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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7432
Experience:  15years with H & R Block. Divisional leader, Instructor
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Hello, I am currently a Minnesota Resident holding a minnesota

Customer Question

Hello,

I am currently a Minnesota Resident holding a minnesota license. I last worked in Florida, but I never changed my residency. I plan on claiming Minnesota (my parents home) as my primary residence.

I plan on taking a job in China. I will be on a rotation, where I will be in China for 6 weeks, followed by 3 weeks in the USA. That leaves me with roughly 240 Days in China, and 120 days in USA (give or take a few). Of the 120 days, probably 20 will be spent in Minnesota, and 100 in New York.

My question is, if I purchase a home in Manhattan, would I be liable for state and local tax? Keep in mind, minnesota does not charge you state tax should be gone for a certain number of days.

I have read the requirements to pay tax in New York, but I am a little confused.

I will be paying taxes in China, and will be using foreign tax credit. My gross income will be roughly $300,000 USD, and I will be paying $120,000 to the chinese government for taxes.

I'd like to know what tax liability I have for New York (state and local) if any, should I purchase a home in Manhattan (Condo).
Submitted: 11 months ago.
Category: Tax
Expert:  Anne replied 11 months ago.

Anne :

Hi

Anne :

Thank you for using justanswer

Anne :

In order to us the Foreign Income Tax Exclusion, you must be either a bona fide residence (meaning you lived in China for a whole calendar year (1/1-12/31

Anne :

Or

Anne :

You may qualify under the "substantial presence test.

Anne :

To qualify for the substance presence test, you must be off US soil for 330 full days during ANY 23 month period

Anne :

You may find this information here:

Anne :

Before you can even think about NY, you must first qualify to exclude your income for the IRS.

Customer :

Actually I would be claiming the "Foreign tax credit"

Anne :

excuse me

Anne :

You did say that

Customer :

Not the Foreign tax exclusion.

Customer :

Correct

Anne :

I apologize for my error.

Customer :

No problem.

Anne :

Yes, if you purchase a home in Manhatten,, you will be liable for state income tax . Even thought you worked overseas, you will need to pay tax on the money you made in China

Customer :

Even if I stay in New york for less than 180 days?

Anne :

Let me double check the regs.......but I'm almost positive that buying that home means that NY is your home state, and you're that will create the liability for NY.

Anne :

Give me just a few minutes here to double check my thinking

Customer :

Okay

Anne :

Hi again

Customer :

Hey

Anne :

Although I am 99.9% positive that you will need to pay NY tax (your home is there, and this is a home I assume you will eventually move into as your primary home at some time) I can not find this in writing

Customer :

Yeah, that's the problem I had it's difficult to find anything about this topic.

Customer :

You are correct, I would eventually move there once I complete a few years in China.

Anne :

Therefore, I will "opt out " and this puts this question back on the board as an open question, so that an expert with more NY experience can give you the definitive answer.

Anne :

I wish you the best of lucky

Customer :

Oh, okay

Customer :

Well, thanks anyway for your help - I really appreciate your time.

Expert:  Robin D. replied 11 months ago.
Hello and thanks for trusting me to help you today. I am a tax adviser with over 15 years of experience.
There are three separate and distinct areas to be examined during the audit of a nonresident individual:
Domicile, Statutory Residency and Income Allocation.

Individuals who reside at several locations during the year and have a long established pattern of maintaining a "home" in New York would be questioned concerning their resident status.
For NY taxation purposes, domicile is defined in the income tax regulations as the place an individual intends to be his permanent home, the place he intends to return to whenever he may be absent.
Residence in a strict legal sense means merely a "place of abode."

NY looks to your intent. Do you have another property that you live in or have a history in that shows it to be your domicile.
Once established, a domicile continues until the person in question abandons the old and moves to a new location with the bona fide intention of making his fixed and permanent home at the new location.
SO just purchasing a property in Manhattan is not the event that would make you resident (even a part year resident). Your domicile would need to be abandoned first.
Since a domicile continues until superseded by another, a change of residence without the intention of creating a new domicile leaves the last established domicile unaffected. You will remain a tax resident of Minnesota until you relinquish your ties there. This is also true for the income you earn abroad.
If you purchase the property in NY and go there and stay, you will be taxed on income you make while staying in NY ( as a part year or nonresident)this is where the allocation comes into play.
You were looking for a published guidance on this, the burden of proving a change of domicile is upon the party asserting the change. The evidence to effect a change of domicile must be "clear and convincing" as noted in Bodfish v. Gallman. You can look to that case if you wish to read more.
The NY law that covers this is 20 NYCRR 105.20(d)(2)

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