A recent taxpayer victory related to one of the most onerous taxing schemes, the New York City Real Property Transfer Tax and the New York State Real Estate Transfer Tax (Transfer Tax) provides a light at the end of the tunnel for those of us facing the continued administrative assaults on relatively clear and legitimately enacted tax incentives.
To encourage additional liquidity in the market, both New York State and City have provisions in place that effectively cut the tax rate in half for transfers to real estate investment trusts (REITs). Without the incentive, combined tax rates can reach as high as 3.025% of the “consideration paid” for the property. In addition to the rate reduction, the NYC tax has the added bonus of using the estimated market value (EMV), an amount determined by reference to the NYC real property tax assessment. This amount is usually significantly less than the actual fair market value of the property.