For privacy, my spouse and I are having a corporation (not us personally) take title to the house we're going to live in as our home. Can that house still qualify for New York's personal-residence exemption from the Real Property Transfer Gains Tax when it's later sold?

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 It was repealed for any transfer occurring on or after June 15, 1996.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

A married couple, seeking to keep their identities confidential, formed a corporation -- RAI (NY), Inc. -- to acquire and hold title to a residential property they intended to occupy and use exclusively as their home, with no portion depreciated for tax purposes. The company asked whether it could still claim the gains tax's personal residence exemption (former § 1443.2) on a later sale, even though the record owner was a corporation rather than the couple themselves.

Normally, a corporation cannot "occupy" a residence -- the exemption by its terms covers premises occupied by the transferor personally. But the Department's own regulation (former 20 NYCRR § 590.25(d)) recognized a narrow exception: where the taxpayer can establish, from all the facts and circumstances, that the corporation's ownership and maintenance of the property related solely to personal use -- and that the property was never treated as business property (for instance, never depreciated for federal income tax purposes) -- the residential exemption may still be allowed, decided strictly on a case-by-case basis. Since the couple represented that the home would be used exclusively as their residence with no depreciation taken, the Department confirmed that if those conditions actually held true at the time of a future transfer, the sale would qualify for the exemption.

What this means for you

High-net-worth individuals and others using privacy/holding entities for a home

Under this now-repealed tax, using a corporation purely as a nominee to hold title to your personal residence -- for confidentiality, not for any business purpose -- didn't automatically forfeit the residential exemption, but it also wasn't automatic. You had to be prepared to prove, with real facts (no depreciation, purely personal use, no business treatment), that the corporate wrapper was just a title-holding convenience and not a genuine business use of the property.

Real estate and estate-planning attorneys structuring privacy-motivated title arrangements

This opinion is a useful example of the Department looking past legal form to substance for a tax exemption, but only where the taxpayer affirmatively proves the corporate form didn't change the property's real character. The same "form vs. substance" analysis shows up in other NY tax contexts involving privacy LLCs or holding companies for real estate.

Common questions

Q: Does this exemption still apply to corporate-held residences today?
A: No. The entire Real Property Transfer Gains Tax was repealed for transfers on or after June 15, 1996, so this specific exemption analysis no longer applies. Other NY taxes on the same transfer, like the Real Estate Transfer Tax, follow their own separate rules.

Q: Was the Department guaranteeing the exemption would apply?
A: No. The Department's conclusion was conditional -- "if... the conditions for the allowance of the residential exemption... are met" at the time of the actual transfer, the sale would be exempt. It didn't pre-certify the exemption regardless of future facts.

Q: What specifically disqualifies a corporate-held property from this exemption?
A: Treating the property as business property -- most concretely, depreciating it for federal income tax purposes -- or any other facts showing the ownership wasn't purely personal.

Q: Can another privacy-holding entity rely on this specific ruling?
A: No, apart from the repeal -- an Advisory Opinion binds the Department only as to the petitioner and facts described, and this exemption was always evaluated "strictly on a case by case basis."

Citations and references

Statutes and regulations:

• former Tax Law § 1441 (imposition of the gains tax at 10% of gain from real property transfers)
• former Tax Law § 1443.2 (personal residence exemption, limited to the portion occupied and used residentially)
• former 20 NYCRR § 590.25(d) (a corporation generally cannot occupy premises as its residence, but the residential exemption may be allowed case-by-case if the taxpayer establishes purely personal use with no business treatment, such as no depreciation claimed)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/real_prop_tran_ao_1996.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/real_property/a96_6r.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-96 (6) R
Real Property
Transfer Gains Tax
June 27, 1996

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M960404A

On April 4, 1996 the Department of Taxation and Finance received a Petition for Advisory
Opinion from RAI (NY), Inc., 25875 Science Park Drive, Beachwood, Ohio, 44122.
The issue raised by Petitioner, RAI (NY), Inc., is whether, under the circumstances, Petitioner
would be entitled to the exemption from the Real Property Transfer Gains Tax ("the gains tax")
provided by section 1443.2 of the Tax Law, which the Petitioner refers to as the personal residence
exemption.
Petitioner submits the following facts as the basis for this Advisory Opinion. In order to
protect their confidentiality, Mr. and Mrs. A formed Petitioner to acquire title to residential real
property. Mr. and Mrs. A intend to use and occupy the premises exclusively as a residence. No
portion of this residence will be depreciated.
Applicable Law and Regulations
Section 1441 of the Tax Law imposes the gains tax on gains derived from the transfer of real
property within the state at the rate of ten percent of the gain.
Section 1443.2 of the Tax Law provides an exemption from the tax to the extent that the real
property that is transferred 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 residential purposes).
Also, Section 590.25(d) of the gains tax regulations (Part 590 of 20 NYCRR) provides as
follows:
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-96 (6) R
Real Property
Transfer Gains Tax
June 27, 1996
Conclusion
If, at the time of the transfer of the real property comprising the residential premises, the
conditions for the allowance of the residential exemption as described in Section 1443.2 of the Tax
Law and Section 590.25(d) of the gains tax regulations are met, the transfer will be exempt from the
gains tax.

DATED: June 27, 1996

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

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