High-tax New York hands Connecticut hedge fund manager $10M bill for back taxes
The financier made nearly $60M from the sale of securities in 2013 alone
As New York faces a multibillion-dollar budget deficit, its tax team is not letting up on collecting taxes from wealthy residents who have left the state.
Following audits, the state is arguing that hedge fund manager David Russekoff, who runs Smith Cove Capital, owes $10 million in back taxes and interest on gains based on the argument that he is a “statutory resident” of New York even though he is domiciled in Connecticut.
Russekoff moved from New York City to Greenwich, Conn., in 2009. He did not, however, give up his home on Shelter Island, which is located between the north and south forks of Long Island. He spent more than 183 days in New York each year and his Shelter Island property is legally considered “a permanent place of abode.”
The taxes, from tax years 2010-2013, are due to New York on “intangible” investment income that is not anchored to a specific place.
At the time, Russekoff was working as a hedge fund manager at Perry Corp. He and his wife filed joint New York nonresident income tax returns and joint Connecticut resident income tax returns for the years in question, according to the appeals decision.
HEDGE FUND MANAGER VOWS TO FIGHT ‘OPPORTUNISTIC’ NEW YORK OVER $526K VACATION HOME TAX BILL
Russekoff and his wife argued that they were entitled to a New York personal income tax credit for taxes already paid to Connecticut on capital gains from the sale of securities on the basis that the capital gains were derived from Connecticut since the couple is domiciled there. That request was denied because the intangible assets could not be tied to any specific state and Russekoff was considered a statutory resident in both locations.
“New York has determined that such income or gain is not derived from or connected to any location, and is subject to New York tax solely upon the owner’s status as a resident of New York,” the ruling states. “Therefore the location of the intangible personal property is not relevant to the imposition of tax in this case.”
Russekoff’s capital gains from the sale of securities totaled more than $5.6 million in 2010, more than $3.46 million in 2011, more than $21.7 million in 2012 and nearly $60 million in 2013.
An attorney representing Russekoff did not immediately return FOX Business’ request for comment.
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A New Jersey-based hedge fund manager, Nelson Obus, is also engaged in a legal battle with New York over a vacation house in the state that a judge ruled rendered him a statutory resident.
Even though Obus lives in New Jersey, it was determined that the vacation house made him a New York resident. Since Obus worked in New York City, he spent an aggregate of more than 183 days in the state each year.
He owes $526,868 in back-taxes, plus interest and penalties for the 2012 and 2013 tax years. He purchased the house, where he spends no more than three weeks per year, in 2011 for $290,000. He had already been paying taxes on income earned in New York.
Obus and his attorney told FOX Business that they planned to appeal the decision.
Experts have also told FOX Business that as New York State loses tax revenue from the flight of individuals to lower-tax havens, like Florida, auditors are likely only going to get more aggressive, specifically where wealthy residents are concerned.
The state is contending with a $6.1 billion deficit.
And, as previously reported by FOX Business, most individuals lose their audit cases against the state of New York. The average amount they are forced to cough up to the Empire State is $144,000.
Between 2013 and 2017, New York State collected about $1 billion from residency audits, according to data from audit defense company Monaeo. During the timeframe, an average of about 3,000 non-residents were audited per year.