As part of a corporate restructuring, our wholly-owned subsidiary is transferring a New York City parcel of real estate to us, its parent company, for no consideration -- just an accounting entry moving the property's book value between our respective capital accounts. Does this trigger New York Real Estate Transfer Tax?

Plain-English summary

AT&T Resource Management Corporation (AT&T-RMC) was formed by American Telephone and Telegraph Co. (AT&T) to acquire, operate, maintain, and dispose of physical plants and other assets for AT&T and its affiliates, and in that role owned several parcels of real estate in New York and other states. AT&T-RMC had issued a single share of stock, held entirely by AT&T.

As part of a broader restructuring of its U.S. operations in January 1990 (involving the merger of several subsidiaries into AT&T, though this particular transfer was not itself part of that merger), AT&T-RMC transferred a New York City real estate parcel -- free of any mortgage or other debt -- to AT&T for no consideration. The transaction was purely an accounting entry: AT&T-RMC's capital stock account was debited and its building/land accounts credited by the property's net book value, while AT&T's capital stock account was credited and its building/land accounts debited by the same amount. No income or gain was recognized by either party, and AT&T continued to hold AT&T-RMC's one share of stock after the transfer just as before.

The Department first confirmed that the transaction involved no "consideration" as the transfer tax statute defines that term (§ 1401(d)) -- AT&T paid nothing of value to AT&T-RMC, and no debt was assumed. But more importantly, the Department held the transfer independently qualifies for the mere-change-of-form exemption (§ 1405(b)(6)): because AT&T-RMC remained AT&T's wholly-owned subsidiary throughout, with the identical ownership structure before and after, there was no change in beneficial ownership of the property -- it moved between AT&T's own books, in substance, even though legal title moved from the subsidiary to the parent.

What this means for you

Corporations restructuring by moving real estate between a parent and its wholly-owned subsidiary

A no-consideration transfer of real property between a parent and its wholly-owned subsidiary -- where the ownership chain doesn't change -- qualifies for the mere-change-of-form exemption from Real Estate Transfer Tax. This is a clean, simple illustration of the doctrine at its most basic: no leases, no IDA financing, no trusts -- just a straightforward parent/subsidiary title transfer with unchanged beneficial ownership.

Accountants and tax professionals

Note this ruling independently establishes TWO separate reasons the transfer isn't taxed: (1) there's no "consideration" under the statutory definition (no money, property, or thing of value changes hands, and no debt is assumed or discharged), AND (2) even if consideration existed, the mere-change-of-form exemption would separately apply given the unchanged beneficial ownership. Either ground alone would support the exempt result.

Common questions

Q: Does transferring real estate from a subsidiary to its parent company trigger New York transfer tax?
A: Not if the subsidiary remains wholly owned by the same parent before and after, with no change in beneficial ownership -- that's exempt as a mere change of form, and separately, a transfer with no actual "consideration" paid may not meet the tax's threshold trigger at all.

Q: Does the deal need to avoid ALL forms of consideration to qualify?
A: In this case there was none, but the mere-change-of-form exemption under § 1405(b)(6) applies independently of consideration -- what matters for that exemption is whether beneficial ownership changed, not whether money changed hands.

Q: Can I rely on this ruling for my own parent-subsidiary transfer?
A: No. This advisory opinion binds the Department only as to the petitioner and the specific facts described.

Citations and references

Statutes:

• Section 1402 of the Tax Law (imposition of the Real Estate Transfer Tax)
• Section 1401(d) of the Tax Law (definition of "consideration")
• Section 1405(b)(6) of the Tax Law (mere-change-of-form exemption)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/real_estate_tran_ao_1989.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/real_estate/a89_4r.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-89 (4)R
Real Estate
Transfer Tax
December 8, 1989

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.M890808A

On August 11, 1989, a Petition for Advisory Opinion was received on behalf of American
Telephone and Telegraph Co., 550 Madison Avenue, New York, New York 10022.
The issue raised is whether the transfer of a parcel of real estate from a wholly-owned
subsidiary to its parent Petitioner, American Telephone and Telegraph Co., for no consideration is
exempt from the Real Estate Transfer Tax,
Petitioner is the common parent of a group of affiliated corporations, including AT&T
Resource Management Corporation and several other companies.
Petitioner, the parent corporation of AT&T Resource Management Corporation ("AT&T RMC") formed AT&T - RMC to acquire, operate, maintain and dispose of certain physical plants
and other assets for AT&T and its affiliates. In this regard AT&T - RMC owns, among other things,
several parcels of real estate in New York and in other states.
Petitioner plans to restructure its United States operations in January, 1990. This restructuring
will entail the merger of several subsidiaries into AT&T. In connection with this restructuring, but
not directly a part of the merger AT&T - RMC will transfer a parcel of real estate located in New
York City to AT&T for no consideration. AT&T - RMC has issued one share of stock which is held
by AT&T. AT&T will continue to hold AT&T - RMC's one share of stock following this transfer.
This parcel of real estate is not encumbered by a mortgage or other debt. The accounting for this
transfer will involve the debiting of AT&T - RMC's capital stock account while its building and land
accounts will be credited by the net book value of the property to be transferred. Likewise, AT&T's
capital stock account will be credited and its building and land accounts debited by the book value
of the transferred property. No income or gain will be recognized by either party in this transaction.
The Real Estate Transfer Tax is imposed upon conveyances of real property where the
consideration exceeds $500 pursuant to Section 1402 of the Tax Law.
Section 1401(d) of the Tax Law states that:
"Consideration" means the price actually paid or required to be paid for the
real property or interest therein, including payment for an option or contract

TP-9 (9/88)

-2­
TSB-A-89 (4)R
Real Estate
Transfer Tax
December 8, 1989

to purchase real property whether or not expressed in the deed and whether paid or required to be
paid by money, property, or any other thing of value. It shall include the cancellation or discharge
of an indebtedness or obligation. It shall also include the amount of any mortgage, purchase money
mortgage, lien or other encumbrance, whether or not the underlying indebtedness is assumed or
taken subject to.
In the proposed transaction, the transfer will not entail consideration as envisioned by this
definition. In exchange for the transfer by AT&T - RMC, AT&T will not pay to AT&T - RMC
any "money, property, or any other thing of value" The removal of the real estate from the books
of AT&T - RMC and its placement on those of AT&T does not constitute the payment of
consideration. Nor does the transfer involve the assumption of any debt or mortgage.
This type of transfer is exempted from the payment of Real Estate Transfer Tax by Section
1405(b) of the Tax Law which provides, in pertinent part that:
The tax shall not apply to the following conveyances:
*
*
*

6. Conveyances to effectuate a mere change of identity or form of ownership or
   organization where there is no change in beneficial ownership, other than
   conveyances to a cooperative housing corporation of the real property comprising the
   cooperative dwelling or dwellings;
   Accordingly, the proposed transaction described above is an exempt transaction pursuant to
   Section 1405(b)(6), based on the fact that AT&T - RMC will be a wholly-owned subsidiary of
   Petitioner both before and after the transfer, with its one share of stock held by Petitioner. Thus,
   there will be a mere change of identity or form of ownership organization without any change in ....
   the beneficial ownership of the subject property.

DATED: November 29, 1989

s/FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.