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INSIGHT: The Cabin in the Woods—Working and Vacationing in New York Just Got More Expensive

Nov. 21, 2019, 2:01 PM

A New York Administrative Law Judge (ALJ) upheld an assessment that classified a couple as residents of New York on the basis that their vacation house, which they used for three weeks or less each year, constituted a “permanent place of abode.” The decision is troubling for those who commute to New York City and also own a vacation property anywhere in New York State.


Nelson Obus and Eve Coulson maintained their primary home and were domiciled in New Jersey, but Mr. Obus commuted to his New York City office for more than 183 days each year. In December 2011, the couple purchased a second house in upstate New York—more than 200 miles from Mr. Obus’s New York City office. The couple used the house two to three weeks each year for vacation purposes only. An apartment was attached to the vacation house, which the couple rented for $200.00 per month. The couple maintained the vacation house and apartment year round, and the expenses for such maintenance exceeded rental income for the apartment.

The couple filed nonresident personal income tax returns in New York in 2012 and 2013. Following an audit of their nonresident returns, the New York State Department of Taxation and Finance issued an assessment on the basis that Mr. Obus was a New York State resident in 2012 and 2013. Despite the negligible amount of time the couple spent at the vacation house during the year, the department claimed that Mr. Obus was a “statutory resident” of New York State because he maintained a permanent place of abode in New York (the vacation house) and was present in New York for more than 183 days each year as a result of working in New York City.

The sole issue considered by the ALJ was whether the couple’s upstate vacation house could be classified as their “permanent place of abode” for New York personal income tax purposes.

The Tax Law

An individual not domiciled in New York will be subject to personal income tax as a “statutory resident” if he or she “maintains a permanent place of abode” for substantially all of the year in New York and “spends in the aggregate more than one hundred eighty-three days of the taxable year” in New York. (N.Y. Tax Law Section 605(b)(1)(B).) department regulations define “place of abode” as “a dwelling place of a permanent nature maintained by the taxpayer . . . [h]owever, a mere camp or cottage, which is suitable and used only for vacations, is not a permanent place of abode.” (20 NYCRR Section 105.20(e)(1).)

In 2014, the New York Court of Appeals held that in order to be classified as a statutory resident, “there must be some basis to conclude” that a purported permanent place of abode “was utilized as the taxpayer’s residence.” Gaied v. N.Y. State Tax Appeals Tribunal. In Gaied, the department argued that a taxpayer was a statutory resident in New York because he was present in New York City for more than 183 days, and he maintained a permanent place of abode in the City, even though it was not his permanent place of abode. Mr. Gaied commuted daily to New York City from New Jersey, and he also owned a multifamily apartment building in New York City that was occupied by his elderly parents. New York’s highest court rejected the department’s assertion of statutory residency and concluded that “there is no rational basis” for such an interpretation of New York law. According to the court, “in order for a taxpayer to have maintained a permanent place of abode in New York, the taxpayer must, himself, have a residential interest in the property.”

The ALJ Decision

The ALJ distinguished Gaied and upheld the department’s tax and penalties assessment against Mr. Obus and Ms. Coulson.

The ALJ rejected the couple’s argument that their vacation house was not their permanent place of abode because, similar to the petitioner in Gaied, they rented a portion of the house, and thus, they claimed the vacation house was actually maintained for their tenant’s use. The ALJ noted that the couple purchased their vacation house for their own enjoyment and had year-round access to the vacation house regardless of the occupancy of the tenant.

Next, the ALJ rejected the couple’s argument that their vacation house was a “mere camp or cottage” by concluding that the vacation house was suitable for use as a residence by the couple and could be used throughout the year.


Mr. Obus and Ms. Coulson have appealed their case to the Tax Appeals Tribunal. The Tribunal (or, if necessary, a New York court) should follow the analysis in Gaied and consider whether the legislative intent of the statutory residency provision allows treating a vacation house as a “permanent place of abode” in these circumstances.

New York Tax Law does not define “permanent place of abode.” The Gaied Court looked to the legislative intent behind the statutory residence provision, which the court explained is to “tax[] individuals who are really and for all intents and purposes” New York residents but “have maintained a voting residence elsewhere and insist on paying taxes to [New York] as nonresidents.” In other words, the statutory residence provision “is intended to discourage tax evasion by New York residents.”

In the case of Mr. Obus and Ms. Coulson, the facts presented do not suggest that the couple sought to avoid New York taxes by living in New Jersey and owning a vacation house more than 200 miles away from Mr. Obus’s office in New York City.

If the ALJ’s decision is not reversed, commuters in a situation similar to Mr. Obus and Ms. Coulson should carefully consider the personal income tax ramifications of buying a vacation home in New York State.

Matter of Nelson Obus & Eve Coulson, DTA No. 827736 (Aug. 22, 2019).

This column doesn’t necessarily reflect the opinion of The Bureau of National Affairs Inc. or its owners.

Author Information

Eversheds Sutherland (US) LLP Counsel Open Weaver Banks represents clients in state and local tax controversies at the administrative, trial and appellate levels. Her work includes income, franchise, sales and use, and property tax matters.

Eversheds Sutherland (US) LLP Associate Michael Hilkin focuses on tax controversy and transactional issues relating to state and local income, franchise, sales and use, gross receipts and other business taxes.

Peter Hull, also with Eversheds Sutherland (US) LLP in New York, is not yet admitted to practice.