TiNY Report for July 5, 2018 (covering DTA cases from June 28)

Two ALJ Determinations, one Tribunal Decision, and one ALJ Order for this week.

ALJ DETERMINATIONS

Matter of Bisceglie; Judge: Galliher; Division’s Rep: Hannelore Smith; Taxpayer’s Rep: pro se; Notice of Proposed Driver License Suspension Referral under Tax Law § 171-v.  Petitioner received a Notice of Proposed Driver License Suspension.  The ALJ found the Notice was in facial compliance with the statutory requirements because it was specifically based on 1) the Division’s claim that the personal income tax assessments against Petitioner remained outstanding and unpaid and 2) Petitioner did not meet any of the six enumerated statutory defenses allowing relief from license suspension.  Petitioner challenged the Notice, and the Division moved for summary determination.  Petitioner didn’t respond to the Division’s motion, so the Judge determined that Petitioner conceded no questions of fact existed.  Also, Petitioner didn’t raise any of the six statutory defenses for relief.  So, the Judge determined the Division was entitled to a finding of summary determination in the Division’s favor. 

Matter of Randell; Judge: Galliher; Division’s Rep: Jennifer Hink-Brennan; Taxpayer’s Rep: Jeffrey Galant and Jason Blasburg; Article 31.  Petitioner claimed a refund of real estate transfer tax as executor of an Estate and as trustee of a Trust.  The purposes of the Trust were to provide for the care of neglected and homeless animals, and prevention of cruelty to animals, including public/private education and research in connection with such.  And the IRS recognized the Trust as 501(c)(3) tax–exempt private foundation. Phyllis Millstein died a New York resident on March 21, 2009, owning real property in New York City.  Pursuant to Ms. Millstein’s will, the residuary estate was to pass to the Trust and title to the NYC property vested in the Trust.  The NYC property was sold and transferred on July 14, 2015 for $15.6 million.  The Estate paid, under protest, real estate transfer taxes in connection with the sale of the NYC property.  Generally, governmental organizations are exempt from paying the NY real estate transfer tax.  Petitioner argued the transferor of the NYC property was by the Trust (as opposed to the Estate) because the legal and beneficial ownership and title to the property vested immediately in the Trust upon the death of Ms. Millstein.  Petitioner argued that the Trust was an exempt entity from the transfer tax because the Trust carried out the well-recognized public policy goal of protecting and providing for the welfare of animals and that the Trust served to alleviate a portion of the financial burden that the government would otherwise have to carry in performing such public policy.  Petitioner argued the Trust should be considered an agent of the federal/state government and should thus be exempt from paying the transfer tax. 

The Judge determined that it was irrelevant which entity was the transferor, because neither the Trust or the Estate fell under the transfer tax exemption for governmental bodies.  The Judge held the Trust was a private trust, and just because it served a charitable public purpose and may reduce the government’s financial burdens didn’t mean the Trust constituted a governmental body or agent of such.  Finally, Petitioner was successful in obtaining a refund for the New York City real estate transfer taxes, but not from New York State.  The Judge determined that refund was proper since the transaction fell under an exemption specific to New York City, however, the State did not provide for the same exemption.  The Judge sustained the Division’s denial of Petitioner’s refund claim for New York State transfer taxes.  

ALJ ORDER

Matter of Estate of Siegal; Judge: Russo; Division’s Rep: Kathleen O’Connell; Taxpayer’s Rep: Miriam L. Fisher and Brian C. McManus; Article 22.  In a Determination the Judge found that Petitioner prevailed on certain issues and lost on other issues.  Not satisfied with the Judge’s half-baby resolution, Petitioner filed a motion for reargument.  Petitioner’s motion was based on the issue of whether the ALJ “may have inadvertently overlooked certain critical evidence in the record that is relevant to the [Division of Tax Appeals’] ultimate findings” because “such evidence might reasonably be expected to alter the conclusion reached.”

Petitioner pointed to the following two pieces of evidence and alleged that the Judge overlooked or misapprehended them: 1) a principal and interest repayment history, and 2 ) Petitioner’s unsigned income tax returns.   Petitioner pointed to the decedent’s check history that had been introduced (without objection) by the Division at the close of the hearing as evidence of a history of interest payments on certain debts.  But the check history was offered “without sworn testimony,” and when offered into evidence neither party provided “authentication, explanation, or further description of the document.”   So, Judge Russo held the check history “was not overlooked in the prior determination, rather it was accorded no weight.”

Ironically, at the hearing Petitioner vehemently objected to the Division’s admission of the tax returns that Petitioner averred (in the motion to reargue) proved that interest income was allocated to the decedent during the years at issue.  From the Judge: “[a]gain, petitioner point[ed] to no testimony to support what it purports that the document ‘suggests’ and provides merely unsubstantiated allegations and arguments. There is no testimony explaining the document, and the petitioner ma[d]e assumptions about the document not supported by the record.”  Hence, Judge Russo determined that the “document was not overlooked” but rather simply was “insufficient to support petitioner’s argument.”

In denying Petitioner’s motion for reargument, the Judge noted that “a motion to reargue a prior determination is designed to afford a party an opportunity to establish that the court overlooked or misapprehended the relevant facts, or misapplied a controlling principle of law.”   She further noted that “its purpose is not to serve as a vehicle to permit the unsuccessful party to argue once again the very questions previously decided.”   Moral of the story: if you want a judge to rely on a document, it needs to either be clear on its face regarding the issue to be proven, or the issue to be proven must be addressed by testimony during the hearing and not after the Determination has been issued. 

TRIBUNAL DECISION

Matter of Strachan; Division’s Rep: Tobias Lake; Taxpayer’s Rep: pro se; Article 22.  First, the Tribunal determined Petitioner’s motion to reopen the matter was untimely because it was filed after the 30-day deadline to reopen passed, so the Tribunal did not consider the additional documents Petitioner offered post-hearing.  Next, the Tribunal considered whether Petitioner failed to demonstrate whether he was a real estate professional during the 2009 year.  Since New York taxable income is based on federal adjusted gross income, the Tribunal looked to the IRC (Internal Revenue Code) and federal case law.  To be deemed a real estate professional, Petitioner had to show:  1) Petitioner’s total real estate rental activities constituted more than half of his personal services performed during the year and 2) that Petitioner performed more than 750 total hours in his real estate rental activities during the year.  The Tribunal agreed with the ALJ that the work logs Petitioner submitted to the Division were unreliable to the extent they were inconsistent with one another, and thus didn’t constitute clear and convincing evidence in support of Petitioner’s position.  The ALJ had reviewed Petitioner’s testimony against the 3 work logs submitted and determined that Petitioner’s testimony was not credible.  Finding nothing in the record to convince it otherwise, the Tribunal determined Petitioner failed to meet its burden to show that Petitioner clearly and convincingly met the two requirements to show he was a real estate professional.  The Tribunal also found that, although Petitioner and the IRS stipulated to the fact that Petitioner was a real estate professional, the Division was not a party to that agreement and was not required to accept such stipulation without any additional evidence to show such.  The Tribunal affirmed the ALJ’s determination that Petitioner was not a real estate professional for 2009. 

Filed in the mental vault for future consideration: shouldn’t the Tribunal defer to IRS’s determinations on Internal Revenue Code matters—even if the determinations are unexplained—unless the determinations are arbitrary and capricious?   The IRS is charged by Congress to interpret and administer the Code.  One would think it should be entitled to the same deference to which the Division is entitled in matters involving New York’s Tax Law.

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