New York Advisory Opinion TSB-A-84 (4)I: If a New Jersey resident wins a New Jersey lottery prize and later moves to New York, will the remaining prize installments be subject to New York personal income tax?

Plain-English summary

John F. Pascucci, a New Jersey resident, won the top prize in the New Jersey Pick-6 Lotto drawing on June 7, 1984 - an annuity prize totaling $1,227,573, paid as an initial payment plus 19 subsequent yearly installments (with the full remaining balance guaranteed to his named beneficiaries if he died before the payout period ended). He asked whether, if he moved his residence to New York, the remaining lottery payments would become subject to New York personal income tax.

This is the mirror image of the more familiar resident-leaving-New-York scenario: here, Tax Law § 654(c)(2) governs a taxpayer moving in the opposite direction, from nonresident to resident. It requires the taxpayer to accrue - meaning include right away, for the pre-change portion of the tax year, regardless of normal accounting method - any income item that had already "accrued" under federal accrual-accounting principles before the change of residence. Under 26 CFR 1.451-1 and 20 NYCRR 148.10(a), an item accrues once all the events fixing the right to receive it, and its amount, have occurred - and here, Pascucci's right to his fixed lottery prize arose the moment he won, well before any move to New York.

Because that right was already fixed and determinable before the proposed change of residence, the Department found the lottery winnings would be accrued to the period before Pascucci becomes a New York resident - meaning they're treated, for New York tax purposes, as belonging to his pre-residence life, not to his New York residency. Critically, Tax Law § 654(c)(3) then provides that income accrued this way is never taken into account again in a later taxable period. So once accrued, the actual future receipt of each yearly lottery installment after Pascucci becomes a New York resident won't trigger New York tax a second time.

What this means for you

Out-of-state lottery winners considering a move to New York

Winning a multi-year lottery prize before you become a New York resident generally keeps those payments out of New York's tax net going forward - the right to the prize accrues to your pre-residency period, and New York's special accrual rule prevents taxing the same income again once you're a resident.

Taxpayers moving into New York with other fixed, pre-existing income streams

The same accrual-and-no-double-tax framework can apply to other income where your right to receive it was already fixed and determinable before you became a New York resident - not just lottery winnings. The key question is whether the right was truly fixed (not contingent) before the residency change.

Accountants advising clients relocating to New York with existing structured payments

Compare this opinion with the mirror-image TSB-A-86(1)I (a New York resident who became a nonresident and had to accrue his remaining lottery balance under § 654(c)(1)): together they show the § 654(c) accrual rule works symmetrically in both directions, tying a fixed, pre-change right to receive income to the residency period in which that right arose, not the period of actual payment.

Common questions

Q: I won a multi-year lottery prize in another state before moving to New York - will New York tax my future installments?
A: No, generally not, if your right to the prize was fixed and determinable before you became a New York resident. It's treated as accruing to your pre-residency period under Tax Law § 654(c)(2), and § 654(c)(3) bars taxing it again when actually received.

Q: Does it matter that I'll actually receive most of the lottery payments after I've already moved to New York?
A: No. The timing of accrual is based on when the right to receive the income became fixed and determinable, not on when each payment is actually received - so later receipt in New York doesn't retrigger tax.

Q: How does this compare to a New York resident who moves away with lottery payments still outstanding?
A: It's the mirror-image rule. A resident becoming a nonresident must accrue the remaining balance into their final resident-period return under § 654(c)(1) (see TSB-A-86(1)I); here, a nonresident becoming a resident instead accrues the balance to the pre-residency period, keeping it out of New York tax altogether.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income_ao_1984.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/income/a84_4i.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-84 (4) I
Income Tax
October 17, 1984

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. I840913A

On September 13, 1984 a Petition for Advisory Opinion was received from John F. Pascucci,
137 Crooks Avenue, Clifton, New Jersey 07011.
The issue raised is whether payments which Petitioner is entitled to receive from a New
Jersey lottery, which he won while a resident of New Jersey, are accruable and therefore not subject
to the New York State Personal Income Tax imposed under Article 22 of the Tax Law should
Petitioner change his state of residence to New York.
Petitioner, a resident of New Jersey at the time, won the top prize for the New Jersey Pick-6
Lotto Drawing held on June 7, 1984. The total amount of Petitioner's annuity prize is $1,227,573.00.
He will receive an initial payment of $47,258.00 and 19 subsequent yearly installment payments in
the amount of $49,200.00. Ail payments are net of the twenty percent (20%) federal withholding tax.
In the event of Petitioner's death prior to the expiration of the pay-out period the full proceeds of the
lottery will be paid to his named testamentary beneficiaries.
Section 654(c)(2) of the Tax Law provides that where an individual changes his status from
nonresident to resident, such individual must, regardless of his method of accounting, accrue for the
portion of the taxable year prior to such change of status any items of income, gain, loss or deduction
accruing prior to the change of status. The phrase "accruing prior to the change of status" refers to
items "required to be included if a Federal income tax return were being filed for the same period
on an accrual basis." 20 NYCRR 148.10(a). The applicable Federal regulation provides that "Under
an accrual method of accounting, income is includible in gross income when all the events have
occurred which fix the right to receive such income and the amount thereof can be determined with
reasonable accuracy." 26 C.F.R. 1.451-1.
Section 654(c)(3) of the Tax Law provides that "No item of income. . ." accrued under
section 654(c) of the Tax Law "shall be taken into account in determining New York adjusted gross
income. . . for any subsequent taxable period."

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-84 (4) I
Income Tax
October 17, 1984

Accordingly, based on the information set forth above, the lottery winnings to be received
by Petitioner were fixed and determinable prior to the proposed change of residence, and thus would
be accrued to the taxable period prior to such change of residence, pursuant to section 654(c)(2) of
the Tax Law. It follows that in any subsequent taxable period the lottery winnings will not be taken
into account in determining Petitioner's New York adjusted gross income.

DATED: October 5, 1984

s/FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.