I own a one-third tenant-in-common interest in a commercial building (subject to a tenant's purchase option worth over $3 million for the whole property). I want to transfer my one-third interest, for no payment, into my own revocable trust -- I'm the grantor and sole trustee, I'll keep receiving all the income during my life, and I can amend or revoke the trust at any time. Does moving my interest into my own revocable trust trigger New York's Real Estate Transfer Tax or Real Property Transfer Gains Tax?

Plain-English summary

Betty G. Reader owned a one-third tenant-in-common interest in a commercial building at 391-401 Sixth Avenue in Manhattan. The property was net leased and unmortgaged, but subject to the tenant's purchase option, priced at over $3 million for the entire property. Reader asked whether she could transfer her entire individual one-third interest, without any payment from anyone, into her own revocable trust -- the Betty G. Reader Revocable Trust dated June 18, 1993 -- without triggering New York's Real Estate Transfer Tax or Real Property Transfer Gains Tax.

Why it's exempt. Reader was both the grantor and the sole trustee of the trust. Under the trust agreement, the trustee had to pay Reader all the trust's income during her lifetime, plus principal as needed for her health, welfare, and maintenance; only upon her death would the trust's assets pass to other named beneficiaries. Reader also retained the unrestricted right to amend or revoke the trust at any time during her life. The trust wasn't obligated to pay her any fixed amount, and wasn't required to keep the property income-producing.

Both the Real Estate Transfer Tax and the Real Property Transfer Gains Tax exempt a "mere change of identity or form of ownership or organization where there is no change in beneficial ownership." The Department had already applied this exemption to an essentially identical fact pattern in Hilles Timpson, TSB-A-92(7)R -- a transfer of real property to a revocable grantor trust. Because Reader would hold exactly the same beneficial ownership of the property as trustee/lifetime-income-beneficiary of her own revocable trust that she held as an individual tenant-in-common before the transfer -- she could still use, benefit from, and even reclaim full ownership of the property at will by revoking the trust -- the Department held the transfer was a mere change of form, exempt from both taxes.

What this means for you

Individuals doing basic revocable-trust estate planning with New York real estate

Moving property you own into your own revocable living trust -- where you remain the grantor, trustee, lifetime income beneficiary, and retain the power to revoke -- is a standard, tax-exempt "mere change of form" transaction under New York's transfer tax and (formerly) gains tax rules. This is one of the most common estate-planning moves, and this ruling confirms the baseline exemption applies even to a fractional tenant-in-common interest subject to a third party's purchase option.

Estate planning and trust attorneys

The exemption here rested on the classic revocable-grantor-trust markers: grantor retains lifetime income, retains the power to amend/revoke, and no consideration changes hands. If a client's trust structure diverges from this pattern -- for example, an irrevocable trust, or one where someone other than the transferor controls the trust -- the mere-change analysis needs to be redone on those different facts.

Accountants and tax professionals reviewing older trust-funding transactions

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 revocable-trust funding transactions -- only the Real Estate Transfer Tax mere-change exemption remains relevant today.

Common questions

Q: Does putting my New York real estate into my own revocable living trust trigger transfer tax?
A: No, as long as you remain the grantor/trustee/lifetime beneficiary and retain the power to revoke -- that's treated as a mere change of form with no change in beneficial ownership, not a taxable conveyance.

Q: Does it matter that the property here was subject to a tenant's purchase option?
A: Not for this ruling's outcome -- the purchase option affected the property's value but didn't change who beneficially owned the underlying fee interest before and after the trust transfer.

Q: Can I rely on this ruling for transferring my own property into my own revocable trust?
A: This is an advisory opinion binding the Department only as to Betty G. Reader and her specific facts, but it reflects a well-established, widely-applied principle for standard revocable grantor trusts. Still, confirm your own trust's terms match the same markers (grantor control, revocability, no change in beneficial interest) with a New York tax professional.

Citations and references

Statutes and prior opinions:

• Section 1401(e) of the Tax Law (definition of "conveyance" -- includes a conveyance to a revocable trust)
• Section 1402 of the Tax Law (RETT on conveyances over $500 consideration)
• Section 1405(a)(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; 20 NYCRR 590.1 (gains tax on transfers of $1 million+)
• 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_1995.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/multitax/a95_4r.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-95 (4)R
Real Estate Transfer Tax
Real Property Transfer
Gains Tax
May 15, 1995

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M950117A

On January 17, 1995, a Petition for Advisory Opinion was received from Betty G. Reader,
5555 Collins Avenue, Apartment 9W, Miami Beach, Florida 33140.
The issue raised by Petitioner, Betty G. Reader, is whether the transfer by Petitioner of a one­
third tenant-in-common interest in real property to a revocable trust is subject to the New York State
Real Estate Transfer Tax (hereinafter the "transfer tax") and the New York State Real Property
Transfer Gains Tax (the "gains tax").
Petitioner is the owner of a one-third interest, as tenant-in-common, of property located at
391-401 Sixth Avenue, New York, New York, known as Block 593, Lots 22, 23, and 24 (the
"Property"). The Property, which is improved by a commercial building, currently is net leased. The
Property is not subject to any mortgage or lien, but is subject to a purchase option held by the lessee
of the Property. The option price for the entire Property is in excess of $3 million.
Petitioner is considering transferring her entire individual one-third interest as tenant-in­
common in the Property to the Betty G. Reader Revocable Trust dated June 18, 1993 (the "Trust").
Petitioner is the grantor and sole trustee of the Trust. Pursuant to the Trust Agreement, the trustee
is required to pay the income from the Trust to the grantor during her lifetime, plus such sums from
the principal as may be advisable for health, welfare and general maintenance of the grantor. Upon
the death of the grantor, the trustee is to distribute the Trust's assets to various named individuals and
organizations. The grantor retains the right during her life to amend or revoke the Trust agreement.
The Trust is not required to pay Petitioner any fixed amount, either in total or on a periodic basis,
and the Trust is not required to maintain the Property as income producing property. Petitioner would
transfer her entire interest in the Property to the Trust without consideration from either the trust, the
trust's beneficiaries or anyone else.
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.

-2­
TSB-A-95 (4)R
Real Estate Transfer Tax
Real Property Transfer
Gains Tax
May 15, 1995
Section 1401(e) of the Tax Law provides, in pertinent part, that the term "conveyance" means
the transfer or transfers of any interest in real property by any method. This would include a
conveyance of an interest in real property to a revocable 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;
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 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 property by any method. This would include a transfer
of an interest in real property to a revocable 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 Op Comm T&F, November 3, 1992, TSB-A-92(7)R, the
Commissioner held 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 of identity or form of ownership.
In the instant case, Petitioner will transfer to the trust a one-third tenant-in-common interest
in the aforementioned Property for no consideration. Petitioner will be the grantor and sole trustee
of the Trust. Further, Petitioner as the grantor will retain the right during her life to amend or revoke

-3­
TSB-A-95 (4)R
Real Estate Transfer Tax
Real Property Transfer
Gains Tax
May 15, 1995
the Trust Agreement. Accordingly, since Petitioner will hold the same beneficial ownership in the
Property under the Trust Agreement as she held prior to the conveyance, pursuant to Section
1405(a)(6) of the Tax Law and Hilles Timpson, supra, the conveyance of the Property to the trust
will not be subject to the transfer tax since the conveyance of the Property will not result in a change
in the beneficial ownership of the Property, but will be a mere change of identity or from of
ownership. Moreover, pursuant to 1443.5 of the Tax Law and Hilles Timpson, supra, the transfer of
the Property to the trust will be exempt from the gains tax since there will be no change in the
beneficial ownership of the Property, but rather a mere change of identity or form of ownership.

DATED: May 15, 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.