Nonresidents Now Required to Pay Estimated Personal Income Tax on Gain From Sale
or Transfer of Real Property Located in N.Y. 

ALBANY – Changes in New York’s tax law now require nonresidents to pay an estimated personal income tax on any gain from the sale or transfer of fee simple interests in real property located in the state.

Effective for transfers after September 1, 2003, nonresident individuals, estates and trusts, prior to recording of the deed, must file an new IT-2663 form with the state Tax Department, pay the estimated tax (if any) and obtain certification of compliance from the department. Exceptions created in the new Section 663 of the state’s personal income tax law include:

• real property used exclusively as a principal residence,
• mortgaged property that is in foreclosure or is to be transferred in lieu of foreclosure, and
• property transferred to or by the federal government, the state of New York, government mortgage agencies, or a private mortgage insurance company.

To qualify for an exemption, a revised form TP-584 (with a new Schedule D) must be completed by all sellers and presented when the deed is recorded.

Fee simple interests refer to (real property) of absolute inheritance, free of any condition, limitations, or restrictions to any particular heirs.

According to Matthew J. Leeds of New York (Bryan Cave LLP), Chair of the of state bar’s Real Property Law Section, the section’s Title and Transfer Committee continues to review the changes and provide comment to the Tax Department concerning the new law and regulations, which were enacted at the end of the 2003 legislative session. Karl B. Holtzschue of New York and Samuel O. Tilton of Rochester (Woods Oviatt Gilman LLP) co-chair the committee.

Additional information and the new forms are available online, at http://www.tax.state.ny.us/pdf/memos/multitax/m03_2r_4i.pdf

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