N.Y. Comp. Codes R. & Regs. tit. 20 § 575.3

Current through Register Vol. 46, No. 45, November 2, 2024

Section 575.3 - Additional tax

Tax Law, § 1402-a

(a) In addition to the tax imposed by section 1402 of the Tax Law and described in section 575.2 of this Part, a tax is imposed on each conveyance of residential real property or interest therein when the consideration for the entire conveyance is $1,000,000 or more. For purposes of this section, residential real property means the following premises that are or may be used in whole or in part as a personal residence at the time of conveyance: a one-, two-, or three-family house; an individual condominium unit; a cooperative apartment unit. When determining the taxable consideration for the purpose of computing the additional tax, no deduction may be made for continuing liens on real property or, in the case of the conveyance of cooperative shares, for any mortgage on the property owned by the cooperative corporation or any lien on the cooperative housing shares.

(b) The rate of such tax is one percent of the consideration or part thereof attributable to the residential real property. The tax must be paid at the same time and in the same manner as the tax imposed by section 1402 of the Tax Law and described in section 575.2 of this Part.

Example 1:

A three-family house is sold for $1,200,000. The grantor did not occupy any portion of the house. The grantee is required to pay the additional tax of $12,000 ($1,200,000 × .01). The result would have been the same if the grantor had occupied any portion of the house.

Example 2:

A building containing ten apartments $1,500,000. The grantor used one of the apartments as a personal residence. This conveyance is not subject to the additional tax since the real property conveyed is not a one-, two-, or three-family house, an individual condominium unit or a cooperative apartment unit.

Example 3:

An individual residential condominium unit is sold for $1,000,000. The grantee assumed an existing $400,000 mortgage and paid $600,000 in cash. For purposes of the transfer tax imposed by section 1402 of the Tax Law and described at section 575.2 of this Part, the grantor must pay tax based upon consideration of $600,000 because the $1,000,000 consideration is reduced by the $400,000 mortgage which remained on the condominium unit. For purposes of the additional tax imposed by section 1402-a of the Tax Law and described in this section, the grantee must pay tax based upon consideration of $1,000,000 since no exclusion is allowed for the $400,000 mortgage.

Example 4:

A three-family house, one-third of which is used for residential purposes and two-thirds of which is used for commercial purposes, is sold for $1,500,000. The commercial portion of the building is valued at $1,000,000 while the residential portion is valued at $500,000. In determining whether or not the consideration for the conveyance is $1,000,000 or more, the consideration for the entire conveyance must be taken into account. In this case, the consideration for the entire conveyance ($1,500,000) exceeds $1,000,000 and, therefore, the conveyance is subject to the additional tax but only on the value of the residential portion ($500,000).

Example 5:

A grantor constructs a two-family house which he then sells for $1,000,000. The grantee intends to convert the house to two offices. The grantee is required to pay the additional tax of $10,000 ($1,000,000 × .01) because the property may be used as residential real property at the time of conveyance. After purchasing the property, the grantee does in fact convert the property to offices. He later sells the property for $1,200,000. No additional tax is due on the sale because the property, at the time of the sale, had been converted to offices and is no longer considered to be residential real property.

(c) Except as otherwise provided in subdivisions (a) and (b) of this section, all of the provisions of this Part relating to or applicable to the administration, collection, determination and distribution of the tax imposed by section 1402 of the Tax Law and described in section 575.2 of this Part shall apply to the additional tax imposed by section 1402-a of the Tax Law and described in this section with such modifications as may be necessary to adopt such language to the additional tax. Such provisions shall apply with the same force and effect as if those provisions had been set forth in this section except to the extent that any provision is either inconsistent with a provision of this section or not relevant to the additional tax authorized by such section 1402-a and described in this section.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 575.3