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?

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 It was repealed for any transfer occurring on or after June 15, 1996.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 1991 opinion is preserved here for historical and research value, not as current law.

An elderly woman (over 80) held a 40% capital, profits, and beneficial interest in a New York general partnership that owned New York City real estate encumbered by a substantial mortgage. Record title to the property was held by a corporate entity ("Holding Corp."), but beneficial ownership had always rested with the partnership's partners: the client at 40%, Holding Corp. itself at 40%, and two other individuals (related to Holding Corp.) at 10% each. The client planned to transfer her entire 40% interest into her own amendable, revocable living trust as part of broader estate planning -- she would remain the sole income beneficiary during her life, with the trust distributing to her children at her death. On its own, this transfer clearly stayed well under the 50%-or-more threshold that defines a taxable "controlling interest" acquisition or transfer.

The complicating wrinkle: Holding Corp.'s sole shareholder had recently died, and his estate was weighing whether to sell its Holding Corp. stock or distribute it under his will -- possibly within roughly three years of the client's trust transfer. Since separate acquisitions or transfers within a three-year window can sometimes be combined ("aggregated") if the parties are "acting in concert," the client's attorney asked whether her unrelated trust transfer might get swept into the same taxable event as the estate's eventual, separate transfer of its Holding Corp. stock. The Department explained that "acting in concert" requires either a controlling relationship between the parties (like a parent and subsidiary corporation) or enough unity in how the transactions were negotiated and timed to show the parties are functioning as a single entity -- factors include how closely in time the transactions occur, how few parties are involved, whether purchase contracts share mutual terms, and whether the parties entered any side agreement binding them to a common course of action. Here, the client and the deceased shareholder were completely unrelated, she had no interest in Holding Corp., and neither she nor her trust intended to acquire the estate's interest. Because their transactions were genuinely independent -- with no relationship, common control, or coordinated planning -- the Department concluded neither the client's transfer to her trust nor the trust's receipt of her interest would be aggregated with the estate's separate, later transfer, and neither counted as a transfer or acquisition of a controlling interest.

What this means for you

Individual partners doing routine estate planning with a revocable trust

Under this now-repealed tax, moving your own minority partnership interest into your own revocable living trust for estate-planning purposes wasn't at risk of being swept into a much larger "controlling interest" taxable event just because another, unrelated co-owner happened to be separately disposing of their own interest around the same time.

Trust and estate attorneys evaluating aggregation risk for a client's real-estate-holding interest

This opinion is a useful worked example of the "acting in concert" factors (relationship, timing, few parties, shared contract terms, side agreements) applied to rule OUT aggregation -- helpful for identifying what facts would need to be different (a family relationship, coordinated negotiation, a joint agreement) before aggregation risk becomes real.

Real estate partnerships watching for controlling-interest thresholds among co-owners

The opinion is a reminder that the 50%-or-more controlling-interest threshold is tested per independent transaction, not by simply adding up all ownership changes happening across an entity in a given window -- genuine independence between transferors (or transferees) breaks the aggregation chain.

Common questions

Q: Does this acting-in-concert aggregation rule still matter today?
A: Not under this specific tax -- it was repealed for transfers on or after June 15, 1996. The "acting in concert" concept has analogs in other New York transfer taxes (the opinion itself cross-references the Real Estate Transfer Tax regulations), but this specific gains-tax application no longer applies.

Q: What would have made the two transactions "acting in concert" instead?
A: A relationship where one party controlled or influenced the other (like affiliated corporations), or enough coordination in timing, terms, or a side agreement that the transactions looked like a single, jointly planned transfer rather than two independent parties each pursuing their own unrelated goals.

Q: Why did it matter that the transactions might occur within three years of each other?
A: Because the gains-tax aggregation rules can combine successive acquisitions of an entity's interests within a three-year window -- but only if the parties involved are found to be acting in concert; mere proximity in time alone, without a relationship or coordination, isn't enough.

Q: Can another partner in a similar situation 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, and this "no aggregation" conclusion depended on the specific lack of relationship and coordination between the client and the deceased shareholder's estate.

Citations and references

Statutes and regulations:

• former Tax Law § 1440.7 (definition of "transfer of real property," including the transfer or acquisition of a controlling interest in an entity with an interest in real property)
• former Tax Law § 1440.2 (defines "controlling interest": 50% or more of voting stock for a corporation, or 50% or more of capital/profits/beneficial interest for a partnership or other entity)
• former 20 NYCRR § 590.44(a) (a controlling-interest acquisition in a partnership, association, trust, or other entity occurs when a person or group acting in concert acquires 50% or more of the capital, profits, or beneficial interest)
• former 20 NYCRR § 590.45(b) ("acting in concert" requires a controlling relationship between parties, or unity in negotiating and consummating a transfer that supports treating them as a single entity; factors include timing, number of purchasers, shared contract terms, and side agreements; independent acquisitions/transfers are treated separately, supported by affidavits of independence)
• former 20 NYCRR § 575.6 (the Real Estate Transfer Tax regulations' analogous "acting in concert" treatment, cited by the Department as applying similarly here)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/real_prop_tran_ao_1991.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/real_property/a91_11r.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-91 (11) R
Real Property
Transfer Gains Tax
December 31, 1991

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M 911002B

On October 2, 1991, a Petition for Advisory Opinion was received from Martin J.Walzer,
Esq., 230 Park Avenue, New York, New York 10169.
The issue raised by Petitioner, Martin J. Walzer, Esq. is whether a transfer by Petitioner's
client of her partnership interest will be aggregated with transfers by an unrelated transferor in
determining whether a controlling interest is transferred for Real Property Transfer Gains Tax
purposes (hereinafter the "gains tax").
A New York general partnership ("P") owns New York City real estate which is
encumbered by a substantial mortgage. Record title to the real property is in the name of Holding
Corp., but beneficial interest is, and has been, held at all times by the partners of the partnership.
The partnership comprises the following partners holding the following percentages in
capital, profits and beneficial interest:
Holding corp. ("Corp")
Petitioner's client
Unrelated individual, but related to Corp.
Unrelated individual, but related to Corp.

40%
40%
10%
10%
100%

Petitioner's client is a woman over the age of 80. Petitioner's client intends to transfer all
her interest in P to an amendable, revocable living trust under which she and her two daughters
will be the trustees. Petitioner's client has already transferred substantially all her other assets to
the trust. The trust provides that all of the income of the trust will be payable to Petitioner's client
during her lifetime and on her death, the property will be distributed to her issue. Since the trust is
amendable and revocable and provides for all the income to go to Petitioner's client, there are no
gift tax consequences and, in fact, for federal income tax purposes, since Petitioner's client is a
trustee, the trust will file income tax returns under the same tax ID number as Petitioner's client,
i.e., Petitioner's clients', social security number.
The sole shareholder of Corp., S, recently died and his estate now owns all of the stock in
Corp. S's estate has advised Petitioner's client that it may be necessary for S's estate to sell the
estate's interest in Corp., and if there is no sale, the interest will be distributed in accordance with

TP-9 (9/88)

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TSB-A-91 (11) R
Real Property
Transfer Gains Tax
December 31, 1991

S's will. This would probably occur within three years of the transfer to be made by Petitioner's
client.
S and Petitioner's client are not related. Moreover, Petitioner's client has no interest in
Corp. and Corp. and Petitioner's client have each held their 40% interest in P for a substantial
number of years. Neither Petitioner's client nor her trust will purchase S's interest in Corp.
Section 1440.7 of the Tax Law defines the term "transfer of real property", in part, to
mean the transfer or acquisition of a controlling interest in any entity with an interest in real
property.
Section 1440.2 of the Tax Law provides as follows:
2.
"Controlling interest" means (i) in the case of a corporation, either
fifty percent or more if the total combined voting power of all classes of stock of
such corporation, or fifty percent or more of the capital, profits or beneficial
interest in such voting stock of such corporation, and (ii) in the case of a
partnership, association, trust or other entity. fifty percent of more of the capital.
profits or beneficial interest in such partnership, association, trust or other entity.
(emphasis added)
Section 590.44 of the Gains Tax Regulations provides, in pertinent part, as follows:
(a)
Question: How is the phrase "acquisition of a controlling interest in
an entity with an interest in real property" applied.
Answer: . . . for purposes of the gains tax . . . In the case of a partnership,
association, trust or other entity, the acquisition occurs when a group of persons,
acting in concert, acquires a total of 50 percent or more of the capital, profits or
beneficial interest in such entity. (emphasis added)
Section 590.45 of the Gains Tax Regulations provides, in part, as follows:
(b)

Question: When is a group of persons acting in concert?

Answer: When the various purchasers have a relationship such that one
purchaser influences or controls the actions of another. For example, if a parent
and a wholly owned subsidiary each purchase a 25 percent interest in an entity, the
two corporations will be considered to have acted in concert to acquire a
controlling interest (i.e.. 50 percent) in the entity.

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TSB-A-91 (11) R
Real Property
Transfer Gains Tax
December 31, 1991

Where the individuals or entities are not commonly controlled or owned
persons will be treated as acting, in concert only when the unity with which the
purchasers have negotiated and will consummate the transfer of ownership
interests supports a finding that they are acting as a single entity. If the acquisitions
are completely independent, each purchaser buying without regard to the identity
of other purchasers, then the acquisition will be treated as separate acquisitions.
The transferees must provide affidavits swearing that they acquisitions are
independent of each other.
Factors that will indicate whether persons are acting in concert include the
following:
(1)

The acquisitions are closely related in time.

(2)

There are few purchasers.

(3)

The contracts to purchase contain mutual terms.

(4)
The purchasers have entered into an agreement in addition to the
purchase contract binding themselves to a course of action with respect to the
acquisition. (emphasis added)
Although the above regulation only sets forth the criteria of "acting in concert" for
transferees, the criteria concerning "acting in concert" also applies to transferors. (See Section
575.6 of the Transfer Tax Regulations for similar treatment for transfer tax purposes.)
Accordingly, pursuant to Sections 590.44 and 590.45 of the Gains Tax Regulations, since
Petitioner's client will transfer only a 40% interest in P and Petitioner's client and S are unrelated,
Petitioner's client will not be deemed to have transferred or acted in concert to transfer a
controlling interest pursuant to Sections 1440.2 and 1440.7 of the Tax Law. In addition, since the
trust will only acquire a 40% in P from Petitioner's client and neither Petitioner's client nor the
trust will acquire S's interest, pursuant to Sections 1440.2 and 1440.7 of the Tax Law the trust will
not be deemed to have acquired a controlling interest.

DATED: December 31, 1991

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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