For privacy, my husband and I formed a corporation to hold title to our residence, which we occupy exclusively as our home -- we've never rented it or claimed depreciation on it. If we later sell the property, does New York's Real Property Transfer Gains Tax's personal residence exemption apply, even though a corporation technically owns it?

Plain-English summary

This tax no longer exists. New York's Real Property Transfer Gains Tax (former Article 31-B of the Tax Law) was a 10% tax on the GAIN from transferring New York real property where consideration was $1 million or more. It was repealed for any transfer occurring on or after June 15, 1996. This 1992 opinion is preserved here for historical and research value, not as current law.

Mr. and Mrs. A formed CHS of Easthampton, Inc. for the specific purpose of holding title to their residence, purely to protect their confidentiality (a common practice for buyers who don't want their names publicly tied to a property's ownership records). They intended to use and occupy the premises exclusively as their home, with no rental use and no depreciation or other business deduction ever claimed on it.

The Department explained the general starting rule: a corporation, as a legal matter, generally cannot "occupy" premises as its own residence the way a human being can, so the residence exemption from the gains tax (former § 1443.2, which exempts a sale of premises occupied by the transferor as "his" residence) doesn't automatically reach corporate-held property. But the Department's regulations recognize a fact-specific exception (former 20 NYCRR § 590.24(d)): if the corporate transferor can establish, through all the facts and circumstances, that the ownership and maintenance of the premises related SOLELY to personal use -- and that the premises were never treated as business property, for example by claiming federal depreciation -- the exemption may still be allowed. The Department applied that standard case by case, on the facts CHS of Easthampton described (a pure privacy title-holding vehicle, personal use only, no depreciation), and indicated the exemption COULD be available if the corporation actually establishes those facts and circumstances at the time of sale.

What this means for you

Owners who titled their residence in a corporation for privacy

Under this now-repealed tax, using a corporation purely as a confidentiality shield for your personal residence didn't automatically forfeit the residence exemption -- but it wasn't automatic either. You needed to be prepared to document that the arrangement was genuinely personal (no rental income, no depreciation, no business treatment) to claim it.

Real estate and privacy-focused attorneys structuring residential title-holding entities

This opinion is one of the earlier examples (predating the more detailed TSB-A-96(6)R opinion on the same doctrine) of the Department's fact-specific, case-by-case approach to corporate-held residences -- useful for understanding how consistently this exception was applied across the tax's history.

Accountants advising clients with privacy-motivated title-holding corporations

If a client sold a residence held in a privacy corporation before June 1996, this opinion (and its regulatory basis, former 20 NYCRR § 590.24(d)) confirms that the exemption turns on actual use and tax treatment of the property, not the entity form alone -- consistent, contemporaneous non-business use and no depreciation claims are the key facts to document.

Common questions

Q: Does this corporate-residence exemption rule still matter today?
A: Not under this specific tax -- it was repealed for transfers on or after June 15, 1996. Current New York real estate taxes have their own separate exemption rules, and privacy title-holding structures raise different considerations under current law.

Q: Why couldn't the corporation just automatically claim the exemption the way an individual owner could?
A: Because a corporation is a separate legal entity that, as a general matter, can't personally "occupy" a residence -- the exemption's plain language exempts premises occupied by the transferor "as his residence," language written with an individual transferor in mind. The regulatory exception exists precisely to bridge that gap for genuinely personal-use corporate title-holding.

Q: What specific facts would defeat the exemption here?
A: Renting out the property, claiming federal income tax depreciation on it, or otherwise treating it as a business or investment asset -- any of those would show the corporation wasn't using the premises "solely" for personal purposes.

Q: Can another corporate title-holder rely on this exact ruling?
A: No, apart from the repeal -- an Advisory Opinion binds the Department only as to the petitioner and facts presented, and this opinion's conditional "may be allowed" language shows the exemption was never guaranteed; it always depended on the specific facts established at the time of sale.

Citations and references

Statutes and regulations:

• former Tax Law § 1443.2 (exemption for premises occupied by the transferor as his residence, limited to the portion actually occupied and used for that purpose)
• former 20 NYCRR § 590.24(d) (a corporation generally cannot occupy premises as its residence, but if the transferor establishes through all facts and circumstances that ownership and maintenance related solely to personal use and the premises were never treated as business property -- e.g., no federal depreciation claimed -- the residence exemption may be allowed on a case-by-case basis)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/real_prop_tran_ao_1992.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/real_property/a92_4r.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-92(4)-R
Real Property
Transfer Gains Tax
September 24, 1992

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M920804B

On August 4, 1992, a Petition for Advisory Opinion was received from CHS of Easthampton,
Inc., c/o Leonard I. Ackerman, Esq., 34 Pantigo Road, East Hampton, New York 11937.
The issue raised by Petitioner, CHS of Easthampton, Inc., is whether the sale of the premises
which is owned by a corporation and occupied by its shareholders as their personal residence is
subject to Real Property Transfer Gains Tax (hereinafter "gains tax").
In order to protect their confidentiality, Mr. and Mrs. A formed Petitioner to acquire title to
the subject residence. Mr. and Mrs. A intend to use and occupy the premises exclusively as a
residence. They will not rent or depreciate any portion of this residence.
Section 1443 of the Tax Law provides, in part, as follows:
Sec. 1443. Exemptions.- - A total or partial exemption shall be allowed in the
following cases:
*

*

*

2. If the real property consists of premises occupied by the transferor as his
   residence (but only with respect to that portion of the premises actually occupied and
   used for such purposes).
   Section 590.24 of the Gains Tax Regulations provides, in part, as follows:
   (d) Question: Is the sale of the premises which is owned by a corporation
   and occupied by its sole shareholder as his residence exempt from the gains tax
   pursuant to section 1443(2) of the Tax Law?
   Answer: No. Generally, a corporation cannot occupy premises as its
   residence. However, if the transferor can establish through all the facts and
   circumstances that the ownership and maintenance of the premises related solely to
   personal use and that the premises were never treated as business property (for
   example, it was not depreciated for Federal income tax purposes), the exemption may
   be allowed. The exemption will be applied strictly on a case by case basis by taking
   all the facts and circumstances into consideration.

-2­
TSB-A-92(4)-R
Real Property
Transfer Gains Tax
September 24, 1992
Accordingly, pursuant to Section 590.24(d) of the Gains Tax Regulations if the Petitioner
can establish through all the facts and circumstances that the ownership and maintenance of the
premises is related solely to their personal use and that the premises were never treated as business
property, then the exemption provided by Section 1443(a) of the Tax Law may be allowed.

DATED: September 24, 1992

/s/
PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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