In a pair of recently released finance letter rulings, FLR 19-4995 and FLR 19-4998, the New York City Department of Finance concluded that certain properties qualified for the lower rate of the City’s real property transfer tax (RPTT) applicable to residential real property. While taxpayers should rejoice at these rulings, the celebration may be bittersweet: As of July 1 of this year, the state imposed certain supplementary rates of tax (collectively referred to as the “mansion tax”) due under the state’s real estate transfer tax (RETT) with respect to residential real property transferred in New York City.
The definitions of residential real property differ for purposes of RPTT and RETT. For the relevant RPTT purposes, residential real property is defined as “one, two or three-family houses and individual residential condominium units.” N.Y.C. Admin. Code §11-2102(a)(9)(i). (Technically, the RPTT statute does not use the term “residential real property,” but, in practice, that term is used. Additionally, there are certain broader definitions of that term for RPTT purposes that are not relevant to the discussion in this article.) For the relevant RETT purposes, residential real property “include[s] any premises that is or may be used in whole or in part as a personal residence, and shall include a one, two, or three-family house, an individual condominium unit, or a cooperative apartment unit” (emphasis added). N.Y. Tax Law §§1402(a), 1402-a(a), and 1402-b(a). Since the relevant definition for RETT purposes is generally inclusive of the relevant definition for RPTT purposes, RPTT guidance, such as the recent finance letter rulings, may also be relevant for RETT purposes.
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