New budget bill will remove some impediments to property transfers.A little known provision of New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of State's new budget bill has removed a major impediment A disability or obstruction that prevents an individual from entering into a contract. Infancy, for example, is an impediment in making certain contracts. Impediments to marriage include such factors as consanguinity between the parties or an earlier marriage that is still valid. to efficient business and estate planning Estate Planning The overall planning of a person's wealth, including the preparation of a will and the planning of taxes after the individual's death. Notes: Contrary to popular belief, estate planning involves much more than preparing a will, and it is not only for the for property owners here, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. a local tax expert. Attorney Robert D. Schachat, tax partner at Wien, Malkin & Bettex, says the provision exempts certain transfers of real estate from New York City's real property transfer tax. "Essentially, the new law says that when property is transferred without any change in beneficial ownership, no city transfer tax is due," Schachat explains. For example, he says, a transfer by tenants-in-common to a new partnership that is owned by them in the same proportions is no longer subject to the city transfer tax. "Until now, any transfer of business or investment property worth $500,000 or more generally triggered a city transfer tax of 2.625 percent on gross market value," Schachat says. "This has been a formidable obstacle to making structural changes in ownership to obtain limited liability protection, facilitate estate planning, and achieve other business objectives." Governor Cuomo signed the new budget bill into law last month. The bill, in other provisions, also reduced state gains and transfer taxes and the city transfer tax on transfers to real estate investment trusts, according to Schachat. He notes that the new city transfer tax exemption tax exemption, immunity from the requirement of paying taxes. Federal, state, and usually local law provide exemption from taxation for a wide variety of organizations, usually not-for-profit, such as churches, colleges, universities, health care providers, various regarding changes in mere form of ownership was already available under the state 0.4 percent transfer tax and 10 percent gains tax laws. Nevertheless, the city transfer tax by itself was enough to preclude pre·clude tr.v. pre·clud·ed, pre·clud·ing, pre·cludes 1. To make impossible, as by action taken in advance; prevent. See Synonyms at prevent. 2. many property transfers. "Paying a $26,250 tax transfer a million-dollar property is a pretty onerous on·er·ous adj. 1. Troublesome or oppressive; burdensome. See Synonyms at burdensome. 2. Law Entailing obligations that exceed advantages. obligation when the real estate isn't really changing hands, and even more so if the owner paid $1.5 million for it five years ago," the attorney observes. As for the types of transfers the new law facilitates, he cites the conversion of a general partnership into a limited partnership, noting also that New York State may soon permit the formation of limited liability companies. "I think we can expect to see a substantial number of property transfers to limited liability companies in the next few years, if the expected legislation is enacted," Schachat says. However, he sees little applicability to "S" corporations. "From a tax viewpoint, S corporations are inferior INFERIOR. One who in relation to another has less power and is below him; one who is bound to obey another. He who makes the law is the superior; he who is bound to obey it, the inferior. 1 Bouv. Inst. n. 8. to partnerships for owning real estate because of state and city income taxes on S corporations and limitations on tax-free distributions of refinancing Refinancing An extension and/or increase in amount of existing debt. proceeds, among other things," Schachat explains. With regard to estate planning, he characterizes the new city transfer tax exemption as "highly significant." He notes that transfers to limited partnerships "can not only limit liability of property owners, but also create a vehicle for future gifts to family members - frequently with a minority discount for gift-tax purposes - while enabling owners to retain management and control." |
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