The New York Division of Tax Appeals has rejected an argument by an Orange County couple that they did not have to pay state income taxes for several years because they were separated by 3,500 miles while the husband worked in London.
Administrative Law Judge Barbara J. Russo upheld a $263,960 tax deficiency on June 27 on $5.9 million in income earned by Sean and Fabiana Lynch from 2015 through 2018.
The Lynches had petitioned the state to reconsider the tax deficiency, arguing that Mr. Lynch’s overseas job amounted to a “separation in fact” that was akin to a legal separation from his wife. For instance, he claimed that he was physically present in New York state for only 85 days from 2014 to 2017.
Mr. Lynch worked for SFM UK Management, the London subsidiary of billionaire George Soros’ investment management business. When he returned home in 2018, he worked as an equities trader for Key Square Capital Management in New York.
The couple did not file state income tax returns for 2015 to 2018, according to the state. In 2019, the state started an audit.
In 2020, the Lynches filed separate tax returns for the four years covered by the audit. Mr. Lynch reported nearly $5.8 million in federal adjusted gross income, and Mrs. Lynch reported $109,331.
He claimed no state taxable income or taxes owed for three years, and $1.1 million for 2018.
Mr. Lynch depicted himself as a non-resident of New York but also as a part-time resident in 2018, having returned from London that February. For all four years he listed his home in Warwick, Orange County as his mailing address, and he checked a box indicating that he and his wife maintained living quarters in New York.
Mrs. Lynch claimed that she was a nonresident of New York in 2015 because she had lived here less than 90 days. After 2015, she depicted herself as a state resident.
Based on the audit, the state determined that the Lynches qualified as nonresidents for only the first seven months of 2015.
They had lived in New York for years, had not sold their Warwick home, and had continuously maintained the home during the years covered by the audit.
Mrs. Lynch confirmed their intention to maintain the Warwick home as their domicile, the judge noted.
“When Sean decided to move to London, I asked him to promise that we would maintain our home in Warwick. I emphasized the importance of spending Thanksgiving and Christmas together in our home, surrounded by family,” she stated in a legal brief. “The choice [was] to keep our home while living in London.”
The sole question of the Lynch’s petition, judge Russo said, “is whether a ‘separation by fact’ should be treated the same as a legal separation” for exclusion of taxation as a nonresident.
She rejected that argument and upheld the $263,960 notice of tax deficiency.
“Had the legislature intended for both legal and informal separations to satisfy the requirements of tax law,” she determined, “it would have so stated.”
