For privacy reasons, we bought a Manhattan townhouse and adjacent lot through a nominee trust -- a bank trustee held bare legal title, but under a separate nominee agreement, I (the settlor) kept all the equitable ownership, all benefits and burdens, and the right to revoke the arrangement at any time. Privacy is no longer a concern, so I want to revoke the trust and nominee agreement and put legal title back in my own name. Does unwinding this nominee structure trigger New York's Real Estate Transfer Tax or Real Property Transfer Gains Tax?

Plain-English summary

H. Christopher Whittle set up a trust arrangement in 1992 designed to keep his identity as the beneficial owner and resident of a Manhattan property private. Under a Trust Agreement dated July 27, 1992, Whittle (as Settlor) named Jack F. Fritts as Trustee of the "Cumberland Trust." A separate Nominee Agreement dated August 12, 1992 designated the Trust as "Nominee" holding bare legal title for Whittle as "Principal," with equitable ownership remaining in Whittle and all benefits and detriments of ownership inuring to him. On August 25, 1992, the Trust, acting as Whittle's nominee, purchased a single-family residence at 4 East 79th Street plus an adjacent empty lot at 2A 79th Street for a combined $11,500,000.

Why the structure existed, and why it no longer needed to. The Trust and Nominee Agreements were set up purely to protect Whittle's privacy -- keeping his name off the public deed records as the property's beneficial owner and resident. By the time of this ruling, that privacy concern was no longer relevant, so the arrangement served no useful purpose. Whittle proposed to revoke the Trust Agreement, terminate the Nominee Agreement, and transfer legal title to the property directly into his own name.

Why it's exempt. New York's transfer tax and gains tax both exempt conveyances that are a "mere change of identity or form of ownership or organization" with no change in beneficial ownership -- previously applied to a revocable grantor trust transfer in Hilles Timpson, TSB-A-92(7)R. Under the Nominee Agreement, Whittle had already held full beneficial and equitable ownership of the property from the moment of purchase -- the Trust held only bare legal title as his nominee, with no independent interest of its own. Because unwinding the arrangement and putting legal title in Whittle's own name wouldn't change who actually, beneficially owned the property (Whittle already did, and continued to), the Department held the transfer qualified as a mere change of form, exempt from both the transfer tax and the gains tax.

What this means for you

Individuals who used a nominee trust for privacy and no longer need it

If you purchased New York property through a nominee arrangement (trustee holds bare legal title, you hold full equitable ownership and bear all benefits/burdens) purely for privacy or similar reasons, unwinding that structure and putting legal title in your own name is a tax-exempt "mere change of form" -- as long as your beneficial ownership genuinely never changed throughout.

Estate planners and privacy-focused real estate attorneys

The key factual anchors here are the same ones that make any nominee/bare-title arrangement work for RETT purposes: the nominee has no independent economic interest, the principal directs all transactions and bears all costs, and the principal can unwind the arrangement (here, by revoking the trust) at will. Document these markers clearly at the outset to support a clean, exempt unwind later.

Accountants and tax professionals reviewing older nominee/privacy trust structures

The Real Property Transfer Gains Tax discussed in this ruling was repealed for transfers occurring on or after June 15, 1996 and is no longer a live concern for new unwind transactions -- only the Real Estate Transfer Tax mere-change exemption remains relevant today.

Common questions

Q: Does putting my New York property's legal title back in my own name, after using a nominee trust for privacy, trigger transfer tax?
A: No, as long as you already held full beneficial ownership under the nominee arrangement throughout -- that's treated as a mere change of form with no change in beneficial ownership, not a taxable conveyance.

Q: What makes a nominee arrangement qualify for this exemption, versus a real change of ownership?
A: The nominee (trustee) must hold only bare legal title with no independent economic interest, while the principal directs all transactions, bears all costs and benefits, and can unwind the arrangement -- if the nominee had any real stake of its own, the analysis would differ.

Q: Is the Real Property Transfer Gains Tax discussed in this ruling still relevant today?
A: No -- it was repealed for transfers occurring on or after June 15, 1996 and does not apply to current transfers.

Q: Can I rely on this ruling for unwinding my own nominee trust?
A: No. This is an advisory opinion binding the Department only as to Jack F. Fritts as Trustee of the Cumberland Trust and the specific facts described. Your own nominee arrangement's terms need their own analysis.

Citations and references

Statutes and prior opinions:

• Section 1401(e) of the Tax Law (definition of "conveyance" -- includes a conveyance upon liquidation or termination of a trust)
• Section 1402 of the Tax Law (RETT on conveyances over $500 consideration)
• Section 1405(b)(6) of the Tax Law (mere-change-of-form exemption from the transfer tax)
• Section 1440.7 of the Tax Law (gains tax definition of "transfer of real property")
• Sections 1441, 1443.1 of the Tax Law (gains tax on transfers of $1 million+; repealed by Chapter 309 of the Laws of 1996 for transfers on/after June 15, 1996)
• Section 1443(5) of the Tax Law (mere-change-of-form exemption from the gains tax)
• Hilles Timpson, Adv Op Comm T&F, November 3, 1992, TSB-A-92(7)R

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/real_estate_tran_ao_1994.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/multitax/a94_2r.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-94 (2)R
Real Property
Transfer Gains Tax
Real Estate Transfer Tax
March 29, 1994

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M940224A

On February 24, 1994, a Petition for Advisory Opinion was received from Jack F. Fritts as
Trustee of the Cumberland Trust, c/o Cadwalader, Wickersham & Taft, 100 Maiden Lane, New
York, New York 10038.
The issue raised by Petitioner, Jack F. Fritts as Trustee of the Cumberland Trust, is whether
the proposed transfer of real property to H. Christopher Whittle resulting from the proposed
revocation of the Trust Agreement and termination of the Nominee Agreement will be subject to
Real Property Transfer Gains Tax (hereinafter the "gains tax") and Real Property Transfer Tax
(hereinafter the "transfer tax").
H. Christopher Whittle entered into a trust agreement dated as of July 27, 1992, by and
between H. Christopher Whittle, as Settlor and John F. Fritts, as Trustee (the "Trust Agreement")
forming the Cumberland Trust (the "Trust"), and a nominee agreement, dated as of August 12, 1992,
by and between H. Christopher Whittle, as Principal and the Trust, as Nominee (the "Nominee
Agreement") (collectively, the Trust Agreement and the Nominee Agreement the "Agreements").
Under the Trust Agreement, Mr. Whittle may direct the Trustee to acquire or sell property
held by the Trust and to apply Trust property or proceeds as Mr. Whittle directs. Mr. Whittle is
obligated to contribute to the Trust the funds necessary to cover all costs of retaining the Trust
property. The Trust terminates (i) if all Trust property is disposed of and (ii) upon Mr. Whittle's
death. In addition, the Trust may be revoked at any time by Mr. Whittle. The Trust is a grantor trust
for Federal income tax purposes.
On August 25, 1992, the Trust, as Nominee for Mr. Whittle in accordance with the Nominee
Agreement, purchased 4 East 79th Street, a single-family residence, and 2A 79th Street, an adjacent
empty lot (Block 1393, Lots 67 and 68) together the "Property") for $11,500,000 from N. V.
Portofino Properties Corporation.
Under the Nominee Agreement, bare legal title to the Property is in the name of the Nominee,
and equitable ownership is in the Principal. The Nominee Agreement further provides that all
benefits and detriments of ownership inure to and are borne by Mr. Whittle. The Nominee
Agreement continues until terminated by either party, or upon conveyance of the Property to the
Principal.
The Agreements were conceived to protect Mr. Whittle's privacy as beneficial owner and
resident of the Property. As Mr. Whittle's privacy is no longer an issue, the Agreements serve no
useful purpose. Therefore, it is proposed to revoke the Trust Agreement, terminate the Nominee
Agreement and transfer legal title to the Property to Mr. Whittle's name.

-2­
TSB-A-94 (2)R
Real Property
Transfer Gains Tax
Real Estate Transfer Tax
March 29, 1994
In accordance with Section 1402 of the Tax Law, a transfer tax is imposed on each
conveyance of real property or interest therein at the time that the instrument effecting the
conveyance is delivered by a grantor to a grantee when the consideration for the conveyance exceeds
five hundred dollars.
Section 1401(e) of the Tax Law provides, in pertinent part, that the term "conveyance" means
the transfer or transfers or any interest in real property be any method. This would include a
conveyance of real property upon liquidation or termination of a trust.
Section 1405 of the Tax Law provides, in part, as follows:
Sec. 1405. Exemptions. - - (a) The following shall be exempt from payment
of the real estate transfer tax:
*

*

*

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;
   Moreover, the gains tax is a 10% tax on the transfer of an interest in real property where the
   property is located in New York State and where the consideration received for the transfer is $1
   million dollars or more.
   Section 1440.7 of the Tax Law defines the term "transfer of real property", in part, to mean
   the transfer or transfers of any interest in real by any method. This would include a transfer of real
   property upon liquidation or termination of the trust.
   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:
   *

*

*

5. If a transfer of real property, however effected, consists of a mere change
   of identity or form of ownership or organization, where there is no change in
   beneficial interest.
   In Hilles Timpson, Adv 0p Comm T&F, November 3, 1992, TSB-A-92(7)R the
   Commissioner opined that the transfer of real property to a revocable grantor trust was not subject
   to gains tax or transfer tax since the transfer of the property did not result in a change in beneficial
   ownership of the property but rather constituted a mere change in form of identity or form of
   ownership. (emphasis added)

-3­
TSB-A-94 (2)R
Real Property
Transfer Gains Tax
Real Estate Transfer Tax
March 29, 1994
In the instant case H. Christopher Whittle will revoke the Trust Agreement, terminate the
Nominee Agreement and have legal title transferred to himself. Accordingly, since H. Christopher
Whittle had beneficial ownership of the Property under the Trust Agreement and the Nominee
Agreement, pursuant to Section 1443.5 of the Tax Law and the rationale set forth in Hilles Timpson,
supra, the transfer of the Property to H. Christopher Whittle as a result of the revocation of the Trust
Agreement and the termination of the Nominee Agreement will be exempt from gains tax since there
is no change in the beneficial ownership of the Property, but only a mere change of identity or form
of ownership. Moreover, pursuant to 1405(b)(6) of the Tax Law and Hilles Timpson, supra, the
transfer of the Property to H. Christopher Whittle as a result of the revocation of the Trust
Agreement and the termination of the Nominee Agreement will be exempt from the transfer tax since
there is no change in the beneficial ownership of the Property, but only a mere change of identity or
form of ownership.

DATED: March 29, 1994

/s/
PAUL B. C0BURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory 0pinions
are limited to the facts set forth therein.