My ex-spouse and I divorced years ago and split the future sale proceeds of our marital co-op, but only my ex-spouse kept living in it after our divorce. I moved out and never lived there again. When we finally sell, is my share of the gain exempt from New York's Real Property Transfer Gains Tax as a personal residence, the same as my ex-spouse's share?

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 It was repealed for any transfer occurring on or after June 15, 1996.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 1995 opinion is preserved here for historical and research value, not as current law.

Robert Liberman bought a cooperative apartment in 1976 (975 shares plus the proprietary lease) for $115,000, later spending over $128,000 on capital improvements, and lived there with his wife Katherine Gill. In 1981, as part of a marital settlement agreement, Liberman agreed to try to add Gill to title as a tenant-in-common -- the co-op board refused to approve the change, but Liberman treated it as done anyway (even filing a federal tax form reporting the "transfer" to joint ownership). The agreement gave Gill exclusive occupancy rights for as long as she used the apartment as her primary residence, made her responsible for all carrying costs, and let her alone decide when to sell it (or upon her death); it also set a formula for splitting the eventual sale proceeds, favoring Liberman on amounts above $2 million. Liberman moved out in September 1981 due to marital discord and never lived there again; Gill continued living there with their son. The couple divorced in 1982, and in 1994 they finally sold the co-op for $6,350,000.

New York's now-repealed gains tax exempted a transfer of premises "occupied by the transferor as his or her residence" (former § 1443.2), and cooperative apartment shares were treated as an interest in real property for this purpose (former 20 NYCRR § 590.25(c)). The Department split its answer by spouse:

Katherine Gill's share was exempt. Even though formal record title was never actually changed to joint ownership, Liberman had, in substance, transferred a portion of his interest to Gill under their agreement -- and Gill held and occupied the co-op exclusively as her residence right up until the sale. That satisfied the residential exemption for her share of the gain.

Robert Liberman's share was NOT exempt. Liberman hadn't occupied the apartment as his residence since he moved out in 1981 -- fourteen years before the 1994 sale. The Department drew on a federal tax case (Perry v. Commissioner) reaching the same conclusion for a similar rollover-of-gain question, and distinguished two of its own prior rulings the couple had cited: one involving a trustee transferring a deceased owner's residence (inapplicable, since Liberman was alive and no trustee was involved) and another where a wife was away for only a few months due to marital discord (inapplicable, since Liberman's 14-year absence was nothing like a brief separation). Because Liberman's portion of the $6,350,000+ sale exceeded $1 million, his share of the gain -- calculated under the settlement agreement's proceeds-splitting formula -- was subject to the gains tax.

What this means for you

Divorced individuals who kept an ownership stake in a marital home they no longer live in

Under this now-repealed tax, simply retaining a financial interest in a former marital residence wasn't enough to keep the personal-residence exemption on your share -- you had to actually be living there (or fall into narrow exceptions, like a very brief absence due to marital discord, or death with a trustee stepping into your shoes) at the time of the eventual sale. A long-term, permanent move-out after divorce meant your share of the gain lost the exemption even if your ex-spouse's share kept it.

Divorce attorneys drafting proceeds-splitting agreements for jointly owned homes

This ruling illustrates how a proceeds-splitting formula in a marital settlement agreement doesn't control the tax treatment of each spouse's share -- the Department analyzed each spouse's residence-exemption eligibility separately, based on who actually occupied the property, regardless of how the settlement agreement allocated the eventual sale proceeds.

Accountants reconstructing pre-1996 divorce-related property sales

If you're working through the gains-tax treatment of an old divorce-related property sale, this opinion is a clear example of splitting a single sale's gain into an exempt portion (occupying spouse) and a taxable portion (non-occupying spouse), based on residence status at the time of transfer.

Common questions

Q: Does this residence-exemption analysis still matter for divorce-related home sales today?
A: No. The entire Real Property Transfer Gains Tax was repealed for transfers on or after June 15, 1996. Divorce-related property transfers today are governed by different tax rules (including federal capital gains rules on principal residences).

Q: Why did the co-op board's refusal to approve joint title not matter?
A: Because for gains-tax purposes, the Department looked at the substance of the arrangement (an agreed transfer of a beneficial interest under the settlement agreement) rather than the formal corporate approval process, since the couple had genuinely intended and acted on the transfer despite the board's refusal.

Q: How long can you be away from a residence and still qualify for the exemption?
A: This opinion doesn't set a fixed number of months or years -- it contrasts a brief, months-long absence due to marital discord (still exempt, per a prior ruling) against Liberman's 14-year permanent departure (not exempt). The key question is whether the property remained your residence in substance at the time of transfer.

Q: Can another divorced couple rely on this exact ruling for their own co-op or house sale?
A: No, apart from the repeal -- an Advisory Opinion binds the Department only as to the petitioners and facts described, and residence-exemption questions like this one are fact-intensive.

Citations and references

Statutes and regulations:

• former Tax Law § 1441 (imposition of the gains tax at 10% of gain, for transfers with consideration of $1 million or more)
• former Tax Law § 1443.1 (the $1 million exemption)
• former Tax Law § 1443.2 (personal residence exemption, limited to the portion occupied and used residentially by the transferor)
• former 20 NYCRR § 590.25(c), formerly § 590.24(c) (cooperative apartment shares allocated to a personal residence are treated as an interest in real property; sale of such shares is treated as a sale of the premises for residence-exemption purposes)

Case law and prior opinions cited:

• Curtis B. and Laura L. Perry v. Commissioner, 67 T.C.M. 3035 (1994) (federal case: a spouse who moved out due to marital discord and never returned could not treat the home as his principal residence at the time of a later sale)
• Hilles Timpson, TSB-A-92(7)-R (Nov. 3, 1992) (a trustee's transfer of a deceased petitioner's residence, occupied by the petitioner up until death, qualified for the residence exemption)
• Underberg and Kessler, TSB-A-92(8)-R (Nov. 3, 1992) (jointly owned marital residence remained fully exempt where a spouse was away only a few months due to marital discord)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/real_prop_tran_ao_1995.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/real_property/a95_12r.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-95 (12) - R
Real Property Transfer
Gains Tax
October 3,1995

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M940629A

On June 29, 1994, a Petition for Advisory Opinion was received from Robert Liberman and
Katherine Gill, c/o The Adler Group, 654 Madison Avenue, New York, New York 10021.
The issue raised by Petitioners, Robert Liberman and Katherine Gill, is whether the transfer
of the couple's residential cooperative apartment (hereinafter the "marital co-op") was exempt from
Real Property Transfer Gains Tax (the "gains tax") under Section 1443.2 of the Tax Law.
On April 19, 1969, Robert Liberman and Katherine Gill, the transferors, were married. On
April 30, 1976, Robert Liberman purchased 975 shares of stock of Fifth and 63rd Street Corporation
(the "Corporation") and the proprietary lease appurtenant to apartment ½, which is the marital co-op.
The purchase price was $115,000.00. In addition, Robert Liberman incurred costs for capital
improvements to the marital co-op in the amount of $128,616.00. Thereafter, on October 25, 1976,
Petitioners' son was born.
On September 9, 1981, Petitioners entered into an agreement dividing all marital property
acquired during the marriage (the "Agreement"). Paragraph SECOND (B)(i) of the Agreement states,
in relevant part, that while Robert Liberman is the record owner of the marital co-op, he will attempt
to convey his interest therein into the joint names of the parties so that they will each be tenant-in­
common thereof. The Agreement further provided that in the event the Corporation would not
cooperate in so transferring the ownership that Robert Liberman would nevertheless hold title to the
marital co-op as if it had been so transferred.
Simultaneous with the execution of the Agreement, Robert Liberman executed the necessary
documents required by the cooperative corporation seeking the approval to effectuate the transfer
of the marital co-op into the joint names of Petitioners. However, the approval to transfer the
cooperative shares into the joint names of Petitioners was denied by the cooperative corporation.
Nevertheless, Robert Liberman considered the marital co-op as if it had been so transferred and as
such filed Federal Income Tax Form 2119 to report the transfer of the marital co-op from Robert
Liberman as sole owner to Robert Liberman and Katherine Gill as joint owners.
In accordance with Katherine Gill's rights as set forth in the Agreement, she had the sole and
exclusive occupancy of the marital co-op for as long as she personally continued to use the apartment
as her primary residence. Also, she had the sole and full responsibility to pay all maintenance charges
and assessments levied by the cooperative corporation as well as all utility, telephone, repair,

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decorative or other expenses associated with the occupancy or ownership of the apartment until its
sale. Moreover, the Agreement provided that the marital coop could only be sold at such time as she
in her discretion determined or upon her death.
The Agreement further stated that the distribution of proceeds from the sale of the marital
co-op following the divorce would be as follows:
1.

Up to the first $2,000,000 of net proceeds to be equally divided between the
parties.

2.

If the net proceeds of sale should exceed the sum of $2,000,000, Robert
Liberman would receive, before distribution of the balance, a sum equal to
the interest which would have been earned on an investment of $1,000,000
had such sum been invested on the date of the Agreement at an interest rate
of ten (10) percent compounded annually through the date of closing. In the
event that the net proceeds of sale of the marital co-op are in excess of two
million dollars plus the aforesaid sum payable to the husband, the balance
remaining would be divided equally between the husband and wife or their
estate.

3.

Net proceeds of sale shall be defined for the purposes hereof as the amount
received from a purchaser less any and all legal fees, brokers' commission,
advertising expenses, or other expenses directly related to the sale of the
marital co-op.

At or about the time of entering into the Agreement, the marital co-op was appraised at a
value of $1,600,000. On December 7, 1982, the parties were divorced and the Agreement was
incorporated but not merged into the divorce decree.
On May 2, 1994, Petitioners agreed to sell the marital co-op at the price of $6,350,000.
Following its transfer, Petitioners individually prepared Federal Income Tax Form 2119 to report the
gain and transfer of their respective interests in the marital co-op.
Neither Robert Liberman nor Katherine Gill ever took depreciation or otherwise treated the
apartment as business property. The apartment was used only as a residence by Petitioners (prior to
their divorce) and by the son and Katherine Gill after the divorce.
Petitioners believe that the sale of the marital co-op is exempt from the gains tax pursuant
to Section 1443.2 of the Tax Law and Section 590.24 of the Gains Tax Regulations since the marital
co-op was the residence of Petitioners during the marriage and remained the residence of Katherine
Gill following the divorce until the sale thereof. In addition, Petitioners reference TSB-A-92(8)R
(November 3, 1992) in which the residence exemption under Section 1443.2 of the Tax Law totally
applied to a residence where a spouse removed herself from the premises due to marital discord.
Further, Petitioners reference TSB-A-92(7)R (November 3, 1992) which provides that where a

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Real Property Transfer
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resident dies and a trustee for the resident is the transferor, the failure of the decedent to be the
resident or owner of the premises at the time of the transfer is not fatal to the availability of the
residential exemption.
Petitioners submitted a copy of the closing statement pertaining to the acquisition of the
marital co-op, a copy of Paragraph SECOND (B) (i) of the Agreement, a copy of the contract of sale
to sell the marital co-op and a copy of a schedule of capital improvements made to the marital co-op
as part of its Petition for Advisory Opinion.
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 any interest in
real property, which includes the acquisition or transfer of a controlling interest in any entity with
an interest in real property, where the real 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 pertinent 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).
   Former Section 590.24(c) of the Gains Tax Regulations (renumbered 590.25(c) effective
   November 9, 1994), provides as follows:
   (c) Question: Is the sale of an individual's shares of capital stock of a
   cooperative corporation that are allocated to the apartment he uses solely as his
   personal residence subject to the gains tax?
   Answer: No. The shares of stock in a cooperative corporation are an interest
   in real property for gains tax purposes, and the sale of such stock will be treated as
   the sale of the premises.
   In Curtis B. and Laura L. Perry v. Commissioner, 67 TCM 3035, May 31, 1994, the Tax
   Court held for Federal income tax purposes that an individual who removed himself from his
   residence in 1984 due to marital discord and later divorced his wife was not entitled to roll over the
   gain from the sale of their residence because at the time of the sale in 1988 it was not considered to
   be his principal residence. Under the terms of the marital settlement agreement, the individual's wife
   had exclusive right to temporarily use the property until it was sold two years after their divorce. The
   individual did not have a right to reside at the residence and, thus, did not physically occupy and live
   in the dwelling at the time of sale. As a result, he could not claim it as his primary residence and
   defer his share of the gain.

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In Hilles Timpson, Adv Op Comm T&F, November 3, 1992, TSB-A-92(7)-R, the
Commissioner held that the transfer of a residence by the Trustee following the death of the
petitioner would constitute the transfer of a personal residence in accordance with Section 1443.2
of the Tax Law and Section 590.24 of the Gains Tax Regulations provided the premises were
occupied and used by the petitioner up until her death exclusively as a residence.
In Underberg and Kessler, Adv Op Comm T&F, November 3, 1992, TSB-A-92(8)-R, the
Commissioner held that the transfer of a personal residence held in the joint names of the transferors
was totally exempt from the gains tax under Section 1443.2 of the Tax Law since the transferors
jointly owned and occupied the premises exclusively as a personal residence. The fact that the wife
removed herself from the premises for several months due to marital discord did not affect the
exemption since the wife was only removed from the premises for a short period of time and the
premises continued to be a joint asset of the marriage.
In the instant case, Robert Liberman was the owner in title to the marital co-op he purchased
on April 30, 1976. Robert Liberman executed the necessary documents required by the cooperative
corporation seeking the approval to effectuate the transfer of the marital co-op into the joint names
of Petitioners. However, the approval to transfer the cooperative shares into the joint names of
Petitioners was denied by the cooperative corporation. Nevertheless, Robert Liberman considered
the marital co-op as if it had been so transferred and as such filed Federal Income Tax Form 2119
to report the transfer of the marital co-op from Robert Liberman as sole owner to Robert Liberman
and Katherine Gill as joint owners. The marital co-op was occupied by Robert Liberman and
Katherine Gill until September 9, 1981, at which time Robert Liberman, due to martial discord
removed himself from the premises. Robert Liberman never again occupied the premises. However,
Katherine Gill continued to occupy and use the marital co-op as a personal residence for her and her
son. On May 2, 1994, Petitioners contracted to transfer the premises to a third party for
consideration of $6,350,000.
Pursuant to Section 1443.2 of the Tax Law and Section 590.25(c) of the Gains Tax
Regulations the Transfer of real property consisting of premises occupied by the transferor as such
transferor's residence is not subject to the gains tax. While record title to the marital co-op was never
held jointly by Petitioners, by agreement Robert Liberman did transfer a portion of his interest in
such co-op to Katherine Gill. Therefore, since Katherine Gill held an ownership interest in the
marital co-op and she occupied the marital co-op exclusively as her residence, the transfer of her
interest in the marital co-op was not subject to gains tax pursuant to Section 1443.2 of the Tax Law
and Section 590.25(c) of the Gains Tax Regulations.
With respect to the transfer of Robert Liberman's interest in the marital co-op, Robert
Liberman did not occupy the premises after September 9, 1981. Therefore, such premises are no
longer his personal residence. This position is supported by the determination reached for Federal
income tax purposes in Curtis B. and Laura L. Perry v. Commission, supra, which provided that a
husband who vacated his residence four years prior to its sale due to marital discord was not entitled
to roll over the gain from the sale because the premises were no longer considered to be his principal

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Gains Tax
October 3,1995
residence. Accordingly, since Robert Liberman did not occupy the premises being transferred as his
residence after 1981, the transfer of his interest in such cooperative apartment would not be exempt
from the gains tax under Section 1443.2 of the Tax Law and Section 590.25(c) of the Gains Tax
Regulations. Thus, since the consideration for the transfer is in excess of $1 million dollars, the gain
from the transfer allocated to his interest in the marital co-op would be subject to the gains tax. It is
noted that to determine his interest in the marital co-op, the formula set forth in the Agreement for
the distribution of the proceeds should be utilized.
In distinguishing Hilles Thompson, supra, from the instant case, Robert Liberman is not
deceased and a trustee is not transferring real property occupied by the transferor as his residence up
until his death on behalf of the transferor. in that case, the trustee was standing in the place of the
deceased. Moreover, in Underberg and Kessler, supra, the wife merely removed herself from the
premises for several months prior to its sale. Robert Liberman removed himself from the residence
for 14 years. Thus, the facts of this Advisory Opinion are clearly distinguishable from the facts at
issue in Underberg and Kessler, supra, given the evident abandonment of Robert Liberman of the
premises as his residence and the fact that the divorce decree was granted in 1982.

DATED: October 3, 1995

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

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