NY TSB-A-94(3)C Corporation Tax 1994-01-19

How does a cooperative housing corporation value the real property it owns for purposes of the Article 9-A capital base?

Short answer: At fair market value -- but the actual value is a factual question. For the Article 9-A capital base, a cooperative housing corporation (defined in IRC section 216) is taxed under section 210.1(b) at four-tenths of a mill per dollar of its business and investment capital allocated to New York, and under section 210.2 real property in that capital is valued at fair market value. Fair market value (20 NYCRR 3-4.5) is the price a willing seller and willing buyer, neither compelled, would agree to; no single rule fits every parcel. So the determination of fair market value is a factual matter that cannot be decided in an advisory opinion. The taxpayer should look at the appropriate indicators relating to the property to determine its fair market value.

Disclaimer: This is an official New York State Department of Taxation and Finance Advisory Opinion (TSB-A), issued by the Office of Counsel at a taxpayer's request. It is limited to the facts set forth in it and binds the Department only with respect to the petitioner to whom it was issued, and only if that petitioner fully and accurately described all relevant facts; another taxpayer cannot rely on it. It reflects the law, regulations, and Department policy in effect when issued and may since have changed. Taxpayer-identifying details are redacted. New York State and local sales taxes are administered centrally by the Department. This summary is informational only and is not legal or tax advice. Consult a licensed New York tax professional about your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

Robert B. Serikstad, CPA asked how a cooperative housing corporation (as defined in IRC section 216) should value the real property it owns for the Article 9-A capital base.

Value it at fair market value -- but what that value is, is a question of fact. For the capital base, section 210.1(b) taxes a cooperative housing corporation at four-tenths of a mill per dollar of its business and investment capital allocated to New York. Section 210.2 says business and investment capital is the average value of the included assets (less certain liabilities), and that real property is valued at fair market value. Fair market value (20 NYCRR 3-4.5) is the price at which a willing seller, not compelled to sell, and a willing buyer, not compelled to buy, would deal -- and no one rule can value all real property, since each parcel is unique.

Because of that, the determination of fair market value is a factual matter that cannot be made in an advisory opinion (which only applies the law to a specified set of facts). The Department's guidance: the taxpayer should look at the appropriate indicators relating to the property to determine its fair market value. (This is the companion to TSB-A-94(2)C, which addressed the same question where only the assessed valuation was known.)

What this means for you

Co-op housing real property enters the capital base at fair market value

For the Article 9-A capital base, real property is valued at fair market value -- not book value or original cost.

Fair market value is fact-specific, not formula-driven

There is no single rule; each parcel is valued on its own circumstances, using the willing-buyer/willing-seller standard.

The Department won't fix a value in an advisory opinion

Valuation is a factual question for the taxpayer (and, if audited, for the audit). Use appropriate indicators of the property's value.

Common questions

Q: How do I value my cooperative housing corporation's real property for the capital base?
A: At fair market value -- the willing-buyer/willing-seller price -- using the appropriate indicators for that specific property.

Q: Can the Department tell me the exact value in an advisory opinion?
A: No. Fair market value is a factual matter that an advisory opinion cannot decide.

Q: Is book value or assessed value the answer?
A: No single figure controls. Fair market value is the standard; assessed or book figures may be indicators but are not automatically the value (see TSB-A-94(2)C).

Citations and references

Statutes, regulations, and authorities:
- Tax Law section 210.1(b) (capital-base rate for a cooperative housing corporation as defined in IRC section 216)
- Tax Law section 210.2 (business and investment capital; real property valued at fair market value)
- 20 NYCRR 3-4.5 (fair market value -- willing seller, willing buyer)
- IRC section 216 (cooperative housing corporation)

Source

Original ruling text

New York State Department of Taxation and Finance
TSB-A-94 (3) C
Corporation Tax
January 19, 1994

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. C921228A

On December 28, 1992, a Petition for Advisory Opinion was received from Robert B.
Serikstad, CPA, c/o Marin & Montanye, 14 Vanderventer Avenue, Port Washington, New York
11050.
The issue raised by Petitioner, Robert B. Serikstad, CPA, is how to value the real property
owned by a cooperative housing corporation as defined in section 216 of the Internal Revenue Code.
Section 210.1(b) of Article 9-A of the Tax Law provides that, for purposes of computing the
capital base, in the case of a cooperative housing corporation as defined in section 216 of the Internal
Revenue Code, the applicable rate is four-tenths of a mill for each dollar of the taxpayer's total
business and investment capital or portion thereof allocated to New York.
Section 210.2 of the Tax Law provides that business and investment capital is determined
by taking the average value of assets included therein (less certain liabilities) and for such purposes,
real property is valued at fair market value.
Fair market value is defined in section 3-4.5 of the Business Corporation Franchise Tax
Regulations as the price at which a willing seller, not compelled to sell, will sell and a willing
purchaser, not compelled to buy, will buy. No one rule can be used to determine the fair market
value of all real property. Each parcel is unique and the valuation must be fixed in accordance with
the particular requirements and circumstances of a particular situation. (See Technical Services
Memorandum TSB-M-85(18.1)C issued December 2, 1993, revoking Technical Services
Memorandum TSB-M-85(18)C issued November 1, 1985.)
Accordingly, the determination of the fair market value of real property is a factual matter
not susceptible of determination in an Advisory Opinion. An Advisory Opinion merely sets forth the
applicability of pertinent statutory and regulatory provisions to a "specified set of facts."Tax Law,
§l71.Twenty-fourth; 20 NYCRR 2376.1(a).
Herein, for purposes of determining the fair market value of real property of a cooperative
housing corporation when computing the taxable capital base, the taxpayer should look at the
appropriate indicators related to the real property to determine the fair market value of such property.

DATED: January 19, 1994

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.
TP-9 (9/88)