The year was 1977 and the internet was barely a glimmer in a 29 year-old Al Gore’s eyes. (In all fairness, I would like to note that the internet says that the rumors that Al Gore claims to have invented the internet are not true.) Accordingly, even though more than forty years ago Bob Seger knew rock and roll never forgets, we simply could not have contemplated that the internet would not.
I have always told my family and friends, do not post anything on the internet you do not want coming back to haunt you, because it will. (Hence, the proliferation of “fake” Facebook accounts acquired under bizarre aliases by all juniors in High School, about to apply to college.) Although it is often difficult to follow your own advice, I try to as often as possible. Generally, having done so with my blog, I was ecstatic to see that one of my March 2017 posts was quoted in last week’s New York Post. (https://nypost.com/2018/08/28/vornado-preparing-for-20m-tax-showdown-with-city/)
As most real property owners in New York State and City know, the transfer tax rates (both State and City) are slashed in half for transfers to a REIT, when certain conditions are met. Once qualified as a REIT transaction, the value used to compute the transfer of the property could also be significantly less than the fair market value, thereby yielding substantial additional benefits.
A 2017 Administrative Law Judge decision resulted in a very favorable decision to real property owners. (https://www.berdonllp.com/resources/blogs/salt-talk-nyc-taxpayer-gets-favorable-reit-transfer-tax-rate-alj-rules-everything-is-less-than-zero/) Unfortunately, the Tax Appeals Tribunal reversed the decision a year later. Now the case is going to the Appellate Division, where the outcome is anybody’s guess and the fate of many attempted REIT transfers hangs in the balance.
Rarely do tax cases of any sort make it this far in the New York State courts. Issues of fact will not be reviewed and the Appellate Division generally limits decision to matters of law. Although taxpayers have been victorious at this stage, the odds are low based on numbers alone and victory by taxpayers is well under twenty percent. We will be watching this one carefully. If you have questions, contact me at WBerkowitz@BerdonLLP.com or your Berdon advisor.
Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, advises on the unique requirements of governments and municipalities across the nation.