Bello v. Tax Appeals Tribunal of State of N.Y.

• Citation: 623 N.Y.S.2d 363,213 A.D.2d 754
• Parties: In the Matter of George E. BELLO et al., Petitioners, v. TAX APPEALS TRIBUNAL OF The STATE OF NEW YORK et al., Respondents.
• Decision Date: 02 March 1995
• Court: New York Supreme Court — Appellate Division

Page 363

623 N.Y.S.2d 363

213 A.D.2d 754

In the Matter of George E. BELLO et al., Petitioners, v. TAX APPEALS TRIBUNAL OF The STATE OF NEW YORK et al., Respondents.

Supreme Court, Appellate Division,

Third Department.

March 2, 1995.

Roberts & Holland (Joseph Lipari, of counsel), New York City, for petitioners.

Dennis C. Vacco, Atty. Gen. (Daniel Smirlock, of counsel), Albany, for Com'r of Taxation and Finance of the State of N.Y., respondent.

Before MIKOLL, J.P., and MERCURE, CREW, WHITE and PETERS, JJ.

CREW, Justice.

Proceeding pursuant to CPLR article 78 (initiated in this court pursuant to Tax Law § 2016) to review a determination of respondent Tax Appeals Tribunal which sustained a personal income tax assessment imposed under Tax Law article 22.

During all times relevant to this proceeding, petitioners were residents of Connecticut. In September 1985, petitioners filed a second amended New York nonresident tax return for tax year 1983 claiming, inter alia, interest expense in the amount of $516,820, certain deductions for a hanger manufacturing business and a $374,126 partnership loss for Reliance Figueroa Associates, a partnership in which petitioner George E. Bello was a member. ¹

Following the filing of petitioners' second amended return, the State Department of Taxation and Finance (hereinafter the Department) conducted an audit of petitioners' tax records for tax years 1982 and 1983. ² After reviewing petitioners' records, the Department's auditor disallowed, inter alia, petitioners' deductions for the hanger manufacturing business, the claimed partnership loss for Reliance and two interest expense deductions payable to Salomon Brothers Inc. and Bankers Trust Company, respectively. The record indicates that these disallowances were based, in large measure, upon petitioners' failure to adequately document the claimed deductions, expenses and losses. At the conclusion of the audit, the Department determined that petitioners had taxable income in the amount of $250,278 for 1983 and assessed income tax in the amount of $24,387, plus interest and penalty, for the 1983 tax year.

Petitioners thereafter challenged the assessment and a hearing was held before an Administrative Law Judge (hereinafter ALJ) in January 1990. With respect to the disallowances for the partnership losses and the deductions for the hanger business, the parties agreed to be bound by the decision in a then-pending companion case, and the only witness to testify was the Department's auditor. When the decision in the companion case failed to resolve the issues relating to the partnership losses and the hanger business deductions, the ALJ reopened the hearing and gave the parties the opportunity to present additional evidence on these points. Although some supplemental documentation was provided, no additional witnesses testified. The ALJ ultimately sustained the disallowances for 1983 and petitioners filed an exception. Respondent Tax Appeals Tribunal thereafter sustained the assessment and this proceeding challenging that determination ensued. ³

It is well settled that as the party challenging the assessment, petitioners bore the burden of establishing, by clear and convincing evidence, that the tax assessed was erroneous (see, Matter of Rizzo v. Tax Appeals Tribunal of State of N.Y., 210 A.D.2d 748, 621 N.Y.S.2d 115; Matter of Mobley v. Tax Appeals Tribunal of State of N.Y., 177...