Matter of REID
DTA No. 811009; TSB-D-95-(26)I
STATE OF NEW YORK-TAX APPEALS TRIBUNAL
October 5, 1995
OPINION: The Administrative Law Judge held that petitioner established that he changed his domicile before the years at issue. The Administrative Law Judge concluded that petitioner's retention of two apartments in New York City and his business interests in New York were outweighed by petitioner's credible testimony with respect to his "general habit of life" before 1986. The Administrative Law Judge found petitioner's documentary evidence (e.g., savings account and mortgage with Connecticut bank, use of Connecticut address on company documents and new investments) supported petitioner's credible testimony. The Administrative Law Judge further relied on the credible testimony of petitioner's witness, Peter Mazza, to support petitioner's assertion that he commuted from his home in Connecticut in lieu of staying in his New York apartment.
The Administrative Law Judge further concluded that petitioner failed to meet his burden to establish he was not a statutory resident [*49] during the period at issue. The Administrative Law Judge accorded little weight to petitioner's business logs, noting that petitioner offered no testimony about the accuracy of the logs. The Administrative Law Judge also rejected petitioner's reliance on receipts purportedly establishing that petitioner was in Connecticut on weekends during the period at issue.
The Administrative Law Judge also held that petitioner's reliance on the advice of his tax advisor did not establish reasonable cause for the waiver of any penalties.
On exception, petitioner asserts that the Administrative Law Judge erred in not concluding that the agreement reached by petitioner's representative and the Division's auditor regarding the number of "workdays" petitioner spent in New York was binding. Petitioner further argues that the Administrative Law Judge failed to consider petitioner's credible testimony with respect to his "general habit of life" to establish that petitioner spent his weekends and holidays in Connecticut and did not venture into New York.
The Division on exception argues that the Administrative Law Judge properly considered the busines logs submitted by petitioner. The Division points [*50] out that petitioner failed to testify as to the accuracy of the business logs. The Division further notes that the logs were qualified and introduced during the testimony of a witness who did not meet petitioner until after the audit period and was not aware who prepared the logs. The Division asserts that petitioner incorrectly relies on the agreement between petitioner's representative and the auditor with respect to days worked in New York. The Division argues that there is nothing in the record to indicate an agreement between the parties. The Division further asserts that petitioner was aware that residency would be an issue at the hearing. The Division also points out that the Administrative Law Judge had no specific knowledge of the facts in the case and that the only evidence upon which she could base her decision was that produced at hearing.
As a final point, the Division, relying on our decision in Matter of Veeder (Tax Appeals Tribunal, January 20, 1994), argues that petitioner incorrectly relied on audit guidelines that were not in effect during the period at issue.
In his reply brief, petitioner asserts that the apartment at 1175 York Avenue was not maintained [*51] as a permanent place of abode but rather as an item of investment; therefore, petitioner cannot be a statutory resident. Petitioner reasserts that the agreement between petitioner's representative and the auditor related to business days in New York and that said days are no longer at issue.
Relying on Matter of Avildsen (Tax Appeals Tribunal, May 19, 1994), petitioner argues that "uncontradicted testimony in and of itself, without corroborating documentary evidence, may be sufficient to carry taxpayer's burden of proving his days in and out of New York" (Petitioner's reply brief, p. 8). Petitioner points out that not only was petitioner's testimony found to be credible, but the testimony of Mr. Mazza as well.
Petitioner argues that this testimony, coupled with petitioner's receipts documenting his location on weekends, is sufficient to meet petitioner's burden of proof.
We reverse the determination of the Administrative Law Judge. Tax Law @ 605 (former [a]) provides in part, that a resident is one: "(2) who is not domiciled in this state but maintains a permanent place of abode in this state and spends in the aggregate more than one hundred eighty-three days of the [*52] taxable year in this state. . . ." Former section T46-105.(0)(a) of the Administrative Code of the City of New York essentially mirros the State's definition of resident individual save for the insertion of "city" where "state" appears.
We must first determine if petitioner timely raised the issue of whether he maintained a permanent place of abode in New York. This Tribunal has held that while new legal issues may be raised on exception (see, Matter of Chuckrow, Tax Appeals Tribunal, July 1, 1993; Matter of Standard Mfg. Co., Tax Appeals Tribunal, July 11, 1991), new factual issues may not (Matter of Howard Enterprises, Tax Appeals Tribunal, August 4, 1994). In this matter, whether petitioner maintained a permanent place of abode is an issue of fact. The reason for the distinction between factual issues and legal issues is generally that the introduction of factual issues after the record is closed deprives the party with the burden to prove the disputed fact of the opportunity to submit evidence, thereby prejudicing that party (see, Matter of Consolidated Edison Co. of New York, Tax Appeals Tribunal, May 28, 1992). In the matter before us, however, the [*53] party raising the issue late is petitioner.
Petitioner asserts for the first time on exception that he did not maintain a permanent place of abode in New York. We note that to establish change of domicile it was incumbent on petitioner to introduce all relevant evidence in his possession with respect to the York Avenue and East 75th Street apartments.
While the Division had a chance to address the evidence submitted as it related to the issue of domicile, the Division did not have the opportunity to do so with respect to the issue of whether the apartments were maintained as a permanent place of abode. Despite the close relation of the two issues, we find it would be patently unfair for us to address the merits of petitioner's argument when the Division did not have a chance to challenge petitioner's claim at hearing.
We next address whether petitioner spent less than 184 days in the City and State of New York.
On audit, petitioner's representative and the auditor agreed as to the number of workdays petitioner spent in New York. The auditor referred to his conclusion in the Division's workpapers on page three of the auditor's case preparation worksheet:
"we analyzed his diaries [*54] (which are silent about the weekends and holidays) and determined 159 working days in 1987 and 160 working days in 1986 in NY. If we include the weekends and other nonworking days, it makes the required minimum of 184 days in each year for making him a statutory resident of NY" (Division's exhibit "J"). The Administrative Law Judge found the agreement between the parties as a fact, nevertheless she rejected the agreement because of a lack of sufficiency, i.e., that the logs were not detailed to the satisfaction of the Administrative Law Judge and that no witness for petitioner testified as to the accuracy of the logs. n13
n13 Petitioner points out in his brief on exception that no such testimony was offered because of the conclusion reached by the auditor with respect to workdays. Further, the Division at hearing did not challenge the contents of the logs relied on by the auditor and, therefore, petitioner considered such testimony unnecessary. We find the Administrative Law Judge erred in rejecting the agreement between the auditor and petitioner's representative. The auditor's conclusions with respect to petitioner's status as a statutory resident are the basis for the [*55] Division's issuance of the notice of deficiency in this matter (Tax Law @ 681[a]).
These conclusions are part of the record and, therefore, provide the starting point for the Administrative Law Judge's determination. Allowing the Administrative Law Judge to reject the auditor's conclusions would inject an element of uncertainty into petitioner's challenge to the statutory notice. Our position is consistent with how courts and this Tribunal have addressed stipulations between a taxpayer and the taxing authority (see, Matter of Ianniello, Tax Appeals Tribunal, November 25, 1992, affd Matter of Ianniello v. New York Tax Appeals Tribunal, 209 AD2d 740, 617 NYS2d 973 [Tribunal found no basis for Administrative Law Judge to delete paragraphs of stipulation from findings of fact where Administrative Law Judge did so because statements contained therein were unsworn, unsigned and constituted mere speculation]; c.f., Jasionowski v. Commissioner 66 T.C. 312 [Tax Court rejected stipulation entered into between the parties because facts adduced at trial were clearly contradictory]).
While it is not our position that an auditor's conclusions should be subject to the same standard [*56] of deference as a stipulation pursuant to 20 NYCRR 3000.7(e), it is our holding that there must be some showing that the basis for the conclusion (e.g., the audit log in this matter) does not support the result reached by the auditor. As a result, we give full effect to the auditor's conclusions with respect to petitioner's workdays in New York for 1986 and 1987, respectively.
Turning to the matter of petitioner's location on nonworking days, we note that for 1986 and 1987, the auditor included 104 Saturdays and Sundays and 30 holiday/vacation days as New York days. With respect to these days, we find the Administrative Law Judge erred in focusing on 20 NYCRR former 102.2(c) in determining what was required to meet a taxpayer's burden at a Division of Tax Appeals hearing. 20 NYCRR former 102.2(c) provides, in part, that a taxpayer was under the obligation to maintain "adequate records to substantiate the fact that he did not spend more than 183 days of such taxable year within New York State."
We have previously held that 20 NYCRR former 102.2(c) is a record keeping provision that does not govern the production of evidence at a Division of Tax Appeals hearing and that specific, credible [*57] testimony may be sufficient to meet petitioner's burden of proof (see, Matter of Armel, Tax Appeals Tribunal, August 17, 1995; Matter of Avildsen, supra). Therefore, we find the Administrative Law Judge erred by not considering petitioner's credible testimony nor the testimony of Mr. Mazza, who the Administrative Law Judge found to be a very credible witness.
The Administrative Law Judge found that petitioner's testimony as to his "general habit of life" before 1986 supported the conclusion that petitioner changed his domicile. We find no basis to conclude that petitioner's testimony is not equally relevant and probative for the period 1986 and 1987. We so conclude given that petitioner's testimony as to his "general habit of life" was not limited to the period before 1986, but rather encompassed all the years spent in his Chicken Street home.
Petitioner testified extensively as to his weekend routine after moving to Connecticut in 1981 and specifically as to where he spent his weekends during 1986 and 1987. This testimony was the same for the entire period after petitioner moved to Connecticut in 1981. n14
n14 It is our impression that the Administrative Law Judge was not aware of our decision in Matter of Avildsen (supra). Without being cognizant of our conclusion that a taxpayer's burden could be met with credible testimony alone, it would appear the Administrative Law Judge considered it unnecessary to address petitioner's testimony for the years 1986 and 1987. [*58] We find petitioner's testimony regarding his weekend routine to account for the Saturdays and Sundays the auditor included as New York days in 1986 and 1987. Petitioner credibly testified that his weekend activities centered around Connecticut and that he did not travel to New York on Saturdays and Sundays.
Petitioner further testified that after the first three years of his involvement with Andy-Johns (i.e., 1975-77) he never worked on weekends. As a result, he never went to his office in New Jersey, nor was there any reason to go to the New York showroom on weekends. Petitioner's testimony as to his weekend routine was corroborated by Mr. Mazza, who testified that when he and petitioner were together on the weekends, their plans never included spending time in New York.
We find petitioner's testimony, supported by Mr. Mazza's testimony, is sufficient with respect to his location on weekends to meet his burden of proof (see, Matter of Moss, Tax Appeals Tribunal, November 25, 1992 [fact that petitioner did not present contemporaneous diary entries did not defeat petitioner's position given credible general testimony regarding location on weekends and holidays]).
We next turn [*59] to the issue of petitioner's location on holidays, vacation days and sick days. With regard to holidays and vacation days in 1986, the auditor attributed 30 such days as New York days. For the week of April 21st, petitioner's business log lists him as being on vacation. We find the notations in the log are corroborated by an American Express receipt during that week for Club Med. The business log also lists petitioner on vacation in San Francisco for the week of July 4th. The record contains a hotel bill and receipt for a car rental for this week in San Francisco.
The business log also notes five sick days for petitioner in 1986. Five days were listed as sick days by the auditor as well, but were apaprently included as New York days along with the other 130 nonworking days. Petitioner at hearing testified that he spent sick days at home. While the Administrative Law Judge did not specifically address petitioner's testimony regarding sick days, we find petitioner's testimony that he was not in New York, but at home in bed in Connecticut, to be logical and sufficient to account for said days.
The elimination of the sick days, as well as the weeks of April 21st and July 4th and Saturdays [*60] and Sundays, removes petitioner from liability as a statutory resident. For 1987, petitioner introduced into evidence an airline receipt indicating arrival in London, England on April 21st and departure from Milan, Italy on April 29th. This receipt corroborates the business log entries for this week which list petitioner as on vacation. The business logs also list petitioner as on vacation for November 24th through 29th. The record contains for these dates a receipt for hotel accommodations in the U.S. Virgin Islands.
These two weeks taken in conjunction with Saturdays and Sundays, as well as five sick days for 1987, result in disqualifying petitioner as a statutory resident for 1987.
Accordingly, it is ORDERED, ADJUDGED and DECREED that:
1. The exception of Andrew M. Reid is granted;
2. The determination of the Administrative Law Judge is reversed;
3. The petition of Andrew M. Reid is granted; and
4. The Notice of Deficiency dated February 15, 1991 is cancelled.
Use your browser's "back" button to return to the text.