§ 23-03 Imposition of Tax.
RCNY § 23-03
(a)General. The tax is imposed on: (1) each deed at the time of delivery by a grantor to a grantee when the consideration for the real property and any improvement thereon (whether or not included in the same deed) exceeds $25,000, (2) after July 12, 1986, when the consideration for the transfer exceeds $25,000, (i) on each instrument or transaction (unless evidenced by a deed otherwise subject to tax) at the time of the transfer, whereby any controlling economic interest in real property is transferred by a grantor to a grantee, (ii) on initial transfers of shares of stock in a cooperative housing corporation by the cooperative housing corporation or sponsor, and (iii) on subsequent transfers (resales) of cooperative housing corporation stock (except that no subsequent transfer (resale) of shares of stock in a cooperative housing corporation made before August 1, 1989 shall be taxable unless the owner held the shares in connection with, incidental to or in furtherance of a trade, business, profession, occupation or commercial activity engaged in or conducted by him or it) and (3) On or after August 1, 1989, when the consideration for the transfer exceeds $25,000, on each transfer of shares of stock in a corporation (other than a cooperative housing corporation), or interest in a partnership, association, trust or other entity, formed for the purpose of cooperative ownership of real property, in connection with the grant or transfer of a proprietary leasehold. The tax applies to each such deed, instrument or transaction evidencing the conveyance of real property, or an economic interest therein, which is situated in whole or in part within the City of New York, unless the deed, instrument or transaction is expressly exempt by the law. Anything to the contrary notwithstanding, after July 12, 1986, in the case of a transfer of real property or an economic interest therein in complete or partial liquidation of a corporation, partnership, association, trust or other entity, the tax imposed shall be measured by (i) the consideration for such conveyance or transfer, or (ii) the value of the real property or economic interest therein, whichever is greater. Conveyances or transfers of controlling economic interests in real property or transfers of shares of stock in a cooperative housing corporation made pursuant to a written contract (including option contracts, but not rights of first refusal) entered into prior to July 31, 1981, are not subject to tax.
(b)Rates of tax on deeds. The tax is computed: (1) at the rate of 1/2 of 1% of the net consideration with respect to conveyances made before July 1, 1971, or made in performance of a contract therefor executed before such date; (2) at the rate of 1% of the net consideration with respect to: (i) conveyances made on or after July 1, 1971 and before February 1, 1982, or made in performance of a contract therefor executed during such period, (ii) conveyances made on or after February 1, 1982 and before July 1, 1982 of 1-, 2- or 3-family houses and individual residential condominium units, (iii) conveyances made on or after February 1, 1982 and before July 1, 1982 where the consideration is less than $500,000 (other than grants, assignments or surrenders of leasehold interests in real property taxable under paragraph (3) below); (3) at the rate of 1% of the consideration with respect to grants, assignments or surrenders of leasehold interests in real property made on or after February 1, 1982 and before July 1, 1982 where the consideration is $500,000 or more, provided, however, that for purposes of this paragraph (3) the amount subject to tax in the case of a grant of a leasehold interest in real property shall be only such amount as is not considered rent for purposes of the New York City Commercial Rent or Occupancy Tax (Chapter 7 of Title 11 of the New York City Administrative Code); (4) at the rate of 2% of the consideration with respect to all other conveyances made on or after February 1, 1982 and before July 1, 1982, except that for purposes of this paragraph, (4), where the consideration includes the amount of any mortgage or other lien or encumbrance on the real property or interest therein which existed before the delivery of the deed and remains thereon after the delivery of the deed, the portion of the consideration ascribable to such mortgage, lien or encumbrance shall be taxed at the rate of 1%, and only the balance of such consideration shall be taxed at the rate of 2%; (5) at the rate of 1% of the consideration with respect to conveyances made on or after July 1, 1982 and before August 1, 1989 of 1-, 2- or 3-family houses and individual residential condominium units; (6) at the rate of 1% of the consideration with respect to conveyances made on or after July 1, 1982 and before August 1, 1989 where the consideration is less than $500,000 (other than grants, assignments or surrenders of leasehold interests in real property taxable as hereafter provided); (7) (i) at the rate of 1% of the consideration with respect to a grant, assignment or surrender, made on or after July 1, 1982 and before August 1, 1989 of a leasehold interest in a 1-, 2- or 3-family house or an individual dwelling unit in a dwelling which is to be occupied or is occupied as the residence or home of four or more families living independently of each other; (ii) at the rate of 1% of the consideration with respect to all other grants, assignments or surrenders of leasehold interests in real property made on or after July 1, 1982 and before August 1, 1989 where the consideration is less than $500,000; or (iii) at the rate of 2% of the consideration with respect to all other grants, assignments or surrenders of leasehold interests in real property made on or after July 1, 1982 and before August 1, 1989 where the consideration is $500,000 or more; (iv) provided, however, that for purposes of subparagraphs (i), (ii) and (iii) of this paragraph (7), the amount subject to tax in the case of a grant of a leasehold interest shall be only such amount as is not considered rent for purposes of the New York City Commercial Rent or Occupancy Tax (Chapter 7 of Title 11 of the New York City Administrative Code); (8) at the rate of 2% of the consideration with respect to all other conveyances made on or after July 1, 1982 and before August 1, 1989; (9) at the rate of 1% of the consideration with respect to conveyances of 1-, 2- or 3-family houses or individual condominium units (other than grants, assignments or surrenders of leasehold interests as hereafter provided) made on or after August 1, 1989 where the consideration is $500,000 or less, and at the rate of 1.425% of the consideration with respect to such conveyances made on or after August 1, 1989 where the consideration is more than $500,000. For purposes of this paragraph (9), an individual condominium unit that is used for residential purposes shall be presumed to be a residential condominium unit, unless such residential use is de minimis; provided, however, an individual condominium unit that is required to be used in whole or part as a hotel room by the contract of sale or other document determining the conditions under which such condominium is transferred shall be presumed not to be a residential condominium unit. To illustrate: Illustration (i): X owns an individual condominium unit in New York City. X leases the unit to Y, who uses the unit solely as a residence. During the term of the lease, X sells the unit to Z for $600,000. The unit is deemed a residential condominium unit, and the tax is calculated as follows: 1.425% of $600,000, for a tax due of $8,550. Although the unit produced income for X, the unit was used for residential purposes. Illustration (ii): An artist owns an individual condominium unit in New York City worth $600,000. The artist both resides and maintains a studio in the unit. When the artist sells the unit, the transfer tax will be calculated as follows: 1.425% of $600,000, for a tax due of $8,550. The unit is deemed a residential condominium unit because the unit was used for residential purposes.
(10)at the rate of 1.425% of the consideration with respect to all other conveyances (other than grants, assignments or surrenders of leasehold interests taxable as hereafter provided) made on or after August 1, 1989 where the consideration is $500,000 or less, and at the rate of 2.625% of the consideration with respect to such conveyances made on or after August 1, 1989 where the consideration is more than $500,000; To illustrate: Illustration (i): An artist owns an individual condominium unit in New York City that is located in a building classified as class two property pursuant to section 1802 of the Real Property Tax Law, and which the artist uses as a studio. Although the artist maintains a separate residence, the artist keeps a bed in the studio and spends twelve nights per year in the studio. When the artist sells the unit for $300,000, the tax will be calculated as follows: 1.425% of $300,000, for a tax due of $4,275. Since the residential use of the unit is de minimis, the unit is not deemed a residential condominium unit. Illustration (ii): A physician owns an individual condominium unit in New York City which is used only as the physician's office. When the physician sells the unit for $800,000, the tax will be calculated as follows: 2.625% of $800,000, for a tax due of $21,000. Since the unit is not used for residential purposes, it is not deemed a residential condominium unit. Illustration (iii): X purchases a condominium unit in a building consisting of 150 separate condominium units. Each unit consists of bedroom(s), sitting areas or rooms and kitchen facilities. Under the terms of sale, X (or X's designee) is entitled to occupy the unit for their own purposes for a limited period in each calendar year. When not occupied by the purchaser (or their designee), the condominium unit must be made available for rental as a transient hotel accommodation. The Certificate of Occupancy for floors containing the condominium units will state "hotel." The cost of X's condominium unit is $1 million. The tax due will be calculated as follows: 2.65% of $1,000,000 for a tax due of $26,250. The unit is not considered an individual residential condominium unit for purposes of calculating the tax.
(11)at the rate of 1% of the consideration with respect to a grant, assignment or surrender made on or after August 1, 1989 of a leasehold interest in a 1-, 2- or 3-family house or an individual dwelling unit in a dwelling that is to be occupied or is occupied as the residence or home of four or more families living independently of each other where the consideration is $500,000 or less, and at the rate of 1.425% of the consideration with respect to a grant, assignment or surrender of such a leasehold interest made on or after August 1, 1989 where the consideration is more than $500,000; (12) at the rate of 1.425% of the consideration with respect to a grant, assignment or surrender of a leasehold interest in any other real property made on or after August 1, 1989 where the consideration is $500,000 or less, and at the rate of 2.625% of the consideration with respect to a grant, assignment or surrender of such a leasehold interest made on or after August 1, 1989 where the consideration is more than $500,000; (13) provided that for purposes of paragraphs (11) and (12) of this subdivision (b), the amount subject to tax in the case of a grant of a leasehold interest shall be only such amount as is not considered rent for purposes of the New York City Commercial Rent or Occupancy Tax (Chapter 7 of Title 11 of the Administrative Code).
(c)Rates of tax on transfers of economic interests. The tax is computed: (1) at the rate of 1% of the consideration with respect to transfers of economic interests in real property made on or after July 13, 1986 and before August 1, 1989 where the real property the economic interest in which is transferred is a 1-, 2- or 3-family house, an individual cooperative apartment, an individual residential condominium unit or an individual dwelling unit in a dwelling which is to be occupied or is occupied as the residence or home of four or more families living independently of each other, or where the consideration for the transfer is less than $500,000; (2) at the rate of 2% of the consideration with respect to all other transfers of economic interests in real property made on or after July 13, 1986 and before August 1, 1989; (3) at the rate of 1% of the consideration with respect to transfers made on or after August 1, 1989 of economic interests in real property in which the economic interest that is transferred is a 1-, 2- or 3-family house, an individual cooperative apartment, an individual residential condominium unit or an individual dwelling unit in a dwelling that is to be occupied or is occupied as the residence or home of four or more families living independently of each other and where the consideration is $500,000 or less, and at the rate of 1.425% of the consideration with respect to such transfers made on or after August 1, 1989 where the consideration is more than $500,000; and (4) at the rate of 1.425% of the consideration with respect to all other transfers of an economic interest in real property made on or after August 1, 1989 where the consideration is $500,000 or less, and at the rate of 2.625% of the consideration with respect to such transfers made on or after August 1, 1989 where the consideration is more than $500,000. Where the transfer of a controlling economic interest involves more than one parcel of real property, the applicable rate is determined based upon the consideration apportioned to each parcel. Example: X Corporation owns two parcels of commercial property in New York City. Building A is worth $400,000 and Building B is worth $600,000. Y, X's sole shareholder, sells his X Corporation stock, which represents his entire interest in both parcels, to Z for $1,000,000. The tax is calculated as follows: 1.425% of $400,000 (Building A) 2.625% of $600,000 (Building B). The tax due is $21,450.
(d)Conveyances subject to tax. (General.) The following are examples of situations in which the tax applies: (Any reference made to a deed or conveyance includes a transfer of an economic interest in realty.) (1) A conveyance by a defaulting mortgagor to the mortgagee. The tax is computed on the amount of the outstanding mortgage debt and unpaid accrued interest. The tax applies without regard to whether the mortgagor is personally liable for the mortgage debt or whether the mortgage is cancelled of record.
(2)Deeds given by referees, receivers, sheriffs, etc., for realty sold under foreclosure or execution. The tax is computed on the amount bid for the property, senior liens not canceled by the sale, and advertising expenses, taxes and other costs paid by the purchaser, whether the purchaser is the mortgagee, judgment creditor, or other person.
(3)A conveyance of realty from one spouse to the other pursuant to the terms of a separation agreement. In the absence of evidence establishing the consideration, it is presumed that the consideration for the conveyance, which includes the relinquishment of marital rights, is equal to the fair market value of the interest in the property conveyed.
(4)The assignment of a successful bid at a mortgage foreclosure sale. The consideration is the amount paid for the assignment.
(5)Realty distributed by a corporation in redemption for stock or by a partnership in return for the surrender of a partnership interest. Example: Example (i): A, B, C and D are equal shareholders of X Corporation. X owns two buildings in New York City. In 1990, X redeems A's shares in exchange for one of the buildings, which is unencumbered and valued at $250,000 (Parcel 1). X's other building is also unencumbered and valued at $750,000 (Parcel 2). X has no other assets. The value of A's shares is $250,000. The consideration for this transfer is the X stock owned by A. Therefore, the amount of tax due is $3,562.50 (1.425% × $250,000). If the redemption occurs on or after June 9, 1994, the transfer would be exempt as a mere change of identity or form of ownership or organization to the extent the beneficial ownership of the real property remained the same. Because A had a 25% beneficial ownership interest in Parcel 1 before the redemption and a 100% beneficial interest afterwards, the transfer of Parcel 1 to A is exempt as a mere change of identity or form of ownership or organization to the extent of 25%. Therefore only 75% of the consideration or $187,500 ($250,000 × 75%) is subject to tax. The tax is calculated by multiplying $187,500 by the applicable tax rate of 1.425% for a tax due of $2,671.88. See 19 RCNY § 23-05(b)(8). Example (ii): Assume the same facts as in example (i) above, except that, in 1990, instead of redeeming A's shares in exchange for Parcel 1, X redeems the shares of B, C, and D in exchange for Parcel 2. In this case, there are two taxable transfers. The first is the transfer by X of Parcel 2 to B, C, and D in exchange for consideration consisting of the X stock owned by B, C and D. The value of B, C, and D's shares is $750,000. The amount of tax due is $19,687.50 (2.625% × $750,000). If the transaction occurred on or after June 9, 1994, the transfer of Parcel 2 to B, C, and D in exchange for consideration consisting of the X stock owned by B, C and D would be exempt as a mere change of identity or form of ownership or organization to the extent the beneficial ownership of the real property remained the same. Because B, C and D collectively had a 75% beneficial ownership interest in Parcel 2 before the redemption (25% each) and 100% afterwards, the distribution of Parcel 2 is exempt from tax as a mere change of identity or form of ownership or organization to the extent of 75%. Therefore, only 25% of the $750,000 consideration is subject to the tax. The tax due is calculated by multiplying the taxable consideration of $187,500 (25% × $750,000) by the applicable tax rate (2.625%) for a tax due of $4,921.88. See 19 RCNY § 23-05(b)(8). The second taxable transfer is the transfer by B, C, and D of a 75% interest in Parcel 1 to A, the remaining shareholder. Since this constitutes a transfer of a controlling economic interest in Parcel 1, it is also taxable. The consideration for the transfer is a proportionate part of Parcel 2 received by B, C, and D in exchange for their X stock. B, C, and D's stock represented their 75% interest in all of the assets of X prior to the redemption. Since Parcel 1 constituted 25% of the assets of X, 25% of the consideration, or $187,500, must be apportioned to B, C, and D's interest in Parcel 1. Thus, the tax due is $2,671.88 (1.425% × $187,500).
(6)A conveyance of realty in exchange for other realty. Each transfer of realty is subject to tax. The consideration for each transfer is the fair market value of the realty and other property received in exchange for the realty conveyed.
(e)Conveyances to corporations and partnerships. (Any reference made to realty or property includes an economic interest in realty. For transfers on or after June 9, 1994, see 19 RCNY § 23-05(b)(8) for rules relating to the exemption for transactions constituting a mere change of identity or form of ownership or organization.) (1) Corporations.
(i)A conveyance of realty to a corporation in exchange for shares of its capital stock is subject to tax. The consideration for the realty is deemed to be equal in value to the greater of the fair market value of the realty conveyed or the amount of any mortgage, lien or other encumbrance on the realty.
(ii)A conveyance of realty to an existing corporation by a sole shareholder as a contribution to capital, where no additional shares of capital stock are issued in exchange, and no cash or other consideration is given, is deemed to be without consideration. However, where the realty is conveyed subject to an existing mortgage, lien or other encumbrance, there is consideration to the extent of the unpaid mortgage, lien or other encumbrance.
(iii)Notwithstanding subparagraph (ii) of this paragraph (1), a conveyance of realty to a corporation organized by the grantor for the purpose of holding or holding and operating the property is subject to tax, even where the conveyance is made some time after the issuance of the capital stock. In such event, the issuance of the stock and the conveyance of the realty are considered elements of a single transaction. The consideration for the realty is deemed to be equal in value to the greater of the fair market value of the realty conveyed or the amount of any mortgage, lien or other encumbrance on the realty.
(iv)On or after June 9, 1994, a conveyance of realty or an economic interest in realty to a corporation is exempt as a mere change of identity or form of ownership or organization to the extent the beneficial ownership of the real property remains the same, whether or not shares of stock are issued in exchange. See 19 RCNY § 23-05(b)(8).
(v)The term "partnership" shall include a subchapter K limited liability company, as defined in § 11-126 of the Administrative Code and the term "partner" or the term "member" when used in relation to a limited liability company shall include a member of a subchapter K limited liability company, unless the context requires otherwise.
(f)Multi-step conveyances. For transactions occurring prior to June 9, 1994, a series of transfers pursuant to a plan to reorganize an ownership network of real property in New York City will be treated as a direct transfer from the entity originally owning the real property or economic interest therein to the entity ultimately owning the real property or economic interest therein, and the tax will apply to the deemed direct transfer if the following factors are present: (1) the series of transfers under the plan has a fixed beginning and end; (2) the final transfer under the plan is completed within thirty days of the first transfer under the plan; (3) the plan will not result in a change in the respective percentage interests of the individuals or entities which were the owners of the network at the beginning of the plan (for this purpose, changes in the ownership of the owners themselves will not be taken into account, although such changes may be subject to tax on their own facts); and (4) the plan requires each interim holder of the real property or economic interest therein to hold such interest solely to pass on to another individual or entity. Under such a plan, each of the interim transfers will be presumed to be transfers to or from conduits. The determination of whether a conveyance falls within this subdivision (e) will be made by the Commissioner of Finance on a case by case basis after a review of all the documentation supporting such treatment. To illustrate: X Corporation owns unencumbered real property in New York City. X is owned 50% by A and 50% by B. Pursuant to a plan to be completed within 10 days, X is liquidated and its realty is distributed to A and B on January 1, 1990. The realty is then immediately conveyed to newly formed Y Partnership, in which A and B each take a 50% partnership interest. The two steps will be treated as a direct transfer of the realty from X to Y. The consideration for the realty (the partnership interests received by A and B) is presumed to be equal to the fair market value of the realty conveyed. See § 23-05(b)(8) of these rules for rules governing the exemption from tax of transactions on or after June 9, 1994 qualifying as mere changes of identity or form of ownership or organization.
(g)Liquidations.
(1)General.
(h)Transfers relating to cooperatives.
(7)The following examples illustrate the application of paragraph (2) of this subdivision only to transfers made before August 1, 1989: Example 1: An individual purchases stock from a cooperative housing corporation or cooperative plan sponsor which is allocated to an occupied apartment. Thereafter the individual sells this stock together with his proprietary leasehold. The transfer tax applies to each transfer. The initial transfer by the cooperative housing corporation or sponsor is subject to the transfer tax. In addition, the subsequent transfer by the individual who has subleased the apartment is a transfer of stock held in connection with a commercial activity and is, therefore, also subject to the transfer tax. Example 2: An individual purchases stock from a cooperative housing cooperation or sponsor as an "insider" and occupies the apartment unit allocated to the stock for residential purposes. The individual then transfers the stock along with the proprietary leasehold to another. The initial transfer from the cooperative housing corporation or sponsor to the individual "insider" is subject to the transfer tax. The sale by the resident individual "insider" to another is not subject to the transfer tax. Example 3: A commercial artist owns stock in a cooperative housing corporation and holds a proprietary leasehold on an apartment therein. The artist both resides and maintains a studio in this apartment. The sale of this stock is subject to the transfer tax. Although the artist resides in the apartment, the stock was nevertheless held in connection with his business. The tax is based on the total amount paid for the stock. No apportionment of the consideration for the portion of the apartment used for residential purposes is permitted. For transfers made before August 1, 1989, in determining whether a cooperative apartment used for residential purposes is also used for business purposes, the Commissioner of Finance will consider, among other factors, whether a home office expense deduction has been claimed for federal income tax purposes and whether the premises have been held out to clients or customers as a place of business within the 24 months preceding the sale. Example 4: (A) An individual owns stock in a cooperative housing corporation and holds the proprietary lease for an apartment which he rents to a residential tenant. The sale of this stock is subject to the transfer tax. The renting of an apartment is a commercial activity and the stock is considered to be held in connection with that commercial activity. (B) An individual owns stock in a cooperative housing corporation and holds the proprietary lease for an apartment which is occupied rent-free by a close family member. The sale of the stock is not subject to the transfer tax. Example 5: A subleased his residential cooperative apartment for 3 weeks while he was on vacation. Later that same year the apartment was sold. The transfer tax is applicable to the sale of this cooperative apartment. Temporary rentals for 15 days or more during any 12 month period within the 24 months preceding the transfer will be deemed to be a commercial activity. Example 6: A wishes to sell his cooperative apartment. A subleases the apartment for 6 months until a sale is made. This sale is subject to the transfer tax. Since the apartment has been rented for 15 or more days, this rental constitutes commercial activity. Example 7: A allows B, a family member, to reside in his cooperative apartment. B pays all of the maintenance charges attributable to the apartment but does not pay any additional amounts to A. The sale of this apartment is subject to the transfer tax. B's occupancy of the apartment in return for payment of the maintenance charges constitutes a rental of the apartment. Therefore, the stock representing the apartment is held in connection with a commercial activity. Example 8: A sells his stock in a cooperative housing corporation on December 21, 1988. A had subleased his apartment until December 20, 1986. A has not subleased his cooperative apartment nor has A conducted any business activity in his apartment within the 24 months preceding the sale. This sale of stock is not subject to the transfer tax. A cooperative residential apartment which had in the past been subleased by the current owner-tenant loses its commercial status after 24 months have passed during which the apartment has not been subleased for 15 or more days. Similarly, a cooperative apartment in which business activity has been conducted by the current owner-tenant loses its commercial status after 24 months have passed during which no commercial activity has been conducted in the apartment. Accordingly, the transfer would not be subject to the transfer tax. Example 9: A, B, C and D each own 25% of the stock of X Corporation, a cooperative housing corporation with four apartments. These four individuals each use their apartments solely for residential purposes. E purchases from A and B 50% of the cooperative housing corporation stock representing two of these apartments. The sales by A and B are not subject to the transfer tax. Cooperative apartment sales are to be taxed only in the case of original sales by the cooperative corporation or sponsor or in the case of resales of apartments which had been used or held in connection with a commercial activity. Thus, even though a controlling interest in real property has been transferred, the transfer tax does not apply to these sales. Example 10: A misrepresents to B that A's cooperative apartment had not been held or used in connection with a commercial activity. B purchases A's cooperative apartment believing it is not subject to the transfer tax based on A's misrepresentations. A prescribed affidavit of non commercial use is filed with the Department of Finance. As the grantee, B will be liable for the appropriate transfer tax if A does not pay it. Example 11: A purchases stock from a cooperative housing corporation incorrectly believing that a transfer tax credit would be available against the transfer tax due. A return is filed claiming such credit. As the grantee, A will be liable for the appropriate transfer tax if the cooperative housing corporation does not pay it. Example 12: A corporation owns stock in a cooperative housing corporation and holds the proprietary lease for a residential apartment in the building. The apartment is used solely as the residence of its chief executive officer. The sale of this stock by the corporation is subject to the transfer tax. The corporation is deemed to maintain the apartment in the City in connection with, incidental to or in furtherance of its business or commercial activity. The result would be the same if the apartment was used to house out-of-town employees or customers of the corporation. Example 13: B, an attorney, owns stock in a cooperative housing corporation and resides in his cooperative apartment. B does not hold himself out as doing business in his apartment, does not meet with clients in his apartment and takes no business deductions relating to his apartment. B occasionally brings work home on weekends for his own convenience. B's occasional work at home will not render the sale of his apartment subject to tax.
(8)The application of paragraphs (2), (5) and (6) of this subdivision to transfers made on or after August 1, 1989 is illustrated by the following examples: Example 1: A, as an "insider," purchases 2% of the stock of a cooperative housing corporation that is allocated to one of fifty apartments in the building. The sales price is $200,000, and there is an unpaid mortgage principal balance of $5,000,000 on the real property. The transfer is taxable and a proportionate share of the mortgage is included in the consideration for the transfer, regardless of the use of the apartment. The tax is calculated as follows: Amount paid for the apartment$200,000 2% of the $5,000,000 mortgage$100.000Total consideration$300,000 Compute 1% of $300,000, for a tax due of $3,000. A then subleases the apartment to B, who uses the apartment as a residence. Subsequently, A transfers the stock to C for $600,000. Since the apartment was used as a residence, no portion of the underlying mortgage on the real property is included in the consideration for the subsequent transfer to C. The tax is calculated as follows: 1.425% of $600,000, for a tax due of $8,550. Example 2: An accountant owns stock in a cooperative housing corporation and holds a proprietary leasehold on one of the fifty apartments located on the real property of the housing corporation. The apartment is used both as the accountant's residence and as an office for an accounting practice, and the accountant is eligible for a home office deduction for federal income tax purposes. There is an unpaid mortgage balance of $2,000,000 on the real property. If the accountant sells the stock for $800,000, the tax will be calculated as follows: 1.425% of $800,000, for a tax due of $11,400. Since the apartment is used for residential purposes, it is deemed an individual residential unit and no portion of the unpaid principal of any mortgage on the real property of the housing corporation is included in the consideration for the transfer. Example 3: A owns 80 shares in a cooperative housing corporation attributable to four separate apartments in the building. The apartments are leased to tenants for residential use. A's 80 shares constitute 20% of the cooperative housing corporation stock, and the building is encumbered by a $1,000,000 mortgage. If A sells the 80 shares in the cooperative housing corporation to B for $800,000, the tax is calculated as follows: Cash consideration received for shares$800,00020% of $1,000,000 mortgage$200,000Total consideration$1,000,000Tax rate = 2.625%; tax is$26,250 The consideration received for the transfer of stock attributable to each of the four apartments is combined to determine the tax base. Because the consideration exceeded $500,000 and the transaction does not constitute the sale of an individual cooperative apartment, the underlying mortgage is included in the consideration, and the tax rate is 2.625%. Example 4: Assume the same facts as in example 3 except that A owns 100% of the stock of X Corporation whose sole asset is the 80 shares of co-op stock. X Corp. has no liabilities. A sells the X Corp. stock to B for $800,000. The tax is the same as in example 3 and is calculated in the same manner. Example 5: Assume the same facts as in example 4 except that the 80 shares are attributable to one apartment. If A sells the X Corp. stock to B for $800,000, the tax is calculated as follows: Cash consideration received for stock$800,000Total consideration$800,000Tax rate = 1.425%; tax is$11,400 The tax is calculated at the rate applicable to a sale of an individual cooperative apartment for consideration in excess of $500,000. The underlying mortgage is not included in the consideration. Example 6: Assume the same facts as in example 5 except that A does not sell the X stock to B. Instead, X Corp. sells the 80 shares in the cooperative corporation to B. The tax is the same as in example 5 and is calculated in the same manner.
(9)Credit. In the case of the original transfer of cooperative housing corporation stock by a cooperative corporation or cooperative plan sponsor in connection with the grant or transfer of a proprietary leasehold, a credit is allowed for a proportionate part of the amount of any tax paid upon the conveyance to the cooperative housing corporation of the land and building or buildings comprising the cooperative dwelling or dwellings. This credit is calculated as follows: Credit = A × N T Where: A = Amount of tax paid upon the conveyance to the cooperative housing corporation. N = Number of shares transferred in this transaction. T = Total number of outstanding shares of the cooperative housing corporation, as well as any shares held by the corporation. To illustrate: X, the owner of a ten unit apartment building, sells the property to Y Cooperative Corporation for $1,000,000. A transfer tax of $20,000 is paid in connection with this transfer. Y is authorized to issue 100 shares of stock. Each of the 10 apartments is allocated 10 shares. Y sells 10 shares to Z for $300,000 within 24 months of payment by X of the $20,000 transfer tax. A credit is allowed against the $3,000 transfer tax due on this subsequent sale from Y to Z, computed as follows: Credit = $20,000 × 10 = $2,000 100 This credit shall not reduce the transfer tax due on the stock sale from the cooperative housing corporation or sponsor below zero. This credit applies only for original transfers of stock by the cooperative housing corporation or cooperative plan sponsor. It does not apply to taxable resales of cooperative housing corporation stock. No credit is allowed for any tax paid more than 24 months prior to the date on which occurs the first in a series of transfers of shares of stock in the offering of cooperative housing corporation shares. Thus, if the first of the original transfers of shares from the cooperative housing corporation or sponsor is made within 24 months of the payment of the tax imposed on the conveyance of the property to the cooperative housing corporation, then all original transfers from the cooperative housing corporation or plan sponsor, regardless of when made, will be entitled to an appropriate credit. If the first transfer is made more than 24 months after payment of the tax imposed on the conveyance of the property to the cooperative housing corporation, then no credit is allowed.
(j)Conveyances not subject to tax. The following are examples of situations in which the tax does not apply: (Any reference made to a deed or conveyance includes a transfer of an economic interest in realty.) (1) A conveyance of realty without consideration, as defined in 19 RCNY § 23-02 "Consideration", and otherwise than in connection with a liquidation. This includes a deed conveying realty as a bona fide gift. A conveyance of realty subject to any indebtedness is not a gift to the extent of the indebtedness.
