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?

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 It was repealed for any transfer occurring on or after June 15, 1996.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 1993 opinion is preserved here for historical and research value, not as current law.

Five families -- George Murian, the Cafarellis, the Spagnolis, the Rosses, and the Lasalandras (with one family owning two of the six units) -- owned six semi-attached condominium homes in Bronx County under New York's condominium law (Article 9-B of the Real Property Law). They wanted to leave the condominium structure entirely and simply own their individual lots and homes in fee simple. Converting out of a condominium requires first recording a "Withdrawal of Property" document; the moment that's recorded, all the affected homes become owned, BY OPERATION OF LAW, by all the former unit owners together as tenants-in-common -- even though everyone understood and agreed that beneficial ownership of each specific home stayed with the family that already lived there. Immediately afterward, each home would be deeded back to that same family.

The gains tax's aggregation rule generally requires combining consideration when SEVERAL co-owners of one parcel (as tenants-in-common, joint tenants, or by the entirety) transfer their interests, once the $1 million threshold is crossed (former 20 NYCRR § 590.43(d)) -- and normally, converting from joint tenant-in-common ownership to individual ownership is itself a taxable event to the extent it changes anyone's beneficial percentage. The Department worked through this in two conceptual steps, drawing on its own prior Board of Managers of Powell's Cove View Condominium opinion: (1) the transfer of the CONDOMINIUM COMMON AREA to all the owners as tenants-in-common (the automatic, by-operation-of-law step) was a mere change of form with no change in beneficial ownership, so it wasn't taxed; and (2) the subsequent transfer OUT of tenants-in-common status, back to individual ownership, would normally be taxable to the extent beneficial interests changed -- BUT here, because each family's beneficial ownership of its own specific home had continuously stayed the same throughout (the tenants-in-common status was only a fleeting legal formality, not a real change), there was, in substance, no change in beneficial interest at any point. The Department concluded the entire sequence -- from condominium form, through the momentary tenants-in-common step, back to individual fee-simple ownership -- was a mere change of identity or form of ownership, fully exempt from the gains tax, with no aggregation issue arising since nothing was actually being sold or reallocated among the families.

What this means for you

Groups of condominium owners converting to fee-simple or townhouse-style ownership

Under this now-repealed tax, the technical, momentary "everyone owns everything together" step required by New York's condominium-withdrawal process didn't itself trigger tax, and neither did the follow-up deeds back to each owner's own specific unit -- as long as beneficial ownership of each individual home never actually changed hands between the families throughout the process.

Homeowners associations and condo boards considering dissolution

This ruling, alongside the Powell's Cove precedent it cites, is a useful two-part framework for analyzing a condominium dissolution: the common-area transfer to tenants-in-common (usually exempt) and the subsequent individual-ownership transfers (taxable only to the extent they actually redistribute beneficial ownership among the former unit owners).

Real estate attorneys structuring condominium-to-fee conversions

The key factual showing here -- documenting, in the transaction's structure and agreements, that beneficial ownership of each home stayed continuously with the same family despite the momentary shared legal title -- was what let the whole sequence qualify as a mere change of form rather than triggering the aggregation and taxable-reallocation rules that would otherwise apply to co-owners splitting up jointly held property.

Common questions

Q: Does this condominium-conversion analysis still matter today?
A: Not under this specific tax -- it was repealed for transfers on or after June 15, 1996. Other current NY taxes on real property transfers, like the Real Estate Transfer Tax, apply their own separate rules to condominium conversions.

Q: Why didn't the aggregation rule for multiple co-owners apply here?
A: Because aggregation matters when there's an actual sale or reallocation of value among co-owners crossing the $1 million threshold. Since no family's beneficial ownership of its own home ever really changed, there was nothing to aggregate -- the whole sequence was treated as a non-event for gains-tax purposes.

Q: Would the answer have been different if the deal actually reshuffled which family got which home?
A: Yes, based on the Department's own reasoning and its citation to the Powell's Cove precedent -- if the post-withdrawal deeds had given any family a different economic share or a different home than what they beneficially owned before, that portion of the change would have been taxable (and if the $1 million aggregate threshold was met, aggregation among the co-owners would apply).

Q: Can another group of condominium owners rely on this specific ruling for their own conversion?
A: No, apart from the repeal -- an Advisory Opinion binds the Department only as to the petitioners and facts presented, and this kind of analysis depends heavily on proving continuous, unchanged beneficial ownership throughout the conversion.

Citations and references

Statutes and regulations:

• former Tax Law § 1440.1 (definition of "consideration": price paid or required to be paid for real property or an interest therein)
• former Tax Law § 1440.7 (definition of "transfer of real property," including a transfer by partition)
• former Tax Law § 1441 (imposition of the gains tax at 10% of gain from real property transfers)
• former Tax Law § 1443.1 (the $1 million exemption)
• former Tax Law § 1443.5 (exemption for a transfer that is a mere change of identity or form of ownership or organization, with no change in beneficial interest)
• former 20 NYCRR § 590.43(d) (consideration paid to each of several co-owner transferors of one parcel must be aggregated to test the $1 million threshold; once met, each transferor is separately liable based on the consideration received)
• former 20 NYCRR § 590.50 (a transfer by a corporation to shareholders holding real property as tenants-in-common in the same pro rata share is a mere change of identity or form of ownership)

Prior opinions cited:

• Board of Managers of Powell's Cove View Condominium, TSB-A-93(8)-R (June 14, 1993) (transfer of a condominium's common area to the unit owners as tenants-in-common upon termination of the condominium declaration was a mere change of form; the SUBSEQUENT transfer of those tenants-in-common interests was taxable to the extent it changed beneficial ownership, with consideration aggregated among the co-owners to test the $1 million threshold)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/real_prop_tran_ao_1993.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/real_property/a93_21r.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-93 (21) R
Real Property
Transfer Gains Tax
December 29, 1993

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M930728A

On July 28, 1993, a Petition for Advisory Opinion was received from George Murian, 2312
Demeyer Street, Bronx, NY 10469, Vincent and Linda Cafarelli, 2310 Demeyer Street, Bronx, NY
10469, Alfonso and Diane Spagnoli, 2316 Demeyer Street, Bronx, NY 10469, Frank and Angela
Ross, 2318 Demeyer Street, Bronx, NY 10469, and Peter and Flavia Lasalandra, 104 Rollingwood
Drive, Stamford, CT.
The issue raised by Petitioners, George Murian, Vincent and Linda Cafarelli, Alfonso and
Diane Spagnoli, Frank and Angela Ross and Peter and Flavia Lasalandra, is whether the
consideration received by each Petitioner for their houses following the withdrawal of the property
from a condominium form of ownership must be aggregated for purposes of the Real Property
Transfer Gains Tax (hereinafter the "gains tax").
Petitioners premises consist of six semi-attached condominium units in Bronx County, New
York. The units are owned by five families. Two of the units are owned by the same family. The
intentions of Petitioners is to remove the property from condominium form of ownership and to have
each respective owner of the condominium unit own the lot and building in fee simple.
In order to effectuate the transaction, Petitioners will first record a document entitled
"Withdrawal of Property from Article 9-B of the Real Property Law of the State of New York."When
the document is recorded, all six homes will, by operation of law, be owned by Petitioners as tenants­
in common. However, while by operation of law bare legal title will be vested in Petitioners as
tenants-in-common, it is understood and agreed to by and between Petitioners that beneficial
ownership of each home will continue to vested solely in each individual Petitioner. Simultaneously,
Petitioners will convey each of the lots and homes to the five families. The deeds are merely
intended to transfer title to each of the homes to the same owner who now owns the respective
dwellings in a condominium form of ownership.
Pursuant to Sections 1441 and 1443.1 of the Tax Law and Section 590.1 of the Gains Tax
Regulations the gains tax is a ten percent tax on the gain derived from the transfer of real property,
which includes the acquisition or transfer of a controlling interest in any entity with an interest in real
property, where the property is located in New York State and where the consideration for the
transfer is one million dollars or more.
Section 1440.7 of the Tax Law defines the term "transfer of real property", in part, to mean
the transfer or transfers of any interest in real property by any method. This would include a transfer
upon liquidation or a transfer by partition.
Section 1440.1 of the Tax Law defines the term "consideration", in pertinent part, to mean
the price paid or required to be paid for real property or any interest therein, less any customary
brokerage fees related to the transfer if paid by the transferor. . .whether expressed in a deed

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TSB-A-93 (21) R
Real Property
Transfer Gains Tax
December 29, 1993
and whether paid or required to be paid by money, property, or any other thing of value.
Section 1443 of the Tax Law provides, in part, as follows:
Sec. 1443. Exemptions.--A total or partial exemption shall be allowed
in the following cases:
*
*
*
5.
If a transfer of real property, however effected, consists of
a mere change of identity or form of ownership or organization, where there is no change in
beneficial interest.
Section 590.43 of the Gains Tax Regulations provides, in part, as follows:
590.43 Aggregation of partial or successive transfers of real property. [Tax Law, § 1440(7)]

Question: How is the aggregation clause of section 1440(7) of the Tax Law, which
states in part:
" . . . Transfer of real property shall also include partial or successive
transfers, unless the transferor or transferors furnish a sworn statement that such
transfers are not pursuant to an agreement or plan to effectuate by partial or
successive transfers a transfer which would otherwise be included in the coverage of
this article, and the transfer of real property by tenants in common, joint tenants or
tenants by the entirety, provided that the subdividing of real property and the sale of
such subdivided parcels improved with residences to transferees for use as their
residences, other than transfers pursuant to a cooperative or condominium plan, shall
not be deemed a single transfer of real property."
applied in the case of:
*
*
*
(d) Several transferors, owning one parcel of land either as joint tenants, tenants in common,
or as tenants by the entirety, one transferee?
Answer: The statute specifically requires that the consideration paid to each such transferor
be aggregated with the consideration paid to the other transferors in determining whether the
consideration is $1 million or more. Once the million-dollar threshold is met, each transferor is liable
for payment of tax based on the consideration he receives, less his original purchase price for the
property.

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TSB-A-93 (21) R
Real Property
Transfer Gains Tax
December 29, 1993
Section 590.50 of the Gains Tax Regulations provides, in part, as follows: 590.50
Mere change of identity. [Tax Law, § 1443(5)]
(a) Question: Section 1443(5) of the Tax Law exempts a transfer from the
gains tax to the extent it "consists of a mere change of identity or form of ownership
or organization where there is no change in beneficial interest." Does this exempt:
*
*
*
(3) The transfer of real property by a corporation to its shareholders, who will
hold the real property as tenants-in-common in the same pro rata share as they own
the corporation?
Answer: Yes. This is a mere change of identity or form of ownership or
organization. The shareholders will have a carry-over original purchase price in the
real property.
In Board of Managers of Powell's Cove View Condominium, Adv Op Comm T&F, June 14,
1993, TSB-A-93(8)R the Commissioner advised that the transfer by Petitioner of the common area
to the owners resulting from the termination of the condominium declaration was not subject to gains
tax since the transfer of the property to the owners as tenants-in-common constituted a mere change
of identity or form of ownership or organization since there is no change in beneficial ownership.
However, the Commissioner advised that pursuant to Sections 1440.7 and 1443.5 of the Tax Law
and Section 590.50 of the Gains Tax Regulations the subsequent transfer by the owners of their
tenants-in-common interest was subject to the gains tax to the extent that the transfers resulted in a
change in beneficial interest. The Commissioner further advised that pursuant to Section 590,43(d)
of the Gains Tax Regulations the consideration paid to each owner for their interest in the real
property must be aggregated with the consideration paid to the other owners for their interest in
determining whether the consideration for the transfer is one million dollars or more, but that, once
the one million dollar threshold was met that each owner was liable for payment of the gains tax
based on the consideration he receives, less his original purchase price for the property.
Under the condominium form of ownership the lots which represent the common area of the
condominium, were commonly owned by Petitioners. Accordingly, pursuant to Sections 1440.7 and
1443.5 of the Tax Law, Section 590.50 of the Gains Tax Regulations and Board of Managers of
Powell's Cove View Condominium, supra, the transfer of real property by Petitioners of the lots
which represent the common area as a result of the withdrawal of the property from the
condominium form of ownership will not be subject to the gains tax since the transfer of such lots
to Petitioners as tenants-in-common will not result in a change in the beneficial interest of such lots.

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Real Property
Transfer Gains Tax
December 29, 1993
As for the transfer of the lots from tenant-in-common ownership to the individual Petitioners,
pursuant to Sections 1440.7 and 1443.5 of the Tax Law such transfer will be subject to the gains tax,
to the extent that the transfer of the lots results in a change in beneficial interest. Pursuant to Section
1440.1 of the Tax Law and Board of Managers of Powell's Cove View Condominium, supra, the
consideration for the transfer of an individual Petitioner's tenant-in-common interest is equal to the
fair market value of the interest in real property received by each individual Petitioner as a result of
the transfer. Pursuant to Section 590.43(d) of the Gains Tax Regulations and Board of Managers of
Powell's Cove View Condominium, supra, the consideration paid to each individual Petitioner for
their interest in the real property must be aggregated with the consideration paid to the other
Petitioners for their interests in determining whether the consideration for the transfer is one million
dollars or more. However, once the one million dollar threshold is met, each individual Petitioner
is liable for payment of gains tax based on the consideration he receives, less his original purchase
price for the property.
Concerning the transfers of the homes under the aforementioned transaction, it is recognized
that beneficial ownership of each home is continuously vested in each Petitioner without regard to
bare legal title being vested with Petitioners as tenants-in-common for a moment in time. Therefore,
pursuant to Section 1443.5 of the Tax Law and Section 590.50 of the Gains Tax Regulations the
transfers by Petitioners of their homes, including any commonly owned walls, roofs and overhangs,
as a result of the withdrawal of the property from its condominium form of ownership to Petitioners
as tenants-in-common and the transfer of their homes by Petitioners as tenants-in-common back to
the respective Petitioner's which owned the homes in condominium form will not be subject to the
gains tax since each transfer constitutes a mere change of identity or form of ownership or
organization as there is no change in the beneficial interest of the homes.

DATED: December 29, 1993

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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