N.Y. Comp. Codes R. & Regs. tit. 20 § 575.12

Current through Register Vol. 46, No. 25, June 18, 2024

Section 575.12 - Real property situated partly within and partly without the State of New York

Tax Law, § 1415(d)

(a) Where real property is situated partly within and partly without the boundaries of the State of New York, the consideration subject to tax is such part of the total consideration as is attributable to the portion of such real property situated within the State of New York or to the interest in such portion. If the consideration attributable to the property located in the State of New York is set forth in the contract, such amount may be used to compute the tax due.

(b) If the contract does not set forth the amount of consideration attributable to the portion of real property or interest therein situated within the State of New York, the consideration must be reasonably allocated between the portion of such property or interest therein situated within the State of New York and the portion of such property or interest therein situated without the State of New York.

(1) If the grantor and the grantee enter into a written agreement, signed by both the grantor and the grantee, which sets forth a reasonable allocation of consideration, that allocation of consideration may be used to compute the tax due.

(2) If the grantor and the grantee do not enter into such an agreement, or if the allocation of consideration set forth in such agreement is deemed unreasonable by the department, the allocation of consideration must be computed by multiplying the amount of consideration by a fraction, the numerator of which is the fair market value of the real property or interest therein situated within the State of New York and the denominator of which is the total fair market value of all the real property or interest therein being conveyed. Except in the case of a transfer or acquisition of a controlling interest where consideration means fair market value of the real property or interest therein (see section 575.1[d][4] of this Part), the tax is computed on the allocated portion of the actual consideration paid even if that amount is greater or less than the fair market value as determined by appraisal.

Example 1:

A conveys to B real property which is situated partly within New York State and partly within Vermont. The consideration attributable to the portion of the property situated within New York State was not specified in the contract of sale or in a written agreement signed by both A and B. B pays A $150,000 consideration for the property. An appraisal of the property, made just prior to the sale, indicates that the total fair market value of the property is $150,000 and that the fair market value of the portion of the property situated within New York State is $120,000. The amount of consideration used to commute the tax is $120,000.

Example 2:

Assume the same facts as example 1 except that the appraisal indicates that the total fair market value of the property is $200,000 and the fair market value of the portion of the property situated within New York State is $160,000. The amount of consideration used to compute the tax is determined by multiplying the amount of consideration paid by B ($150,000) by 80 percent. Eighty percent equals the fair market value of the property situated within New York State ($160,000) divided by the total fair market value of the property ($200,000). The amount of consideration used to compute the tax is $120,000.

Example 3:

Corporation A owns real property which is situated partly within New York State and partly within Vermont. This is the only asset of corporation A. One hundred percent of the stock of corporation A is sold to corporation B for $300,000. Since a controlling interest in corporation A was transferred to corporation B, there was a taxable conveyance of the real property owned by corporation A to corporation B. An appraisal of the real property indicates that the total fair market value of the property is $250,000 and that the fair market value of the property situated within New York State is $200,000. The amount of consideration used to compute the tax is $200,000. The appraised fair market value is used rather than an allocated portion of the amount paid for the stock.

(c) Where the methods provided under this section do not allocate the consideration in a fair and equitable manner, the department may require a grantor and grantee to allocate the consideration under such method as it prescribes, as long as the prescribed method results in a fair and equitable allocation.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 575.12