petitioner retaining his very expensive Manhattan apartment, which was periodically used in 2011 and 2012.  However, at the Hearing, following emotional testimony from the petitioner and Clara that they viewed Paris as their home and location of their heartfelt mementos, the auditor recanted his conclusion with respect to the active business involvement factor and the near and dear items.  As for the time factor, the petitioner showed that the aggregate number of days should be discounted for days that did not reflect a desire to be in New York, such as medical or transit days.

In cancelling the assessment, the administrative law judge was so smitten by Stephen and Clara’s love story (a “Casablanca” like reunion), that when testing for intent, his findings were so strong that it overshadowed any other concern as to whether Stephen changed his domicile to Paris. In addition to the value of taking the time to put in the record all detailed and thoughtful facts, the determination is instructive in other ways as well.  For example, if unfavorable, the time factor should be analyzed on a qualitative basis to show that the quality days were not spent in New York.  Secondly, it is not always necessary to abandon the New York residence, just explain how its function has changed. Lastly, enough cannot be said about the value of credible, heartfelt testimony.

[1] Matter of Patrick, Tax Appeals Tribunal, ALJ Division, June 15, 2017.