Tax stuff I think is interesting. It is either copied from my primary blog on forbes.com http://www.forbes.com/sites/peterjreilly/ or stuff that I did not put there because being on forbes is a good gig and they have, you know, standards. Also some guest posts.
Wednesday, August 27, 2014
Manhattan Spring Costs Internet Executive Quarter Million in State and City Tax
Originally Published on forbes.com on December 17th,2011
Robin Ingle,as senior vice president of advertising for Trip Advisor needed only a cell phone and a laptop computer to perform her job duties. The job required lots of travel. She could really live anywhere. So she chose to live in Manhattan. I certainly understand that. She had a desire though to return to her roots in Tennessee, where she had grown up and most of her family lived. So on April 1, 2004 she abandoned her New York domicile and established a new one in Tennessee, according to her. The New York Division of Taxation agrees that she abandoned her New York domicile. Only they say she did it on July 9, 2004. Her final spring as a New Yorker is costing her a quarter million dollars, as the New York Tax Appeals Tribunalupheld a previous decision in favor of the Division.
Ms. Ingle’s desire to return to Tennessee took on some urgency in February of 2004:
Ms. Ingle learned that InterActiveCorp (IAC) was to purchase Trip Advisor. The transaction was scheduled to take place sometime in late April or May 2004. As she expected to benefit financially from the sale transaction, petitioner consulted with Mr. Veitch and the law firm of Horwood Marcus & Berk Chtd., as to the steps to take to minimize her tax obligations to New YorkState and City. Following these conversations, Ms. Ingle decided it would be advantageous to move out of New York City by April 1, 2004 and to move to Tennessee.
She took appropriate steps:
Ms. Ingle journeyed to Tennessee to look for an apartment. During these trips, Ms. Ingle would pack an extra suitcase containing some artwork, her father’s pocket watch and her clothing, and would store the suitcases at her parents’ home. She eventually entered into a one-year lease, from April 1, 2004 through April 1, 2005, for an apartment located in Johnson City, Tennessee. On April 2, 2004, Ms. Ingle registered to vote with the Unicoi County Election Commission and opened a bank account. On April 4, 2004, furniture and household items borrowed from her parents were moved into the apartment. Included in the items borrowed and moved were a bed, sheets, towels, a gas grill and cookware. On April 10, 2004, petitioner and her niece went shopping for towels, a shower curtain, sheets, cookware and glasses for the apartment. On April 13, 2004, she established hard-linetelephone service at the apartment. Ms. Ingle did not establish an individual account for electricity until May, although it is alleged that the utilities for her apartment were active as of April 1, 2004 through a master account billed to the apartment complex. Her paycheck from Trip Advisor dated April 15, 2004 contained her parents’ address.
That was pretty thorough. I imagine her ticking off a list that the Horwood Marcus & Berk SALT group had provided her. It is not just about establishing your new home, though. You also have to abandon your old home. Ms. Ingle’s connection to New York did not seem that strong:
In New York, petitioner did not own any real property, have a safe deposit box, have a membership in any clubs, organizations or gyms, belong to any church, have a regular accountant, lawyer, dentist or doctor or own an automobile.
She did, however, have an apartment which was what created the problem. The upcoming sale of the company had some major customers nervous as IAC had subsidiaries that competed with them. Combining that with setting up in Tennessee did not leave much time for cleaning up loose ends in Manhattan, which included painting her apartment. (That part of the story has me a little mysitified. I thought the point of being a tenant was so that you did not have to do things like that.) Then there was the matter of her significant other, Michael Veitch, who also worked for an internet company and lived on the west coast. He would not be available to help her move until mid-June.
Ms. Ingle contacted her landlord to request a lease extension of two months, until June 30, 2004. It was the landlord’s policy not to permit month-to-month leases, but the landlord would allow a one or two-year lease with an option to terminate the lease early. On May 20, 2004, petitioner signed a two-year lease for the period May 1, 2004 through April 30, 2006 with an option to terminate the lease on June 30, 2004, although the landlord actually allowed her to stay in the apartment until July 9, 2004. On July 9, 2004, with the assistance of Mr. Veitch and professional movers, Ms. Ingle moved most of her furniture and personal effects remaining in the New York City apartment to the apartment in Johnson City, Tennessee, with some items, such as kitchenware, going into storage in Boston, Massachusetts, in anticipation of leasing an apartment there. Furniture that was moved on July 9, 2004 included two sofas, two chairs, a glass coffee table, a fully furnished office, a bedroom set, outdoor furniture and a grill.
I am going to bet a dollar that Ms. Ingle did not review the particulars of her moving plans with the SALT (State and Local Tax) experts at Horwood Marcus & Berk. On April 30, 2004 Ms. Ingle received a wire transfer of $1,986,916.32 in her Tennessee bank account (I bet that was on the list) in exchange for her Trip Advsior stock. She had a fully furnished Manhattan apartment which she had treated as her principal residence for the last two years (She had moved there from West 57th street.) She was in the process of extending the lease for two years, with an early out option. I do not have to be a SALT expert to see that those are really bad facts. And this was because her boyfriend did not have time to help her move. It makes me want to scream. She worked for Trip Advisor which had just been purchased by a company that owned Expedia. If she needed a place to stay in the area, she could find one. Also whenever she looked at the sunset she saw another state which happens to have a lot of self-storage facilities, assuming that she did not just want to buy new stuff in Tennessee.
A change of domicile may be made through caprice, whim or fancy, for business, health or pleasure, to secure a change of climate, or a change of laws, or for any reason whatever, provided there is an absolute and fixed intention to abandon one and acquire another and the acts of the person affected confirm the intention.