Mansion Tax Surprise

A few weeks ago, I was honored to be asked to "guest write" on Norman Calvo's blog (Universal Mortgage, Inc), which I eagerly agreed to do. I wrote about what I believe to be an important issue for some purchasers who are fortunate enough to be buying near the million dollar range, particularly in "sponsor sales".
I feel it was, perhaps, important enough to be posted on my own blog as well.
As most informed buyers have learned in their research into condominiums (as well as the less common new coops), one of the major closing costs to anticipate is the "mansion tax". On any purchase of a condo, coop, or house where the purchase price is $1,000,000.00 or more, the buyer has to pay a tax of 1% of the purchase price. This, of course, is in addition to all the other closing costs associated with the purchase.
As those same informed purchasers have learned, in a strong real estate market (which still includes most of the NY City Real Estate market) there are some typical “seller’s costs” that can pass on to buyers by contractual
agreement. Specifically, these are the New York City and New York state transfer taxes that amount to 1.425% and $4.00 per thousand of the purchase price.
As a Real Estate attorney, I’ve come across many cases where purchasers were excited that they "dodged" mansion tax because they negotiated a price just under $1,000,000. However, here’s how it got interesting! Once transfer taxes are computed, the forms require the inclusion of the buyer-paid transfer taxes in the consideration. What this means is that taxes will now be calculated on the combined sum of the purchase price and the transfer taxes. In other words, the buyer is taxed on the tax. No big deal, right? Wrong! Now, when you add the transfer taxes to the old purchase price (which was only just short of $1,000,000.00), the “new” consideration is now well over 1,000,000.00 and subject to mansion tax!
Therefore, an aggressive purchaser, who is reluctantly expecting to pay NY City and State transfer taxes, and also wants to avoid paying mansion tax, must negotiate a price to at least $19,000 below the $1,000,000.000 “magic number”.

Client News:
In the past few weeks, I've mentioned clients who sing and dance. This week, a different type of artist shall be highlighted: Alyssa Ettinger, a very talented young artist whose media of choice is ceramics (or pottery to us).
Alyssa and other artists in her studio foundation are having an open studio weekend on May 31st and June 1st, at the NARS Foundation (New York Artists in Residency), 253 36th St (3rd Floor) Brooklyn, NY
To view the true talent Alyssa possesses, please feel free to visit her beautiful website: http://www.alyssaettinger.com/

It's convenient, so we should all attend.

Last minute addition:

FRED BENDHEIM, another of my talented clients, an accomplished artist working, primarily in abstract oils and watercolors is part of an event taking place near the Brooklyn Navy Yard.
You are invited to his studio (and many others) to come and see what art is being made in the South of the Navy Yard area in Brooklyn, this weekend Saturday and Sunday May 17th & 18th, from 12-6PM. This is a link to the studio stroll map: www.sonyaonline.org/images/Stroll_web.pdf
Directions to his studio at 20 Grand Ave. #410: G train to Classon Ave., walk north 5 blocks to Flushing Ave, turn left,go 2 blocks to Grand Ave. Bike riding is a good option too.
It should be fun.
-- Fred Bendheim 20 Grand Ave. #410Brooklyn, NY 11205 tel: 718-753-1659 www.fredbendheim.com