“New York Just Can’t Seem to Let You Go”

By: Jeffrey M. Fetter

Some New York snowbirds change their residency to Florida for many reasons, including the fact that Florida does not have an estate or an income tax imposed on its residents.  But, New York just does not like to lose its residents go putting the snowbird through an exhaustive exercise of changing everything about their lives to ensure they are truly no longer New York residents (voting registration, vehicle registrations, club memberships, being outside New York for at least 183 days per year, etc., etc.).

One of the “strategies” that former New Yorkers would utilize to ensure that they still had a physical place to return to when they were in New York after they changed their residences was to create an LLC that would own their former principal residence.  New York cannot impose an estate tax on a nonresident’s “intangible property”, only “tangible property” like real estate owned by the non-resident in the Empire State.  But, an LLC is certainly not tangible property; it’s ownership in a business, like stock. Right? Maybe not.

In Advisory Opinion TSB-A-15(1)M, the Department of Taxation concluded that a Single Member Limited Liability Company ( “SMLLC”) that owned real property, although completely disregarded for state and federal income taxes, is not treated as “Intangible Property” for purposes of the estate tax and as a result, the real estate is treated as being owned by the owner or the SMLLC and is subject to New York’s Estate Taxes.  However, if the LLC is taxed as a corporation or as a multi-member LLC (i.e. a partnership), it is not treated in the same manner.  Although advisory opinions are binding only on the taxpayer requesting the opinion, this careful planning is required.

New York just hates to lose you.  Sometimes it’s nice to be wanted – other times, not so nice.

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