I own three contiguous residential buildings that are legally, structurally, and operationally separate (separate systems, entrances, tax lots, and registrations), and I'm selling all three to the same buyer by separate deeds. Do I have to add the sale prices together when testing against the $1 million exemption threshold for New York's Real Property Transfer Gains Tax, or does each building's price stand on its own because the buildings are legally distinct?

Plain-English summary

This tax no longer exists. New York's Real Property Transfer Gains Tax (former Article 31-B of the Tax Law) was a 10% tax on the GAIN from transferring New York real property where consideration was $1 million or more. It was repealed for any transfer occurring on or after June 15, 1996. This 1985 opinion is preserved here for historical and research value, not as current law.

340 West 89th Corporation had owned three contiguous residential buildings since 1969 -- 345, 347, and 349 West 87th Street in Manhattan (three separate tax lots on the same block). The Corporation described the buildings as legally and operationally distinct in nearly every respect: independent plumbing, heating, and electrical systems; separate gas and electric metering; separate entrances, stairways, and mailboxes; separate multiple-dwelling registration numbers; separate Division of Housing and Community Renewal registrations; and separate tax block and lot designations. The only thing genuinely shared was a single oil tank. The Corporation proposed selling all three buildings to one buyer using three separate deeds, and argued that because the buildings were otherwise independent, their sale prices shouldn't be added together when testing against the gains tax's $1 million exemption threshold -- meaning each building's individual price, if under $1 million, would escape the tax on its own.

Former Tax Law § 1440.7 defines "transfer of real property" to mean "the transfer or transfers of any interest in real property," and the Department's rule under that provision treats separate deed transfers of CONTIGUOUS properties to one transferee as a single transfer for gains-tax purposes -- UNLESS the properties aren't used for a common or related purpose, in which case aggregation doesn't apply. Here, the Department found that all three buildings shared the same use: each was employed as a residential dwelling to produce rental income. That common use -- not the buildings' separate physical systems, registrations, or tax lots -- controlled the analysis, so the Department required the Corporation to aggregate the consideration from all three deed transfers when determining whether the combined sale crossed the $1 million exemption threshold.

What this means for you

Landlords selling multiple contiguous rental buildings in one deal

Structural and administrative separateness (different utility systems, registrations, tax lots) does NOT prevent aggregation if the properties are being used for the same purpose. What mattered here was that all three buildings served the identical function -- residential rental income -- despite being legally distinct parcels.

Business owners structuring a multi-parcel sale to avoid a dollar threshold

Splitting a sale of adjoining properties into separate deeds to keep each transaction under a tax threshold doesn't work if the properties share a common or related use; the Department looks past the deed-by-deed structure to the properties' actual function.

Accountants and real estate attorneys evaluating contiguous-parcel sales

The test here turned entirely on USE (residential rental income across all three buildings), not on any of the many physical/administrative distinctions the taxpayer cited. If contiguous parcels instead had genuinely different uses (e.g., one residential, one purely commercial with no shared function), a different result might follow -- but this opinion doesn't reach that scenario.

Common questions

Q: Does this contiguous-property aggregation rule still matter today?
A: Not under this specific tax -- it was repealed for transfers on or after June 15, 1996. Similar aggregation concepts may appear in other transfer taxes, but would need to be checked separately.

Q: Why didn't the buildings' separate utility systems, registrations, and tax lots matter?
A: Because the aggregation test under former Tax Law § 1440.7 asks whether contiguous properties are used for a "common or related purpose" -- not whether they are administratively or physically independent. All three buildings here were used identically as residential rentals, which was enough to require aggregation regardless of their many separate legal and physical features.

Q: Would the result have been different if the buyer purchased the three buildings in one single deed instead of three separate deeds?
A: No -- the Department's rule already treats "the transfer or transfers" (plural) of contiguous property to one transferee as a single transfer for aggregation purposes when there's a common or related use, so using separate deeds didn't change the outcome.

Q: Can another owner of contiguous properties with a similar setup rely on this exact ruling?
A: No, apart from the repeal -- an Advisory Opinion binds the Department only as to the petitioner and facts presented, though the "common or related purpose" aggregation principle applied generally while the tax existed.

Citations and references

Statutes and regulations:

• former Tax Law § 1440.7 ("transfer of real property" includes the transfer or transfers of any interest in real property; separate deed transfers of contiguous properties to one transferee are treated as a single transfer for the gains tax if the properties are used for a common or related purpose)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/real_prop_tran_ao_1985.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/real_property/a85_2r.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-85 (2) R
Real Property Transfer
Gains Tax
June 25, 1985

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. M850411A

On April 11, 1985 a Petition for Advisory Opinion was received on behalf of the 340 West
89th Corporation located at 307 West 90th Street, New York, New York 10024.
The issue raised is whether consideration received by the Petitioner from the transfer of
contiguous properties to one transferee by separate deeds should be added together for purposes of
applying the $1 million exemption to determine if such transaction will be subject to the Real
Property Transfer Gains Tax imposed by Article 31-B of the Tax Law.
Petitioner describes the properties involved in the proposed transaction as follows:
The properties (hereinafter the "Buildings"), which have been held in ownership by the
Petitioner since 1969, are three contiguous buildings located at 345 West 87th Street, New York,
New York (Block 1249, Lot 13), 347 West 87th Street, New York, New York (Block 1249, Lot 12),
and 349 West 87th Street, New York, New York (Block 1249, Lot 11).
Notwithstanding the common ownership of the Buildings, and the fact that they share one
common oil tank, Petitioner claims that the Buildings are in all respects separate, independent and
distinct from one another, as demonstrated by the following characteristics, among others:
independent plumbing, heating and electrical systems; separate metering for gas and electricity;
separate entrances, stairways and mailboxes in the Buildings; separate multiple dwelling registration
numbers; separate registrations under the Division of Housing and Community Renewal; and
separate tax block and lots.
Petitioner employs the Buildings as residential dwellings to produce rental income.
It is the contention of the Petitioner that the only correlation between the Buildings is their
contiguity. Petitioner contends that the Buildings are not being used for a common or related
purpose.
A "transfer of real property" is defined in Section 1440.7 of Article 31-B of the Tax Law to
mean "the transfer or transfers of any interest in real property." The separate deed transfers of
contiguous properties to one transferee are considered, for purposes of the Gains Tax, a single
transfer of real property. However, if the properties are not used for a common or related purpose,
the consideration will not be aggregated.

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

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

-2­
TSB-A-85 (2) R
Real Property Transfer
Gains Tax
June 25, 1985
Since Petitioner employs all three of the Buildings as residential dwellings to produce rental
income, the Buildings are deemed to be used for a common or related purpose. Accordingly, the
consideration received by the Petitioner for the transfer of these properties to one transferee must be
aggregated for purposes of applying the $1 million exemption to determine if the gain from such
transfer is subject to the Real Property Transfer Gains Tax.

DATED: June 17, 1985

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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