NYS - real estate transfer tax????

[schirallicpa]

Client owns real property in NYS and has received a contract to receive $1000 each year for 3 years for an easement.  And this year at the initial contract, they gave him a bonus of $2500 for signing early.  And then they gave him TP-584 to pay the RETT.  Now - I have never looked at one of these before, but aren't they for actual transfer of property?  He's basically renting to them a pathway thru his property.  

And do you show all 3 years of payment on the form?  Or just the initial year?  How will NYS collect for years 2 and 3?

Feel like telling him to ignore it.  Does an easement rental like this even get recorded in the property tax offices?  How does NYS know this transaction exists?

I guess real estate attorney goes on my resume now too.

 

[Lee B]

Is the easement permanent ?

[schirallicpa]

no

 

[Lee B]

It appears that the key question is, "What is NY's legal definition of which transactions are subject to the RETT?

[jklcpa]

https://www.osc.state.ny.us/state-agencies/audits/2019/01/08/administration-and-collection-real-estate-transfer-taxes

According to the above issued statement, the state knows about any transactions when deeds are recorded at county clerk offices.

For IRS purposes, it is considered rental income and reported on Schedule E.  You should review the definitions of "conveyance" (item #7) and "interest in the real property" (item #8) contained on page 3 of 8 of the instructions to Sch B of Form TP-584.  To me it sounds as though this is an "interest in" because of the instruction's wording that says ... "or any other interest with the right to use or occupancy of real property."

Sorry, can't provide a direct link to the instructions because it is a pdf, but here is a link to the NY RETT page that will lead you to the form and its instructions.  Look in the second column from the left for TP-584-I-(instructions):    https://www.tax.ny.gov/forms/real_prop_tran_cur_forms.htm

This page has links to lots of info too, but I don't have a lot of time to continue digging to know if it would be helpful: https://www.tax.ny.gov/bus/transfer/rptidx.htm

No personal experience with temporary easements or your particular state on this issue, just trying to provide some useful information I found.