INSIGHT: Investment Strategist Never Abandoned His New York Domicile

A Wall Street investment strategist failed to convince a New York tax tribunal that he had abandoned his domicile in New York and moved to Connecticut.

Despite moving certain “near and dear” items of personal property to the Connecticut residence, Thomas McManus couldn’t provide sufficient evidence to prove that he intended to change his domicile to Connecticut, the New York Division of Tax Appeals ruled in the Matter of McManus, No. 827116 (N.Y. Div. of Tax App. 2/7/19)

On Aug. 6, 2013, the New York State Division of Taxation issued to McManus, a noted Wall Street investment strategist, a notice of deficiency asserting additional New York personal income tax due for 2009 in the amount of $53,203 plus interest. The deficiency resulted from the division’s determination that McManus was a “domiciliary” of New York during 2009.

For 2009, McManus filed a New York nonresident and part-year resident income tax return claiming married filing separately status and indicating his address as High Ridge Avenue, Ridgefield, Conn. McManus maintained “living quarters” in New York during the audit period, located at Normandy Road, Bronxville, N.Y.

McManus worked in New York from 1980 to April 2008, and in September 2008, he accepted a new position and began to work in St. Louis, Mo., until December 2009. McManus returned to work in New York City in 2010. McManus’s children continued to go to school in New York state. The auditor concluded that McManus had not established “by clear and convincing evidence” that he intended to change his domicile from New York to Connecticut and, therefore, McManus was considered to be a New York resident for income tax purposes.

General Habits of Living

McManus and his wife purchased a residence, the Bronxville residence, in August 2002. Shortly thereafter, in December 2002, the couple purchased another residence in Ridgefield, Conn. McManus and his wife filed federal and New York state tax returns from 2003 through 2008 listing the Bronxville address as their primary residence. From January 1999 through April 2008, McManus worked for Banc of America Securities in New York City. In April 2008, McManus was laid off from his position as chief investment strategist at Banc of America Securities.

In September 2008, one month before the financial crisis began, McManus joined Wachovia Securities as its chief investment officer. In October 2008, Wells Fargo purchased Wachovia Bank and Wachovia Securities. McManus “recognized that his association with Wachovia Securities/Wells Fargo was damaging his reputation and business career, and in early-2009, he began actively seeking employment in the New York City area,“ the court said. In June 2009, he informed his employer that he would not be extending his contract beyond December 2009. In April 2010, McManus began working for Lazard in New York City.

McManus maintained his Bronxville marital residence for both his and his family’s personal use through 2009. McManus’s wife and children slept at the Bronxville residence during the week, and his wife’s office was located at the Bronxville residence. McManus’s Verizon statement, bank statements, and business correspondence were all sent to the Bronxville residence during 2009. McManus’s general pattern through 2010 was to spend weekends in Connecticut and to return to the Bronxville home on Sunday evenings so his children and wife could prepare for school (in New York City) Monday through Friday.

McManus and his wife sold the Bronxville residence in August 2011. Upon the sale, the couple took a $200,000 federal exclusion on the gain from the sale of a primary residence. McManus was registered to vote in New York and did so in 2009. McManus had vehicles registered in New York and had a New York driver’s license in 2009. McManus did not register to vote in Connecticut until September 2010, and did not register any vehicles in Connecticut.

Union of Residence and Intent

New York imposes a personal income tax on “resident individuals.” N.Y. Tax Law Section 605(b)(1) defines a resident individual as “someone who is domiciled in New York.” The regulations define the term domicile as follows—“(1) Domicile … is the place which an individual intends to be such individual’s permanent home—the place to which such individual intends to return whenever such individual may be absent. (2) A domicile, once established, continues until the person moves to a new location with the bona fide intent of making such individual’s fixed and permanent home there (emphasis added). … (4) A person can have only one domicile. If such person has two or more homes, such person’s domicile is the one which such person regards and uses as such person’s permanent home.”

An existing domicile continues until a new one is acquired. Whether there has been a change of domicile is a question of fact rather than law. “The test of intent with regard to a proposed new domicile is ‘whether the place of habitation is the permanent home of a person, with the range of sentiment, feeling and permanent association with it,’“ the court said. See Matter of Bourne. “In order to acquire a new domicile, there must a union of residence and intention. … Mere change of residence … does not effect a change of domicile.” See Matter of Newcomb.

The courts have consistently looked to certain objective criteria to determine whether a taxpayer’s “general habits of living” demonstrate a change of domicile. “For a taxpayer to meet his or her burden of proof to establish a change in domicile, he or she must show a change in lifestyle.” See Matter of Ingle. The court concluded that McManus had not proven, by clear and convincing evidence, that he relinquished his New York domicile and acquire a domicile in Connecticut as of the year at issue.

McManus and his wife, beginning in 2002 and continuing through 2009, continuously and uninterruptedly maintained the Bronxville marital residence for both McManus’s and his family’s personal use. Whenever McManus was in New York, he lived at the Bronxville home, and his wife and children lived there Monday through Friday. McManus’s Bronxville address was listed on the federal and New York state tax returns filed by McManus and his wife for tax year 2008. McManus had a New York driver’s license and vehicles registered in New York in 2009; and voted in New York in 2009.

The record, the court remarked, clearly shows that McManus’s “life remained centered in Bronxville during the year at issue.“ There is no evidence that McManus took any steps to sever his relationship with his New York domicile during the year 2009. McManus admitted that he was present in New York state for a total of 76 days for work purposes during 2009. McManus did not engage in any business activity in Connecticut during 2009. The court noted that ”active business ties have been considered an indication of failure to abandon a New York domicile.“ See Matter of Kartiganer v. Koenig.

About the only “factor” in McManus’s favor was that he and his wife had moved certain “near and dear” items of personal property to the Connecticut residence. This was not nearly enough, however, to carry the day. The court concluded that McManus “has failed to carry his [heavy] burden of proving, by clear and convincing evidence, that he intended to change his domicile from New York State to Connecticut.”

Robert Willens is president of the tax and consulting firm Robert Willens LLC in New York and an adjunct professor of finance at Columbia University Graduate School of Business.