simultaneously (even if the apartments are contiguous), the City of New York takes the position that the transaction is no longer considered a sale of an “individual” residential unit and applies the commercial tax rate to the transaction. The applicable tax rates are one point four two five (1.425%) percent for purchases priced at $500,000 or less and two point six two five (2.625%) percent for purchases priced at more than $500,000. The higher tax rate can be avoided if the Sponsor combines the units prior to closing. In addition, since the transfer taxes are by statute a seller’s expense, New York City and New York State taxing authorities take the position that when a purchaser pays the transfer taxes, the purchase price should be increased or (grossed up) to include the amount of the transfer taxes (the grossed up consideration also applies to the calculation of the Mansion Tax). In those instances where the purchaser pays the transfer taxes, the state transfer tax and the city transfer tax are calculated by computing the transfer taxes on the purchase price and then adding those taxes to the purchase price to arrive at a new grossed up purchase price and then recalculating the transfer taxes based upon this new grossed up purchase price. In addition, if two or more unconnected residential units will be purchased simultaneously, you will be obligated to pay the New York City Transfer Tax at the commercial tax rate of two point six two five (2.625%) percent. If you purchase a co-op, condo, or single-family house in New York State and the purchase price is less than $1 million, you may still end up paying the Mansion Tax. Why? If you are purchasing your home from a Sponsor or Developer and are obligated contractually to pay the transfer taxes, the transfer taxes are, for tax purposes, added to the purchase price. If the new purchase price (or “grossed-up” price) is now $1 million or more, you will be obligated to pay the mansion tax at closing based upon the grossed-up price. For example, if you purchase an apartment priced at $985,000 and are obligated to pay the transfer taxes (RPT tax $14,036.25 + state transfer tax $3,940 =
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