Originally published on Forbes.com Nov 15th, 2013
Tatiana Varzar may well have been pleased with the praise she received from Marty Markowitz, Brooklyn‘s Borough President, in his 2006 Inaugural:
Brooklyn is also proud to be the Russian Capital of America – and Tatiana’s help define the Russian experience. Not only did Tatiana Varzar re-open her restaurant less than a year after a devastating fire, she launched the Brighton Beach Blini Festival, celebrating Brooklyn’s rich – and delicious! – Russian heritage. Ladies and gentlemen, the Kravavaya Zenzena of Brighton Beach, Tatiana Varzar – You do Brooklyn Proud!
He was reiterating praise that he had heaped on her during Russian Heritage Week in 2005. She probably did not think that those words would be used against her in this recent decision by the New York Division of Tax Appeals, but that is the type of thing that you have to put up with in domicile cases. What she really needed was for Lamar Fisher to be making speeches like that about her. Lamar Fisher is the mayor of Pompano Beach, Fl. That is where Ms. Varzar said she was living when she filed her non-resident New York returns for 2004, 2005 and 2006.
The Division of Taxation thought she was still living in Brooklyn. The difference in tax for those three years came to $231,422. That’s before interest and penalties are tacked on. The Division had two possible ways to tax Ms. Varzar as a resident. The first was to claim that Ms. Varzar had not changed her domicile from New York to Florida. “Domicile” is a question of intent, but that intent is manifested in actions. Sometimes it borders on the mystical. The fundamental principle is that everybody has a domicile and that place remains their domicile until they actually abandon it and establish a new one. This makes for what I call the “stickiness of domicile”.
The other string in the Division’s bow is something called the New York rule. If you have a place of abode in New York (Ms. Varzar continued to own a house in Brooklyn where her daughters lived) and you are in New York more than 183 days, then you are a “statutory resident”. You are treated as a full year resident even though your domicile is elsewhere. Since a day is any part of a day, I have this plausible scenario of someone with a big house in Connecticut and small apartments in Boston and Manhattan who often does morning meetings in Manhattan and evening meetings in Boston. With the right day count, such a person could be considered a full year resident of three states.
The administrative law judge tackled the domicile question first. Things did not go well for Ms. Varzar. The judge noted that there was no evidence that Florida Intangibles Tax had been filed. Ms. Varzar had purchased her home in Pompano Beach in 1992, but it was not until 2004 that she decided to claim that as her principal residence. That can be a problem in a domicile case, since there is supposed to be this clear delineation when you abandon one domicile and adopt a new one.
Petitioner was asked to explain why she changed her domicile from Brooklyn to Florida. She testified that she decided to abandon Brooklyn based upon two events. First, she stated that there was a fire at her restaurant and nightclub in September of 2003 and, secondly, she was robbed at gunpoint in February 2004.
I liked the robbed at gunpoint one. In Florida, you have a right to carry and stand your ground. That makes the fact that they don’t have no stinking state income tax incidental. Also according to a New York Times story, the fire was suspicious
The authorities said from the start that the fire was suspicious. A second alarm was called one minute after firefighters first arrived, an indication that the flames had burned with extraordinary intensity. Battalion Chief Steven Bernius spent a good part of the next morning examining a charred propane space heater, and people in the neighborhood quickly voiced sinister theories.
Unfortunately for the domicile narrative, the same story indicates that Ms. Varzar was not intimidated.
She has a steely gaze, too, and if indeed someone was trying to scare her by setting fire to her restaurant, the effort failed. Enlisting the help of elected officials, civic boosters and others in the neighborhood who feel they owe her gratitude for enlivening the boardwalk, Ms. Varzar managed to reopen before the next beach season began. The city quickly replaced the damaged slats of boardwalk, she said, and she replaced the water-damaged carpets, ceilings and music gear.
Things went downhill from there.
Petitioner submitted seven months of bills for Comcast for the year 2005. The bills indicate that service was for the Florida house, yet all the bills were mailed to petitioner at the New York house. Petitioner submitted eight months of bills for DISH network service; however, these bills were in the name of Michael Varzar.. Petitioner submitted various other documents that were in the name of Michael Varzar. It is noted that most of this documentation was for periods outside of the audit period and, additionally, the Florida address indicated in these documents does not coincide with the Pompano Beach address of the Florida house. Additionally, Michael Varzar did not testify at this proceeding, and petitioner did not mention him in her testimony except regarding the aforementioned exhibits with his name on it.
That was probably enough to doom her. If you want to draw a lesson there it is a pretty obvious one that you should have all the bills going to the place you say is your home, even if that is a bit inconvenient some times. There is another more subtle lesson for snow birds who want to claim Florida as their true home.
Petitioner did not testify to any aspect of life in Florida that caused her to make it her new domicile. In fact, a glaring omission in the record is of any single tie to Florida. Although it is acknowledged that petitioner did start certain business ventures in Florida during the audit period, it is noted that the first venture was in Tampa, which is quite a distance from Pompano Beach, and then, the purchase and eventual operation of the restaurant in Hallandale was accomplished after the audit period. Therefore, the overriding sense is that petitioner continued to remain domiciled in Brooklyn throughout the audit period.
This is what trips people up in the domicile cases. You can get a real sense of what it means to be a New Yorker, but establishing yourself as in your heart a Floridian is much more challenging. I have been trying to cultivate a real appreciation for Florida history. The book that is universally recommended, at least by Central Floridians, is A Land Remembered
In this best-selling novel, Patrick Smith tells the story of three generations of the MacIveys, a Florida family who battle the hardships of the frontier to rise from a dirt-poor Cracker life to the wealth and standing of real estate tycoons.
It probably won’t win a domicile case for you, but it can’t hurt and it is a great read.
At any rate, the judge concluded that Ms. Varzar was clearly a Brooklynite not a Pompanoan (or whatever the term might be). Even if she had won on domicile, though, they still had her as a full year resident thanks to the infamous New York rule.
Although petitioner has been determined to be liable for New York State and City personal income taxes based upon being a domiciliary, it is concluded that she failed to establish that she was outside of the city for more than 183 days of any of the three years of the audit. Her general testimony was so vague and is found to be unreliable given the lack of documentation used to provide a frame of reference for her conclusory statements as to her whereabouts.
By the way, Tatiana’s in Brighton Beach has quite a good reputation. This video will show you what it looks like. If you can’t make it there, you might get a sense of the food as Ms. Varzar shows you how to make Chicken Kiev.