New York State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in New York, with full citations and the original source on every page.
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I was set to close on the sale of my mother's residence, but the buyer refused to close, claiming we needed a full gains-tax pre-transfer audit and tentative assessment instead of the simple exemption affidavit we offered. Was the affidavit actually enough?
Yes -- the affidavit would have been enough, given the facts presented. Bonnie Lee Smith had lived in her New Rochelle residence for decades (with a brief period living elsewhere after the town wrongf…
New York State condemned part of my land for a highway project and paid me an advance payment, with more expected after settlement or trial. Part of that money compensates me for damage to the LAND I'M KEEPING, not the part that was taken. Does that severance-damage portion count as taxable consideration under New York's Real Property Transfer Gains Tax?
No -- severance damages don't count as taxable consideration, to the extent the property owner can prove that's what the payment represents. Stefco Realty Corp. owned about 70,567 square feet of land …
We're the fee owner of an office building. To help a corporate tenant get economic-development tax benefits through the NYC Industrial Development Agency (IDA), we're converting our building to a condominium and conveying legal title to the tenant's units to the IDA for a nominal price, then leasing those units back from the IDA for nominal rent under an 'Overlease.' We (not the IDA) will keep all the rent, insurance and condemnation proceeds, income-tax ownership treatment, and the right to sell, mortgage, or alter the units; title reverts to us automatically when the IDA benefits end (no later than 2016). The tenant separately subleases from us and its rent obligations flow through additional financing leases to fund the IDA bonds. Are the conveyance to the IDA, the eventual reversion back to us, and the various leases and lease amendments subject to New York's Real Estate Transfer Tax or the (now-repealed) Real Property Transfer Gains Tax?
Exempt at every step -- Metropolitan Life Insurance Company kept all the real economic benefits and burdens of ownership throughout. Metropolitan Life, the fee owner of 11 Madison Avenue in Manhattan,…
Two charitable lead annuity trusts, created under the same family trust instrument with identical remainder beneficiaries, are being combined into one 'Surviving Trust' by court order because their income no longer covers their required annual charitable payments. The trusts jointly own New York real property as tenants-in-common. To protect the separate remainder beneficiaries' interests despite the combination, we're setting up a bookkeeping 'Pro Forma Account' that tracks what each set of beneficiaries would have received had the trusts stayed separate, plus a 'Loan-Back Agreement' so that if a 2003 distribution from that account requires deeding out New York real property, the recipient beneficiaries can immediately loan the property interests back to the Surviving Trust instead of the trust having to sell real estate to raise cash. Does combining the trusts -- or the later Pro-Forma-driven deed-and-loan-back mechanism -- trigger New York's Real Estate Transfer Tax or Real Property Transfer Gains Tax?
Exempt -- combining the two trusts didn't change who beneficially owned the underlying New York real estate. Lew R. Wasserman, Jean Stein, Gerald H. Oppenheimer, and Andrew Shiva, as trustees of two c…
I'm buying a building and gutting it down to the four exterior walls to add a story and a half. Does that rehab count as a fresh 'qualifying capital improvement' under New York's builders' exemption from the Real Property Transfer Gains Tax, even though the building already existed before I bought it?
Yes -- the gut rehabilitation qualified. Dashal 67, LLC planned to buy a five-story building for about $2.5 million and immediately gut-rehabilitate it down to its four exterior walls while adding a s…
My family's real estate partnership is splitting up: I'm taking two of our five properties into a new entity with my spouse, and my siblings are taking the other three into their own entity. Does New York's Real Property Transfer Gains Tax apply, and does the value of the ownership interest I keep for myself get taxed as part of the deal?
The full fair market value of each parcel counted as taxable consideration, but each partner's own retained percentage ownership was exempt under the 'mere change of identity or form' rule. Under New …
I subdivided a parcel of land into five residential lots and I'm now selling two more of them to a builder who will build houses on them. Do I have to add up the sale prices of all the lots I've sold from this subdivision to see if I hit New York's $1 million Real Property Transfer Gains Tax threshold, or is each lot sale tested separately?
No aggregation needed -- each lot sale is tested separately. New York's now-repealed Real Property Transfer Gains Tax exempted transfers with consideration under $1 million, but ordinarily required ag…
For privacy, my spouse and I are having a corporation (not us personally) take title to the house we're going to live in as our home. Can that house still qualify for New York's personal-residence exemption from the Real Property Transfer Gains Tax when it's later sold?
Yes, potentially -- if the facts support it at the time of the later transfer. A married couple formed a corporation, RAI (NY), Inc., solely to hold title to a residential property for confidentiality…
As part of a bankruptcy reorganization, we (NBC and GE) will end up as the 'owners for tax purposes' of the office condominium units we already occupy at Rockefeller Center (the GE Building and adjacent Studio/West Buildings), even though a specially formed financing trust will hold nominal legal title and lease the units back to us under 'Trust Leases' with purchase options. We'll pay all taxes, insurance, and maintenance, keep all appreciation, bear all depreciation risk, and be treated as owners for all tax purposes (though not for our own balance sheets). The financing trust's notes and mortgages that back this deal won't be recorded unless our guarantor's (GE's) credit rating drops. Does this transaction trigger the Real Estate Transfer Tax, the Real Property Transfer Gains Tax, or the Mortgage Recording Tax at any step -- the initial bankruptcy-plan transfer to the trust, the trust's lease-with-purchase-option back to us, or the unrecorded financing documents?
Exempt at every step described -- National Broadcasting Company (NBC) and General Electric Company (GE) structured a synthetic-lease financing of their Rockefeller Center office condominium interests …
We (an unaffiliated seller) are transferring a commercial property to a newly formed LLC owned by a REIT and its operating partnership, in exchange for a 40% ownership stake in that LLC plus cash and mortgage-related consideration. We signed the sale agreement on December 1, 1995, but the REIT's shares were first issued in its IPO on June 2, 1995, and our closing may slip past the six-month anniversary of that IPO. Does our sale qualify for the reduced 'REIT transfer' tax rates under New York's Real Estate Transfer Tax and Real Property Transfer Gains Tax if the closing happens within a reasonable time after we signed but after the strict six-month window? And if we (the selling partnership) later distribute the sale proceeds to our individual partners, does each partner need to separately satisfy the requirement of retaining at least 40% of their share's value in the new LLC for two years?
Yes, largely favorable to the taxpayer -- signing the sale contract counts as the operative 'transfer' for timing purposes, and a later closing can still qualify for the REIT transfer's reduced tax ra…
We're trustees of two charitable lead annuity trusts, created under the same family trust instrument with currently identical beneficiaries, that co-own New York real property as tenants-in-common. We're proposing to combine them into one 'Surviving Trust' by court order because their income no longer covers required annual charitable payments. To protect the separate remainder beneficiaries' interests, we're setting up a detailed 'Pro Forma Account' formula (tracking what each set of beneficiaries would have received had the trusts stayed separate, adjusted for years of investment gains/losses and a complex liquidity test) plus a 'Loan-Back Agreement' so that if a 2003 distribution requires deeding out New York real property, the recipients can immediately loan the property back to the Surviving Trust. Will combining the trusts -- or the later Pro-Forma-driven mechanism -- trigger New York's Real Estate Transfer Tax or Real Property Transfer Gains Tax?
Exempt -- the proposed combination wouldn't change who beneficially owned the underlying New York real estate. Lew R. Wasserman, Jean Stein, Gerald H. Oppenheimer, and Andrew Shiva, as trustees of two…
My real estate broker has agreed to pay New York's Real Property Transfer Gains Tax out of its own pocket (not passed on to the buyer) so a contingent multi-parcel closing can go through. Does the broker's payment of my tax count as additional taxable consideration for the sale?
No, it's not additional consideration -- as long as the broker's payment isn't really the buyer's obligation in disguise. Robert Schwagerl was selling vacant land in Suffolk County for $1,250,000 as p…
My ex-spouse and I divorced years ago and split the future sale proceeds of our marital co-op, but only my ex-spouse kept living in it after our divorce. I moved out and never lived there again. When we finally sell, is my share of the gain exempt from New York's Real Property Transfer Gains Tax as a personal residence, the same as my ex-spouse's share?
Split result -- exempt for the spouse who stayed, taxable for the one who left. Robert Liberman bought a co-op apartment in 1976 that he and his wife Katherine Gill lived in as their marital home. A 1…
Our partnership owns seven Manhattan properties. We're proposing to exchange them for land under a building owned by a related corporate subsidiary, 1133 Building Corp. Both entities are ultimately owned (through different family trusts) by the same thirteen family members ('the Second Generation Children'), but the ownership chains aren't perfectly identical -- our partnership is 99.9% owned by them equally through one set of trusts plus a 0.1% sliver owned by a corporation that only four of the thirteen family members own, while 1133 Corp. is 100% owned by them equally through a different set of trusts. Since the same family effectively owns both sides before and after this exchange, is it exempt from the Real Estate Transfer Tax and Real Property Transfer Gains Tax as a 'mere change of form,' or does the slight difference in cross-ownership percentages make part of it taxable?
Mostly exempt, with a tiny taxable sliver -- the mirror image of a companion ruling covering the other side of the same exchange. Eastern Pork Products Company ('Petitioner'), a New York general partn…
Our company owns land under a Manhattan building. We're proposing to exchange it for seven other Manhattan properties owned by a related partnership, Eastern Pork Products Co. Both our company and Eastern Pork are ultimately owned (through different family trusts) by the same thirteen family members ('the Second Generation Children'), but the trusts and ownership percentages aren't identical -- our company is 100% owned by them equally through one set of trusts, while Eastern Pork is 99.9% owned by them equally through a different set of trusts, plus a small sliver owned by a corporation that only four of the thirteen family members own. Since the same family effectively owns both sides before and after this exchange, is it exempt from the Real Estate Transfer Tax and Real Property Transfer Gains Tax as a 'mere change of form,' or does the slight difference in cross-ownership percentages make part of it taxable?
Mostly exempt, with a tiny taxable sliver -- New York taxes only the fraction of beneficial ownership that actually changed hands. 1133 Building Corporation, a wholly-owned subsidiary of The Durst Bui…
An insurance company sold a shopping mall it held in a separate investment account for 190 pension plan clients -- some private (covered by ERISA) and some government pension plans (not covered by ERISA). Is New York's Real Property Transfer Gains Tax on the sale preempted by federal ERISA law for any of these clients' shares of the gain?
Split by investor type. Prudential Insurance Company of America sold the Smith Haven Mall through PRISA, a separate investment account holding real estate on behalf of 190 pension-plan contract holder…
Three home building companies pooled land into a joint holding corporation, then each builder sold its allotted lots (with houses already built by that builder) to individual home buyers -- sometimes using a redundant second deed from the builder since the builder never actually held title. Do all these individual home sales get added together for New York's $1 million Real Property Transfer Gains Tax threshold, since they all trace back to one big parcel?
No aggregation required -- each home sale was tested on its own. Four individuals, through three separate home-building companies (A, B, and C), pooled their resources into a jointly-owned holding cor…
My mortgage lender foreclosed on 10 unsold condo units and bought them back at a foreclosure sale. Is New York's Real Property Transfer Gains Tax consideration the actual foreclosure bid price, or the much larger unpaid mortgage debt -- and does construction money my lender agreed to cover on my behalf also count as consideration?
The higher of the two figures -- the total mortgage debt, not the (lower) bid price -- plus the lender's covered construction costs. Port Jefferson Development Corp. built 133 condominium units financ…
I'm the fee owner and ground tenant of an office building. To help a tenant (Donaldson, Lufkin & Jenrette) get NYC Industrial Development Agency economic-development benefits, I'm converting the building to condominium units and conveying title to the IDA-benefited units to the IDA for nominal consideration, then leasing them back from the IDA under a 22-year 'Overlease.' I'll keep all the rent, insurance and condemnation proceeds, income-tax ownership treatment, and the right to sell, mortgage, or transfer the units; title reverts to me automatically in 2016 or whenever the tenant's IDA benefits end. Are the conveyance to the IDA, the eventual reversion, and the various leases subject to New York's Real Estate Transfer Tax or Real Property Transfer Gains Tax?
Exempt at every step -- Stanley Stahl, doing business as Stahl Park Avenue Co., kept all the real economic benefits and burdens of ownership throughout. Stahl, the fee owner and ground tenant of 277 P…
I own a one-third tenant-in-common interest in a commercial building (subject to a tenant's purchase option worth over $3 million for the whole property). I want to transfer my one-third interest, for no payment, into my own revocable trust -- I'm the grantor and sole trustee, I'll keep receiving all the income during my life, and I can amend or revoke the trust at any time. Does moving my interest into my own revocable trust trigger New York's Real Estate Transfer Tax or Real Property Transfer Gains Tax?
Exempt -- moving property into your own revocable trust doesn't change who beneficially owns it. Betty G. Reader owned a one-third interest, as tenant-in-common, in a commercial building at 391-401 Si…
I sold two parcels of land on the same road to the same buyer on the same day, but they're separated by a third parcel owned by a completely unrelated party. Do I have to add the two sale prices together to test New York's $1 million Real Property Transfer Gains Tax threshold, since they're roughly in the same area?
No aggregation required. Gick Road Development Corp. owned two parcels on the same side of Old Gick Road in Suffolk County: a narrow 1.24-acre former railroad-bed strip used for a mobile home park, an…
We're trustees of two charitable lead annuity trusts, created under the same family trust instrument with currently identical beneficiaries, that co-own New York real property as tenants-in-common. We're proposing to combine them into one 'Surviving Trust' because declining income no longer covers required annual charitable payments. To protect the separate remainder beneficiaries' interests, we're setting up a detailed 'Pro Forma Account' formula (tracking what each set of beneficiaries would have received had the trusts stayed separate, adjusted annually for investment gains/losses and a liquidity test comparing available assets against the discounted present value of future charitable obligations). Will combining the trusts trigger New York's Real Estate Transfer Tax or Real Property Transfer Gains Tax?
Exempt -- this is the first (earliest) of three related advisory opinions the Department issued to the same trustees about the same proposed trust combination, as the underlying facts evolved. Lew R. …
I'm planning a three-step real estate deal: (1) sell a small 5% stake in my two buildings to an outside investor for under $1 million, (2) contribute my and the investor's interests into a new limited partnership, and (3) later sell a 44% limited partnership stake for over $1 million. Does New York's Real Property Transfer Gains Tax apply to any of these three steps?
None of the three steps triggered the tax. A real estate developer owned two commercial buildings individually and planned a three-step restructuring: first, sell a 5% undivided interest in each build…
My family's 71-acre estate has multiple houses on it -- my house, my brother's house, my sister's occasional-use cottage, and a caretaker's house -- plus outbuildings including a horse barn some neighbors use. If we sell the whole estate for over $1 million, is any of it exempt from New York's Real Property Transfer Gains Tax as our residence?
Yes -- the entire 71-acre transfer was exempt. The McIntyre family's estate in Dix Hills, New York -- a 71-acre parcel with four residences and nine outbuildings, including a horse barn -- had been in…
My business partner and I each own a 50% share (as tenants-in-common) in five properties held through a partnership, and we each want to put our share into a Grantor Retained Annuity Trust for estate planning, then divide the actual properties between our two families instead of continuing to co-own everything. Does that division trigger New York's Real Property Transfer Gains Tax?
Partly exempt, partly taxable -- split by how much each family's beneficial share actually changed. Two families, the Moskelands and the Tobiassens, each held a 50% interest (via tenants-in-common tit…
We leased out our property in 1968 for 21 years with a 21-year renewal option. That option lapsed, and we've since extended the lease twice more -- a 5-year extension in 1989, then a 23-year extension in 1994. The lease includes a right of first refusal (not a purchase option) and lets the tenant make substantial capital improvements, covering essentially the whole property. The new tenant (who took an assignment of the lease) now wants to extend the current term from 23 years to 30 years. Does stacking these lease extensions eventually push the lease term over New York's 49-year threshold and trigger the Real Property Transfer Gains Tax?
Not taxable -- because each lease modification creates a fresh lease for gains-tax purposes, and the newly aggregated term stayed under 49 years. Strausman-Mayfair Associates, L.P. leased New York rea…
Our client died leaving five tenancy-in-common interests in New York real property to her charitable foundation under her will. Rather than deed the properties to the foundation first and then have the foundation deed each one again to five separate title-holding corporations it just formed (one per property), the estate's executors want to deed each property directly from the estate to the matching title-holding corporation, skipping the foundation as an intermediate step. Does conveying directly to the title-holding corporations -- instead of first to the foundation itself -- still count as an exempt bequest, or does the extra corporate layer make it a taxable conveyance subject to the Real Estate Transfer Tax or Real Property Transfer Gains Tax?
Exempt -- conveyances made under a will are excluded from the definition of a taxable 'conveyance' or 'transfer' in the first place, even when the deed runs directly to an alter-ego entity rather than…
Our development is a subdivision run by a homeowners association -- each homeowner holds a deed to their own individual lot, and everyone is automatically a member of the association, which separately owns the common areas (athletic facilities, community center). We're proposing to convert the whole thing to a condominium structure: homeowners who opt in would deed their lot to the condominium (through an escrow agent) in exchange for a condominium unit deed covering that exact same lot, plus a proportional interest in the condo's common elements. The homeowners association would keep existing and keep owning the shared common areas as before. Does converting from lot-deed/HOA ownership to condominium ownership trigger New York's Real Estate Transfer Tax or Real Property Transfer Gains Tax?
Exempt -- each homeowner keeps exactly the same beneficial interest in exactly the same lot, just under a different ownership label. Vacation Village Homeowners Association, Inc., a homeowners associa…
We're a 1771-chartered not-for-profit hospital. We formed a separate not-for-profit affiliate solely to acquire, hold, and manage real property for our benefit -- all of the affiliate's members are, by its bylaws, automatically our own Governors, and our bylaws ensure we control the affiliate's business and affairs. We're proposing to transfer one of our psychiatric care facilities to this affiliate, which will then lease it back to us for 99 years at nominal rent so we keep operating exactly as before, subject to an existing $154 million mortgage. Does this transfer-and-leaseback to our own controlled not-for-profit affiliate trigger New York's Real Estate Transfer Tax or Real Property Transfer Gains Tax?
Exempt from both taxes -- The Society of the New York Hospital ('Petitioner'), a not-for-profit membership corporation originally chartered by King George III in 1771, proposed transferring a psychiat…
My brother and I are partners in a family realty partnership that, on paper, owns two unrelated New York properties -- but our partnership agreement has always allocated Property A entirely to me and Property B entirely to him (separate income, separate capital accounts, separate distribution on dissolution), even though title to both properties has always been recorded in our individual names as tenants-in-common (not the partnership's name), for accounting/administrative reasons. We're proposing to liquidate the partnership and simultaneously correct the recorded title so each of us becomes sole owner of 'our' respective property. Does liquidating the partnership and correcting title this way trigger New York's Real Estate Transfer Tax or Real Property Transfer Gains Tax?
Exempt -- each partner already beneficially owned 'his' property under the partnership agreement, so liquidation didn't change anything real. Heinrich Realty Company was a two-partner realty partnersh…
My four-partner partnership has owned a mixed residential/commercial building for 20 years, with each partner exclusively occupying one residential floor. We want to convert it into a two-unit condominium, with the residential floors becoming a cooperative corporation that issues each partner shares for the same floor they already live in. Does any of this trigger New York's Real Property Transfer Gains Tax?
No gains tax at any step, because every partner ended up with exactly what they already had. 115 Spring Street Company was a four-partner (25% each) partnership that had owned a five-story New York Ci…
For privacy reasons, we bought a Manhattan townhouse and adjacent lot through a nominee trust -- a bank trustee held bare legal title, but under a separate nominee agreement, I (the settlor) kept all the equitable ownership, all benefits and burdens, and the right to revoke the arrangement at any time. Privacy is no longer a concern, so I want to revoke the trust and nominee agreement and put legal title back in my own name. Does unwinding this nominee structure trigger New York's Real Estate Transfer Tax or Real Property Transfer Gains Tax?
Exempt -- the beneficial owner never actually changed. H. Christopher Whittle had purchased a Manhattan townhouse (4 East 79th Street) and an adjacent empty lot for $11.5 million through a nominee str…
Five families own six semi-attached condominium homes and want to convert to plain fee-simple ownership instead. That means briefly passing through a moment of joint tenants-in-common title before each family gets its own home back. Does converting out of the condominium form trigger New York's Real Property Transfer Gains Tax, and do we have to add all our home values together to test the $1 million threshold?
The conversion itself was exempt -- no gains tax was owed, and no aggregation mattered, because there was no real change in who owned what. Five families owned six semi-attached condominium units in t…
I'm structuring a turnkey deal where I sell my client a vacant lot, buy it back at the same price, build a building on it as construction financing, then sell (or lease) the finished building back to the client. Will New York's Real Property Transfer Gains Tax apply when I transfer the finished building back?
The Department wouldn't give a yes-or-no answer -- it depends on facts an Advisory Opinion can't resolve. Deegan Development Group, Inc. owned a parcel of land and proposed a turnkey arrangement for i…
As trustee of an estate, I'm selling a farmhouse where two disabled beneficiaries lived, plus two adjacent vacant farm parcels, to the same buyer. Is the house sale exempt from New York's Real Property Transfer Gains Tax as a residence, and do I have to add its sale price to the two land parcels' prices to test the $1 million threshold?
Split answer: the house sale was exempt on its own terms, but still had to be combined with the land sales to test the $1 million threshold. Mary and Seely Ward's ~100-acre Orange County farm, with a …
I own a nine-acre beachfront parcel that I've treated as my principal residence, with a main house, a separate beach house, and an old barn, none of which I've ever rented out or depreciated. If I subdivide and sell just the beach house and barn (on six of the nine acres) to a buyer, does New York's Real Property Transfer Gains Tax apply?
No gains tax, because the beach house and barn were part of the owner's tax-exempt residence, not separate business or investment property. Burton Brous bought a nine-acre Long Island beachfront parce…
We're the fee owner of an office building. To help a prospective tenant (Newsweek) get NYC Industrial Development Agency economic-development benefits and a real estate tax abatement, we're converting our building to a condominium and conveying title to the tenant's units to the IDA for nominal consideration, then leasing those units back from the IDA at nominal net rent under an 'Overlease' lasting about 15 years and 8 months. We'll keep all the economic benefits and burdens (condemnation/insurance proceeds, income-tax ownership treatment, the right to sell/mortgage/transfer), and the IDA's title will end automatically on a set date or earlier if certain events happen (like the Prime Lease terminating), with title reverting to us. Are the conveyance to the IDA, the eventual title reversion, the Overlease, the Prime Lease with our tenant, and the related financing all exempt from New York's Real Estate Transfer Tax, Real Property Transfer Gains Tax, and Mortgage Recording Tax?
Exempt at every step -- Midtown Realty Company kept all the real economic benefits and burdens of ownership throughout. Midtown Realty, the fee owner of the office building at 1775 Broadway in Manhatt…
We're a securities broker-dealer buying two office buildings for our headquarters. To avoid putting $500 million of real estate and debt on our own balance sheet -- which would reduce our regulatory net capital under broker-dealer rules -- the seller will transfer title directly to a financing trust instead of to us. The trust will fund the purchase with senior notes, junior notes, and investor certificates, then lease the buildings back to us with a purchase option we can exercise anytime. We'll pay all taxes, insurance, and maintenance, keep all appreciation, bear all depreciation risk, and be treated as the owner for income tax purposes (though not on our own books). None of the financing mortgages will be recorded unless our parent company's credit rating drops. Does this financing structure trigger New York's Real Estate Transfer Tax, Real Property Transfer Gains Tax, or Mortgage Recording Tax at any step?
Exempt at every step described -- Smith Barney, Harris Upham & Co. structured an off-balance-sheet financing purchase of two Manhattan office buildings (388 and 390 Greenwich Street) so that beneficia…
A partnership owes $30 million on a nonrecourse mortgage loan, secured by real property worth $10 million plus a $50,000 cash account the bank also has a security interest in. The partners personally guaranteed part of the debt. If the partnership transfers everything to the bank in lieu of foreclosure -- or the bank forecloses and is the winning bidder -- in exchange for cancelling the debt and the guarantees, what's the 'consideration' for New York's Real Property Transfer Gains Tax, and does it matter whether the loan was recourse or nonrecourse?
For a transfer occurring before April 15, 1993, the consideration was the amount of debt cancelled, apportioned to reflect only the real property's share of value -- and the answer was the same whethe…
Our company's Employee Stock Ownership Plan (ESOP), an ERISA-covered retirement plan, owns nearly all the stock of our company, which itself holds leasehold interests counting as New York real property. If the ESOP sells all its stock in the company for $100 million allocable to that real estate -- a controlling-interest transfer -- does New York's Real Property Transfer Gains Tax apply?
The gains tax would otherwise apply, but ERISA preempts it as long as the selling entity remains an ERISA-covered employee benefit plan. Avis, Inc.'s Employee Stock Ownership Plan (Avis ESOP), created…
A husband and wife subdivided lakefront land into lots, sold four, and later put the remaining nine lots into a family trust for estate planning, gradually gifting beneficial interests to their children. When the trust liquidates and distributes the lots to all nine beneficiaries proportionally, does New York's Real Property Transfer Gains Tax apply to that distribution, and are the beneficiaries' later individual sales of their lots aggregated with each other for the $1 million threshold?
The trust's liquidation and distribution of lots to its nine beneficiaries counted as a taxable partition, with all the beneficiaries' shares aggregated to test the $1 million threshold -- but each be…
Our eight-unit condominium (each unit is a two-family semi-attached house with its own 12.5% interest in the shared common elements/yards) wants to terminate the condominium declaration entirely. Under our plan, all eight owners would first become tenants-in-common in the whole property, then each owner would receive a deed from the other seven conveying their combined 87.5% share of that owner's home-and-yard, so each owner ends up owning 100% of just their own unit and yard outright (no more condo regime). No money changes hands since everyone's share is roughly equal in value. Will this termination-and-partition trigger New York's Real Estate Transfer Tax or Real Property Transfer Gains Tax? And if the gains tax applies, is each owner's 'consideration' measured on the increase in their property's value, and do all eight owners' shares get combined to see if we cross the $1 million threshold?
Mixed result -- the condominium termination itself is fully exempt from both taxes, but the follow-on exchange among the individual owners is a separate, potentially taxable event for gains tax purpos…
As sponsor of a non-eviction cooperative conversion, I estimated the Real Property Transfer Gains Tax consideration for my unsold shares based partly on a wraparound mortgage. I'm now negotiating to give the co-op board back my unsold, underperforming shares, and as an incentive I'll reduce the underlying mortgage by $375,000. Does that mortgage reduction lower my gains-tax consideration?
Only PARTIALLY -- the $375,000 mortgage reduction lowers the gains-tax consideration solely to the extent it's allocable to the STILL-UNSOLD shares being returned to the cooperative board, not to unit…
We're merging a related corporation that owns real estate into our company, with its former shareholders receiving stock in ours. The two companies are owned by overlapping family members, but not in identical percentages -- does New York's Real Property Transfer Gains Tax apply to this merger, or does the mere-change-of-identity exemption cover it?
The merger is a taxable controlling-interest acquisition, but the mere-change-of-identity exemption applies proportionally -- so gains tax was owed only on the small SLICE of beneficial interest that …
Our partnership sponsor holds 26 unsold condominium units and wants to liquidate, distributing the units to its eight partners in proportion to their ownership percentages. Because unit values don't divide evenly (especially for four partners with just 1.5% interests each), we may need side payments of cash or property to equalize the distributions, or have small partners take fractional tenant-in-common interests. Does any of this trigger New York's Real Property Transfer Gains Tax, and how would later individual sales by the partners be aggregated?
Distributing the unsold condominium units to the partners in proportion to their ownership interests is exempt from the gains tax -- but ONLY if any cash or other property used to equalize the distrib…
One month after getting a ruling on our IDA condo conveyance-leaseback structure for our tenant's financing benefits, we realized the initial condominium units will actually be conveyed to the IDA in phases over time as construction is completed, and we want the ruling to also cover our affiliates, nominees, successors, and assigns. Does this refined, phased structure change the tax-exempt conclusions?
Still exempt -- the phasing doesn't change the answer. This opinion refines TSB-A-93(1)R (issued a month earlier on the same petition) to reflect that the condominium units at One New York Plaza occup…
As first mortgagee, I'm set to receive a commercial building free and clear under a Chapter 11 reorganization plan, in full satisfaction of my $90 million loan. The plan also wipes out an unrelated second mortgage on the same building with no payment to that lender. Does the discharged second mortgage debt count as part of MY consideration for New York's Real Property Transfer Gains Tax, even though I'm not paying it and get no benefit from its discharge?
No -- the discharged second mortgage debt is NOT part of the first mortgagee's consideration; consideration is only the amount of the recipient's OWN debt that gets extinguished. Prudential Insurance …
Our building's fee owner needs to convert floors of a Manhattan office tower into condominium units and convey the units occupied by a major tenant to the NYC Industrial Development Agency, so the tenant can get IDA financing benefits, then lease those units back. Do the conveyance to the IDA, the IDA leaseback, the eventual reversion, and a restated/consolidated lease with the tenant trigger New York's Real Estate Transfer Tax or Real Property Transfer Gains Tax?
Exempt at every step. Resnick Water St. Development Co., fee owner of One Seaport Plaza, needed to convey condominium units occupied by tenant Prudential Securities, Inc. (PSI) to the New York City In…
As fee owner of our Manhattan office tower, we need to convey the condo units occupied by a major tenant to the NYC Industrial Development Agency so the tenant can get IDA financing benefits, then lease those units back from the IDA and sublease to the tenant -- with the IDA's title later reverting to us, possibly repeatedly as the deal is restructured. Does any of this trigger Real Estate Transfer Tax, Real Property Transfer Gains Tax, or Mortgage Recording Tax?
Exempt across the board. The Chase Manhattan Bank, N.A., fee owner of One New York Plaza, needed to convey condominium units occupied by tenant Prudential Securities Incorporated (PSI) to the New York…
A partnership is transferring 100% of its partnership interests to a bank, in exchange for the bank cancelling debt and releasing guarantees -- but the partnership's underlying real estate is worth $10 million while the debt being cancelled is $15 million. For New York's Real Property Transfer Gains Tax, is the taxable 'consideration' the $15 million in cancelled debt, or the $10 million fair market value of the real estate?
The taxable consideration is the $10 million fair market value of the underlying real estate -- NOT the $15 million in debt actually cancelled to acquire the ownership interest. A partnership held a l…
My clients, a married couple both now in bankruptcy and heading toward divorce, jointly own a 37-acre residential property. My client moved out several months ago due to marital discord, but her husband still lives there. If their bankruptcy trustees sell the property (including to a tax-exempt buyer) for $1.5 million, does the personal residence exemption from New York's Real Property Transfer Gains Tax still apply, given my client's recent absence?
The residence exemption still applies -- a spouse's few-month absence due to marital discord, with the other spouse continuing to live there, doesn't break the exemption, and neither does the property…
I want to transfer my three New York properties -- including my personal residence -- into a revocable living trust to avoid probate, keeping full control and the right to revoke at any time. Will funding the trust trigger Real Estate Transfer Tax or Real Property Transfer Gains Tax? And will my residence be exempt from gains tax when the trustee eventually sells it after I die?
Both exempt. Hilles Timpson planned to transfer her Southampton personal residence, a New York City residence used by relatives rent-free, and a New York City rental property (each worth over $1 milli…
Our company owns numerous New York real estate interests, many of which we built ourselves, generating huge volumes of vendor invoices, purchase orders, and accounting records supporting the 'original purchase price' we'd need to prove for the Real Property Transfer Gains Tax. Can we keep those supporting records solely on microfilm or similar media, instead of retaining the original paper documents?
Yes -- microfilm (or similar media) recordkeeping is acceptable for substantiating original purchase price, as long as the taxpayer follows the Department's established recordkeeping procedures for su…
For privacy, my husband and I formed a corporation to hold title to our residence, which we occupy exclusively as our home -- we've never rented it or claimed depreciation on it. If we later sell the property, does New York's Real Property Transfer Gains Tax's personal residence exemption apply, even though a corporation technically owns it?
The exemption MAY apply, but it has to be earned on the specific facts -- a corporation can't automatically claim the residence exemption just because its shareholders live in the house, but it can qu…
As a bank, I made a construction loan to a cooperative sponsor, secured by a pledge of the sponsor's unsold co-op shares, proprietary leases, and purchase-money notes. The sponsor defaulted, and I'm about to foreclose under the UCC by bidding in my share of the debt. Will I become personally liable, as 'transferee,' for any unpaid Real Property Transfer Gains Tax the sponsor owes, once I take ownership of the pledged shares and leases through the foreclosure?
No transferee liability -- a 1992 statutory amendment specifically releases a secured party from personal liability for the transferor's unpaid gains tax when it enforces its lien on pledged cooperati…
A shareholder of our corporation, which owns real property, acquired 44% of our stock back in 1981 -- before either the gains tax or the transfer tax's entity-transfer rules existed. He now wants to acquire another 49% now, and the remaining 7% at some future point. Does his old 1981 stake count toward triggering a taxable 'controlling interest' acquisition when he buys the rest?
The pre-existing 44% stake does not count. A shareholder's acquisition of a 44% stock interest in a corporation before the effective dates of the gains tax (March 28, 1983) and the transfer tax's enti…
I'm the trustee of a marital trust created for my client's late husband's surviving spouse, who is the sole income and principal beneficiary. I'm planning to terminate the trust and distribute its entire corpus -- including a one-quarter undivided leasehold interest worth well over $1 million -- directly to her, with no payment involved. Does that distribution trigger New York's Real Property Transfer Gains Tax?
No gains tax -- distributing the entire trust corpus, including the real property interest, to the sole beneficiary who already owned 100% of the trust's beneficial interest is an exempt mere change o…
My elderly client holds a 40% interest in a partnership that owns New York real estate and wants to transfer her entire interest into her own revocable living trust for estate planning. Separately, and completely unrelated to her, the estate of another 40%-owning partner may soon sell or distribute its interest. Will my client's trust transfer be aggregated with that unrelated transfer to trigger the 50%-or-more 'controlling interest' threshold under New York's Real Property Transfer Gains Tax?
No aggregation -- the client's transfer of her 40% partnership interest into her own revocable trust will NOT be combined with the unrelated estate's separate, independent transfer of its own 40% inte…
We're a federal government-chartered corporation that buys and resells mortgages nationwide. When mortgagors on our New York mortgages default and we foreclose or take a deed in lieu of foreclosure, are we exempt from New York's Real Property Transfer Gains Tax and Real Estate Transfer Tax as the transferee, and later as the transferor when we resell the foreclosed property? And do we still have to file the tax return paperwork even if we're exempt?
Exempt as a federal instrumentality, but filing obligations still apply. The Federal Home Loan Mortgage Corporation (Freddie Mac), a federally chartered corporate instrumentality of the United States,…
Our cooperative housing corporation ended up owning back its own unsold shares (for 8 vacant and 22 occupied units) after a messy chain of foreclosures and a bank settlement, paying the bank $1,215,000 for the first mortgage, second mortgage, and all the unsold shares combined. When we eventually resell those unsold units, is that subject to New York's Real Property Transfer Gains Tax, and what's our original purchase price?
Yes, future sales of the unsold cooperative shares will be subject to the gains tax if their combined consideration reaches $1 million, and the cooperative corporation's original purchase price for th…
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These are official tax letter rulings and advisory opinions issued by New York's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.