Having already surpassed $600 million at the box office, it’s no surprise that the New York State Tax Appeals Tribunal is looking to Rogue One and the Star Wars franchise for guidance. Case-in-point, the Tribunal’s recent decision confirming a New York nonresident individual’s source income will always be with them. The unpleasant experience of one couple plainly points to the absolute necessity of planning for the state tax consequences when settling a lawsuit.
Meet the Murphys.
As nonresidents of New York, these husband and wife taxpayers were subject to tax on only their New York source income. Mr. Murphy was a member in an LLC that conducted a portion of its business in New York and, accordingly, had New York source income during its years of operation. Mr. Murphy assigned his LLC interest to Mrs. Murphy during 1999. Various issues arose with the LLC and Mrs. Murphy started legal action against the LLC.