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Success and Failure Are Not Permanent, So Why Is My Abode?

11.23.15 | SALT Chat

Last week we briefly hinted to one of the linchpins of statutory residence; the permanent place of abode or PPA. So crucial is this term of art to a determination of statutory residency (remember, you need the days and the PPA) that many audit controversies have revolved solely around this issue.

The New York State Income Tax Regulations (“Regulations”) define a PPA as a “dwelling place of a permanent nature maintained by the taxpayer, whether or not owned by him, and will generally include a dwelling place owned or leased by his or her spouse.” Attention must be paid to every word in this regulation and this post will focus on one aspect of the term “permanent nature.”

Permanent nature not only addresses a taxpayer’s relationship to a dwelling, but also speaks to the physical aspects of the structure. The Regulations set forth that in order to meet the permanent nature requirement, it must be suitable for year round use. There is no connection to the taxpayer’s actual use.  So if a vacation home is suitable for year round use, whether or not it is actually used all year, is completely irrelevant as far as the State is concerned.

Suitability can still be at issue. Clearly the extremes are easy to define. A fully heated and air conditioned vacation retreat that is only used for the summer months meets the suitability test, while a duck hunting shack in the woods with no roads leading to it most certainly would not.  What about the summer vacation home that has no heat and is winterized during the off-season? While some have been able to argue against permanence (this is a very fact specific inquiry) it is certainly the proverbial Pandora’s Box that we would rather be able to keep closed with a little planning.

Concerned about your exposure to statutory residence regulations and the impact on your tax position? Contact me at wberkowitz@berdonllp.com.

Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, advises on the unique requirements of governments and municipalities across the nation.