New York Advisory Opinion TSB-A-87 (6)I: For the 1987 taxable year, how should a married E-1 treaty trader who is a dual-status alien for federal purposes handle New York filing status, the standard deduction, proration of deductions/exemptions between resident and nonresident periods, and claiming a nonworking spouse as a dependent?

Plain-English summary

Richard Berman asked the Department, on behalf of "various E-1 Treaty Traders," how New York should handle four filing questions for the 1987 taxable year specifically - a follow-up, essentially, to an earlier opinion (TSB-A-87(2)I) that had addressed similar issues for Japanese treaty traders for 1986 and flagged that 1987 amendments might change the analysis. During a year of arrival in or departure from the United States, an E-1 treaty trader is a dual-status alien: a resident alien for part of the year and a nonresident alien for the rest. Federally, in that year a married trader must use the "married filing separately" table (while still being allowed to claim a nonworking spouse as a dependent), and must itemize deductions even if the standard deduction would be larger.

The Department answered all four questions. First, on filing status: Tax Law § 651(b) requires that if a couple's federal tax liability is determined on a separate return, their New York liabilities and returns must also be separate - so a trader forced into the federal "married filing separately" table must use the same New York table. Second, on the standard deduction: the Department found no Tax Law provision requiring these treaty traders to itemize for New York purposes, so they remain free to claim the New York standard deduction on their 1987 returns even though federal law forces itemizing. Third, on proration: because a dual-status trader must file one resident return and one nonresident return under § 654(a) for the respective portions of the year, both the personal exemptions (§ 654(e), regulation § 148.20) and the standard deduction (§ 654(f), regulation § 148.21(f)) must be prorated between the two returns according to the number of months covered by each. Fourth, on dependents: for 1987, sections 616 and 636 tie New York personal exemptions to federal exemption entitlement, so a trader filing "married filing separately" for New York may claim a nonworking spouse as a dependent if - and only if - he's permitted to claim that spouse as a dependent on his federal return.

Taken together, this opinion mirrors the earlier 1986-focused opinion (TSB-A-87(2)I, also requested by Richard Berman) on the filing-status and standard-deduction points, while adding fresh detail on exemption/deduction proration across a dual-status year and confirming the dependent-spouse question - filling in exactly the 1987-specific gaps that opinion had flagged as potentially different.

What this means for you

E-1 (or other) treaty traders in their year of arrival or departure from the US

For 1987 (and, by the same reasoning, likely for similar later years absent further law changes), you must mirror your federal "married filing separately" status on your New York return if you're forced into it federally - but you are NOT required to itemize on your New York return just because federal law forces itemizing in your dual-status year; the New York standard deduction remains available.

Treaty traders who change resident status mid-year

Expect to file two New York returns (one as a resident, one as a nonresident) for the portions of the year covered by each status, with your personal exemptions and standard deduction prorated by the number of full months in each period - not simply claimed in full on one return.

Married treaty traders wanting to claim a nonworking spouse as a dependent

This is available on your New York return even while filing "married filing separately," but only if you're also entitled to claim that spouse as a dependent for federal income tax purposes - New York's exemption rules for 1987 track federal exemption entitlement directly.

Accountants and preparers comparing this opinion to the 1986-focused TSB-A-87(2)I

Note that this opinion, requested by the same preparer (Richard Berman) roughly six months later, works through the same filing-status and standard-deduction questions but for the 1987 tax year and for E-1 treaty traders specifically, plus new proration and dependent-exemption detail not covered in the earlier opinion - useful as a fuller, updated companion rather than a contradiction.

Common questions

Q: I'm a married E-1 treaty trader forced into federal "married filing separately" in my dual-status year - do I use the same status for New York?
A: Yes. Tax Law § 651(b) requires your New York filing status to match your federal one when your federal tax is determined on a separate return.

Q: Do I have to itemize deductions on my New York return if federal law forces me to itemize federally in my dual-status year?
A: No. The Department found no New York Tax Law provision requiring these treaty traders to itemize; you remain free to claim the New York standard deduction for 1987.

Q: How do I handle exemptions and the standard deduction if I was a New York resident for only part of 1987?
A: You must file two returns (resident and nonresident, per section 654(a)) and prorate both your personal exemptions (section 654(e)) and standard deduction (section 654(f)) according to the number of months covered by each return.

Q: Can I claim my nonworking spouse as a dependent if I file "married filing separately" for New York?
A: Yes, if you're also allowed to claim that spouse as a dependent on your federal return - New York's 1987 exemption provisions (sections 616 and 636) track federal exemption entitlement.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income_ao_1987.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/income/a87_6i.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-87 (6) I
Income Tax
October 29, 1987

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. I870807B

On August 7, 1987, a Petition for Advisory Opinion was received from Richard Berman, 860
Longview Avenue, Valley Stream, New York 11581.
The issues raised are (1) whether a married treaty trader who is a dual-status alien for federal
income tax purposes must use the New York State table for "married filing separately"; (2) whether
such individual must itemize his New York State deduction rather than claim the standard deduction;
(3) whether such individual must allocate his New York State deductions and exemptions by the
number of full months he resides in New York State; and (4) whether such an individual who files
as "married filing separately" for New York State purposes is permitted to claim a nonworking
spouse as a dependent.
Petitioner specifically requests that the advice given in this advisory opinion be applicable
to taxable year 1987.
Petitioner's questions relate to the New York tax treatment of "various E-1 Treaty Traders"
during the year of arrival or departure from the United States. During such year, the treaty trader is
a resident alien for a portion of the year and a nonresident alien for a portion of the year. For federal
income tax purposes, a married treaty trader is required to use the federal table for "married filing
separately" but may claim his non-working spouse as a dependent. Additionally, in the dual-status
year, the treaty trader must itemize his deductions even if his itemized deductions are less than the
federal standard deduction.
Issue (1)
Section 651(b) of the Tax Law provides that "[i]f the federal income tax liability of husband
or wife is determined on a separate federal return, their New York income tax liabilities and returns
shall be separate."
Accordingly, if the treaty trader is required to use the federal table for "married filing
separately" for purposes of computing his federal income tax liability, he must use the New York
State table for "married filing separately" in computing his New York State personal income tax
liability.
Issue (2)
Section 611 of the Tax Law provides that the "New York taxable income of a New York
resident shall be his New York adjusted gross income less his New York deduction .... " Section 613
of the Tax Law provides that the "New York deduction of a resident individual shall be his New

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

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

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TSB-A-87 (6) I
Income Tax
October 29, 1987
York standard deduction unless he elects to deduct his New York itemized deduction .... " Section
614 of the Tax Law sets forth the manner of computing the New York standard deduction of a
resident individual.
For taxable year 1987, section 631 of the Tax Law provides that the "New York taxable
income of a nonresident individual shall be his New York adjusted gross income less his New York
deduction .... " For taxable year 1987, section 633 of the Tax Law provides that the "New York
deduction of a nonresident individual shall be his New York standard deduction unless he elects to
deduct his New York itemized deduction .... " For taxable year 1987, section 634 of the Tax Law sets
forth the manner of computing the New York standard deduction of a nonresident individual.
No provision of the Tax Law requires individuals such as those described by Petitioner to
itemize their deductions for New York State personal income tax purposes.
Accordingly, the treaty traders are free to claim the standard deduction on their 1987 New
York State personal income tax returns even though they are required to itemize for federal purposes.
Issue (3)
For taxable year 1987, section 654(a) of the Tax Law provides that when "an individual
changes his status during his taxable year from resident to nonresident, or from nonresident to
resident, he shall file one return as a resident for the portion of the year during which he is a resident,
and one return as a nonresident for the portion of the year during which he is a nonresident .... "
For taxable year 1987, section 654(f) of the Tax Law provides that "[w]here two returns are
required under this section, the New York standard deduction allowable on each return shall be the
amount allowed pursuant to the provisions of section six hundred fourteen or six hundred thirty-four,
as the case may be, prorated according to the period covered by each such return."
For taxable year 1987, section 654(e) of the Tax Law provides that "[w]here two returns are
required under this section, the New York personal exemptions allowable under sections six hundred
sixteen and six hundred thirty-six shall be prorated, under regulations of the tax commission,
between the two returns to reflect the portions of the entire taxable year during which the individual
was a resident and a nonresident."
Personal income tax regulation section 148.20(a)(1) provides, in part, that "[w]here an
individual is required to file two New York State personal income tax returns for the taxable year
in which he changes his resident status...the amount of the New York personal exemptions
allowable...must be first prorated...between the two New York State personal income tax returns
according to the number of months covered by each...return." Regulation section 148.20 sets forth
additional rules in this regard.
Personal income tax regulation section 148.21(f) sets forth similar rules regarding the
proration of the New York standard deduction.

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TSB-A-87 (6) I
Income Tax
October 29, 1987
Accordingly, for taxable year 1987, if a treaty trader is a New York resident for a portion of
the taxable year and a New York nonresident for a portion of the taxable year, he is required to file
two returns and is required to prorate his personal exemptions and standard deduction according to
the period covered by each return.
Issue (4)
Section 616 of the Tax Law provides, in part, that "[f]or taxable years beginning in nineteen
hundred eighty-seven...a resident individual shall be allowed a New York exemption...for each
exemption for which he is entitled to a deduction for the taxable year for federal income tax purposes
.... " Section 636 of the Tax Law provides, generally, that for taxable year 1987 "[a] nonresident
individual shall be allowed the same New York exemptions as are allowed by section six hundred
sixteen to a resident individual.
Accordingly, for taxable year 1987, a treaty trader who files "married filing separately" for
New York State purposes is permitted to claim a nonworking spouse as a dependent if he is
permitted to claim such spouse as a dependent for federal income tax purposes.

DATED: October 29, 1987

s/ANDREW F. MARCHESE
Chief of Advisory Opinions

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