The New York City Real Property Transfer is as much as 2.625% on the transfer of commercial real property and on the transfer of a controlling interest in a real property owning entity. New York State’s
Real Estate Transfer Tax on such transfers is $4.00 for each $1,000 of consideration. With some material exceptions, these taxes are generally applied in the same manner. For example, a transfer of title to an entity which involves no change in beneficial interests is exempt as a so-called “mere change”, and the transfer or acquisition of less than 50% of the interests in an entity owning real property is not subject to tax. However, recent decisions issued by State and City Administrative Law Judges have diverged in the application of those rules.
GKK2 Herald LLC (“GKK2”) and SLG 2 Herald LLC (“SLG”), the owners of 45% and 55% tenant-in-common interests, respectively, in real property located at 2 Herald Square in Manhattan conveyed their interests to 2 Herald Owner LLC (“Herald LLC”). GKK2 received a 45% member interest in Herald LLC and SLG received a 55% interest in Herald LLC. On the same date as the conveyance to Herald LLC, GKK2 transferred its 45% member interest to SLG. In a Determination dated April 1, 2015, an Administrative Law Judge of the New York City Tax Appeals Tribunal, applying the “step transaction” doctrine, ruled that the transfer of the 45% member interest from Herald to SLG was taxable as a change in beneficial ownership.
