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April 23, 2014

Division of Tax Appeals Finds Taxpayers Established Change in Domicile from New York City to the Hamptons

A New York State administrative law judge (ALJ) recently ruled in Matter of Gordon R. & Jennifer L. Cooke that the taxpayers established a change in domicile from New York City to the Hamptons notwithstanding the fact that they continued to maintain and use a New York City apartment.  The ALJ determined that the taxpayers met their burden of proof and established through credible testimony and corroborating evidence that their intention was to move “the focus of their life from New York City to the Hamptons.”

The taxpayers asserted that beginning in 1984, upon their move into their Hamptons family home and continuing through the years at issue in this matter (2002–2004) they intended for the Hamptons to be their domicile.  The taxpayers (including their daughter) provided extensive testimony, corroborated by supporting documentary evidence (including many family photographs, baptismal certificates and insurance policies) demonstrating that, beginning in 1984, they spent their time together as a family and celebrated monumental family events (including religious and U.S. holidays) year-round in their Hamptons home, and moved all of their treasured personal possessions (of monetary and sentimental value) to their Hamptons home.  Although the Division pointed to the taxpayers’ continued maintenance and use of a New York City apartment (which included the taxpayers and their children spending Mondays through Fridays in New York City through 1996) and the children’s continued attendance at New York City schools after 1984 as evidence for its claim that the taxpayer’s Hamptons home was nothing more than the traditional “weekend/vacation Hampton’s lifestyle,” the ALJ was not persuaded.

In holding in favor of the taxpayers, the ALJ noted, significantly, that while the taxpayers and their family may have spent their workweeks at their “jobs” in New York City, the place to which the taxpayers always returned whenever they did not have “somewhere [they] had to be” was the Hamptons: “the record was replete with photographs memorializing” birthdays, milestones and other significant events celebrated by the family in the Hamptons year-round.  Indeed, the ALJ observed the following: “In essence, petitioner was an extremely busy executive who traveled extensively and returned to the Hamptons whenever he did not have somewhere he had to be.”  In addition, likely in response to the Division’s arguments regarding the taxpayers’ maintenance and use of their New York City apartment, the ALJ observed that “petitioner was a very successful executive with several prominent companies . . . he was fortunate enough to be able to afford several residences.” 

This determination not only represents a victory for the taxpayers regarding the establishment of a change in domicile, it also captures a notion that appears to be at the essence of determining an individual’s “domicile”—that an individual’s domicile is the place to which one returns when he or she does not have a specific reason to be anywhere else; in other words, it is a “residual” concept.  The determination also represents a continued recognition that the maintenance of a dwelling in New York City alone is insufficient.  Simply because an individual can afford to maintain several residences does not change the fact that someone can have only one domicile “as his grounding place among many possibilities.”  In this case, “petitioner chose the Hamptons.” 

© 2014 McDermott Will & Emery

About the Author

Associate

Maria P. Eberle is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s New York office.  She focuses her practice on various state and local tax matters, including corporate income/franchise tax, sales and use tax, and property tax.  Maria assists businesses and individuals with state and local tax planning and litigation matters.

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About the Author

Partner

Arthur R. Rosen is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s New York office. His practice focuses on tax planning and litigation relating to state and local tax matters for corporations, partnerships and individuals. Formerly the Deputy Counsel of the New York State Department of Taxation and Finance, as well as Counsel to the Governor’s Temporary Sales Tax Commission and Tax Counsel to the New York State Senate Tax Committee, Mr. Rosen has held executive tax management positions at Xerox Corporation and AT&T. In addition, he...

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