I own a nine-acre beachfront parcel that I've treated as my principal residence, with a main house, a separate beach house, and an old barn, none of which I've ever rented out or depreciated. If I subdivide and sell just the beach house and barn (on six of the nine acres) to a buyer, does New York's Real Property Transfer Gains Tax apply?

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 It was repealed for any transfer occurring on or after June 15, 1996.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 1993 opinion is preserved here for historical and research value, not as current law.

Burton Brous bought a nine-acre beachfront parcel on Long Island in 1988, intending it as his principal residence. The parcel had three structures: a main house (which he renovated and occupied as his primary home, claiming the former IRC § 1034 gain-deferral benefit on the sale of his prior residence), a separate beach house used for guest entertainment and his own summer/overnight use, and an old barn used to store his lawn and garden equipment, vehicles, and off-season wardrobe. Neither the beach house nor the barn was ever rented out, and Brous never claimed depreciation or any business expense deduction on either structure on his tax returns. He received an offer to buy just the beach house and barn on a subdivided six-acre portion of the parcel (the remaining three acres, with the main house, would stay his).

The Department confirmed the personal residence exemption (former § 1443.2) applied. Its regulations made clear the exemption isn't limited to a taxpayer's primary residence -- a summer residence used solely for personal purposes also qualifies (former 20 NYCRR § 590.24(b)), with no requirement that it be in a different location from the primary home. The exemption also extends to land abutting the residence, as long as that land was never used for business purposes (former 20 NYCRR § 590.24(f)) -- which covered the barn, used only for personal storage. Because the beach house and barn were never rented or depreciated, the Department concluded the sale of the beach house, with or without the barn, was not subject to the gains tax.

What this means for you

Owners of multi-structure residential parcels

Under this now-repealed tax, a residence didn't have to be a single building -- a main house, a secondary/summer structure, and an outbuilding used purely for personal storage could all fall within the residence exemption, as long as none of them was ever rented or claimed as a business or depreciable asset.

Owners considering subdividing and selling part of a residential parcel

The opinion shows that carving off a secondary structure (here, a beach house and barn) for separate sale didn't forfeit the residence exemption, so long as the sold portion had itself always been used and treated as part of the personal residence, not as a separate investment.

Accountants reconstructing pre-1996 residential sales

If you're researching the gains-tax history of a multi-structure residential sale, the key facts the Department looked at were consistent personal (non-business, non-rental, non-depreciated) use of each structure -- that's what distinguished exempt residence property from taxable investment property.

Common questions

Q: Does the personal residence exemption 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 (like the Real Estate Transfer Tax) have their own separate exemption rules.

Q: Why did it matter that the beach house and barn were never rented or depreciated?
A: Those are the classic markers of business use. The residence exemption applied only to the portion of the premises actually occupied and used by the owner as a residence -- once a structure is rented out or its cost is depreciated for tax purposes, it's being treated as investment or business property instead.

Q: Would the answer have been different if the barn had been rented out at some point?
A: Likely yes for the barn's portion of the sale -- the exemption under former 20 NYCRR § 590.24(f) specifically required that abutting land and structures never have been used for business purposes like renting.

Q: Can another property owner selling a secondary structure 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 result depended on Brous's specific, long-standing personal (non-business) use of the beach house and barn.

Citations and references

Statutes and regulations:

• former Tax Law § 1441 and § 1443.1 (the gains tax: 10% of gain on NY real property transfers with consideration of $1 million or more)
• 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(a) (confirms the residence sale exemption applies even where consideration exceeds $1 million)
• former 20 NYCRR § 590.24(b) (the exemption is not limited to a primary residence; a summer residence used solely by the transferor also qualifies)
• former 20 NYCRR § 590.24(f) (the residence exemption includes land abutting the dwelling, as long as that land was never used for business purposes; land sold separately from the dwelling does not itself qualify)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/real_prop_tran_ao_1993.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/real_property/a93_16r.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-93 (16) R
Real Property
Transfer Gains Tax
November 1, 1993

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M930823D

On August 23, 1993, a Petition for Advisory Opinion was received from Burton B. Brous,
c/o Nodgson, Russ, Andrews, Woods & Goodyear, 1300 One M & T Plaza, Buffalo, NY 14203.
The issue raised by Petitioner, Burton B. Brous, is whether the transfer of Petitioner's beach
house and a barn located on the same parcel by a single deed to one purchaser will be subject to the
Real Property Transfer Gains Tax (hereinafter the "gains tax").
On June 15, 1988, Petitioner purchased a nine acre parcel of beach front property on Long
Island, New York with the intention of making the property his principal residence. The nine acre
parcel had then and still has three structures: a main house, a beach house and an old barn. After
renovations necessary to make the main house habitable, Petitioner occupied the main house, sold
his prior principal residence and claimed the benefit of Section 1034 of the Internal Revenue Code
with respect to the gain recognized upon the sale of his prior principal residence. Petitioner has
consistently treated the entire nine acre parcel as his "principal residence" under IRC § 1034.
Petitioner has continuously occupied the entire nine acre parcel as his principal residence.
The beach house is used for guest entertainment and during summers for Petitioner's personal use.
On occasion, Petitioner has spent the night at the beach house. It has never been rented and Petitioner
views the beach house as an adjunct to the main house. Additionally, Petitioner has never taken
depreciation or any other business expense deduction on his federal or New York State income tax
returns in connection with the beach house.
Similarly, the old barn has not been rented nor has Petitioner allowed any use other than
personal use of the old barn. Petitioner has not taken any depreciation or any other business expense
deduction on any tax returns in connection with the old barn. Consistent with Petitioner treatment
of the entire nine acre parcel and the three structures on it, the old barn has been used for residential
purposes, i.e., storing of Petitioner's lawn and garden equipment, Petitioner's vehicles, Petitioner's
off-season wardrobe, etc.
The beach house and the old barn have not been utilized by Petitioner for business purposes.
Petitioner has received an offer to purchase the beach house and old barn as part of a total
area of six acres. To effectuate the transfer, the nine acre parcel would be subdivided into two
parcels. One for the main house and one for the beach house and old barn. The offer has come from
one purchaser and if the purchase takes place, the six acre parcel may be structured for zoning or
other "real estate" concerns. Also, the purchaser may require Petitioner to remove or demolish the
old barn prior to the transfer.

-2­
TSB-A-93 (16) R
Real Property
Transfer Gains Tax
November 1, 1993
Pursuant to Sections 1441 and 1443.1 of the Tax Law and Section 590.1 of the Gains Tax
Regulations the gains tax is a ten percent tax on the gain derived from the transfer of real property,
which includes the acquisition or transfer of a controlling interest in any entity with an interest in real
property, where the property is located in New York State and where the consideration for the
transfer is one million dollars or more.
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:
   (a) Question: Is the sale of an individual's personal residence subject to the
   gains tax where the consideration received is in excess of $1 million?
   Answer: No. Section 1443(2) of the Tax Law specifically exempts from the
   gains tax the sale of premises occupied by the transferor exclusively as his residence.
   (b) Question: Is the sale of the premises occupied and used solely by the
   transferor as his summer residence subject to gains tax?
   Answer: No. The exemption does not state that it must be the transferor's
   primary residence. Thus, a summer residence qualifies for the exemption.
   *

*

*

(f) Question: When a residence is sold, does all of the land abutting the
residence qualify for the exemption?
Answer: Yes . A residence includes all the land on which the dwelling is
located and the land abutting the dwelling as long as the abutting land was never used
for business purposes (e.g., farm, rental, etc.). (See section 590.25 of this Part for a
discussion on property used for business.) However, the land alone is not a residence
and thus where part of the land is sold separately, the portion or portions sold without
the dwelling will not qualify for the residential exemption found in section 1443(2)
of the Tax Law.

-3­
TSB-A-93 (16) R
Real Property
Transfer Gains Tax
November 1, 1993
The beach house was used by Petitioner as a second residence during the summer months.
In addition, the beach house and the old barn were neither depreciated nor used for business
purposes. In accordance with Section 590.24(b) of the Gains Tax Regulations, the sale of a
transferor's residence qualifies for exemption from the gains tax under Section 1443(2) of the Tax
Law even though such summer home was not the transferor's primary residence. Also, pursuant to
such regulation, there is no requirement that the summer residence be in a different location than that
of the primary residence. Moreover, pursuant to Section 590.24(f) provided the premises has not
been used for business purposes, the residence includes all the land on which the dwelling is located
and the land abutting the dwelling. Therefore, pursuant to Section 1443.2 of the Tax Law and
Section 590.24 of the Gains Tax Regulations the transfer by Petitioner of his beach house, with or
without the old barn, is not subject to the gains tax.

DATED: November 1, 1993

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

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