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Old 11-16-2009, 08:58 AM
 
1,014 posts, read 2,530,583 times
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Quote:
Originally Posted by mathjak107 View Post
20% ??????????? ha ha ha are you aware we have a city and state tax here? thats around 11% all by istself . how do you know what their other income is? are they married with 2 incomes? also you certainly dont know if the amt will hit depending on their other income and deductions .. that money is generally reported on a 1099 , we report it that way so the tenant better also report it. its like not reporting income on your w2.

assuming around a total of 100,000 taxible income or so its about 28% federal and around 11% city and state , thats 39% right off the bat .

its about 43- 45% with the amt
I doubt they make more than $50k or so or they'd have likely not held the apartment from long enough ago that they'd have really low rent (obviously your units that overlook central park are probably the sort of exception which would make you not assume such). Or, at least, they'd be more likely to be able to figure out the financial implications of a decision like this on their own without an internet message board.

$100,000k would be 28% federal and would be subject to those city and state tax rates, but the amount of money paid to local tax collectors is substracted from the top line of gross income, so that the rate is less than 39%. Also, for their number to be $100k gross would mean they already make $50k from regular income. That means part of the "39%" figure you cite is already being paid by them in regular taxes. The amount that the jump from $50k to $100k costs in federal is $13k; if the person establishes residency in a zero income tax state, they might be able to avoid ny local tax.

With that said, I'm sure that a tax professional can message their liability down some how. Maybe it'd be wise to enter into a contract where the owner pays $25k this year and $25k next or something along those lines.
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Old 11-16-2009, 09:01 AM
 
Location: NJ/NY
10,634 posts, read 16,209,154 times
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Yeah, there is no way it will be 20-30%. I would agree to be expecting more in the 40% range.

"Assuming you report the whole thing" - there should be no assuming, you absolutely should report the whole thing, you will be get busted if you don't.
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Old 11-16-2009, 09:30 AM
 
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Quote:
Originally Posted by gradstudent77 View Post
I doubt they make more than $50k or so or they'd have likely not held the apartment from long enough ago that they'd have really low rent (obviously your units that overlook central park are probably the sort of exception which would make you not assume such). Or, at least, they'd be more likely to be able to figure out the financial implications of a decision like this on their own without an internet message board.

$100,000k would be 28% federal and would be subject to those city and state tax rates, but the amount of money paid to local tax collectors is substracted from the top line of gross income, so that the rate is less than 39%. Also, for their number to be $100k gross would mean they already make $50k from regular income. That means part of the "39%" figure you cite is already being paid by them in regular taxes. The amount that the jump from $50k to $100k costs in federal is $13k; if the person establishes residency in a zero income tax state, they might be able to avoid ny local tax.

With that said, I'm sure that a tax professional can message their liability down some how. Maybe it'd be wise to enter into a contract where the owner pays $25k this year and $25k next or something along those lines.
you got an aweful lot of assumptions about their income, including them moving and leaving the state.... you also are assuming he can even deduct those extra state and local taxes hes paying. he may be below the standard deduction and gets nothing back additionally from tthem.. ....

never confuse living in a rent stabilized apartment with income as long as your below the threshhold in rent and max income to hold the stabilized status. . my wife and i live in a rent stabilized apartment in queens...

we are also landlords ourselves and have a family owned real estate business.

my wife has been here for 25 years even before we married...

as i said origionally no one can guess for them , they have to run there own taxes.... we havent a clue what their deal is

Last edited by mathjak107; 11-16-2009 at 09:52 AM..
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Old 11-16-2009, 09:42 AM
 
Location: NJ/NY
10,634 posts, read 16,209,154 times
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Quote:
Originally Posted by gradstudent77 View Post
I doubt they make more than $50k or so or they'd have likely not held the apartment from long enough ago that they'd have really low rent (obviously your units that overlook central park are probably the sort of exception which would make you not assume such). Or, at least, they'd be more likely to be able to figure out the financial implications of a decision like this on their own without an internet message board.

$100,000k would be 28% federal and would be subject to those city and state tax rates, but the amount of money paid to local tax collectors is substracted from the top line of gross income, so that the rate is less than 39%. Also, for their number to be $100k gross would mean they already make $50k from regular income. That means part of the "39%" figure you cite is already being paid by them in regular taxes. The amount that the jump from $50k to $100k costs in federal is $13k; if the person establishes residency in a zero income tax state, they might be able to avoid ny local tax.

With that said, I'm sure that a tax professional can message their liability down some how. Maybe it'd be wise to enter into a contract where the owner pays $25k this year and $25k next or something along those lines.
The limit for rent stabilized is much more than $50k... It's $175k household income... and people in Manhattan absolutely will hold on to an apartment for that low of a rent for a long time, even if they are making $175k.
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Old 11-16-2009, 09:50 AM
 
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its 175,000 2 years in a row and the rent has to be more then 2,000.00 .. under 2,000 rent income dosnt count...
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Old 11-16-2009, 03:37 PM
 
1,014 posts, read 2,530,583 times
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Quote:
Originally Posted by mathjak107 View Post
you got an aweful lot of assumptions about their income, including them moving and leaving the state.... you also are assuming he can even deduct those extra state and local taxes hes paying. he may be below the standard deduction and gets nothing back additionally from tthem.. ....

never confuse living in a rent stabilized apartment with income as long as your below the threshhold in rent and max income to hold the stabilized status. . my wife and i live in a rent stabilized apartment in queens...

we are also landlords ourselves and have a family owned real estate business.

my wife has been here for 25 years even before we married...

as i said origionally no one can guess for them , they have to run there own taxes.... we havent a clue what their deal is
Very true. I just chimed in because I felt like your estimates were all closer to the worst case scenario than would probably actually be the case, but you're right that it could be very high. The best advice, that I think we both would recommend, is for the op to go get a consultation from an accountant and a lawyer to see what the best way to deal with this would be.
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Old 11-16-2009, 04:41 PM
 
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its amazing how high the taxes can be.. like i found out on my own taxes you cant even count on getting to deduct any of those local taxes to make a difference. either you may not even clear the standard deduction to take the write off or in my case i tripped the amt and lost ALL my deductions on everything.

we sold some of our co-ops in the family business this year. our son who is a partner lives in new jersey.. now new jersey is no low tax state thats for sure but the difference in state and local taxes between nyc and jersey were close to 40 grand difference on the sale.

Last edited by mathjak107; 11-16-2009 at 04:50 PM..
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Old 06-05-2011, 06:58 PM
 
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I was curious. I may be getting offered a buy-out from my rent-stabilized apartment. If I reinvest that money immediately in purchasing another property is there any kind of tax break?
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Old 06-06-2011, 03:00 AM
 
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nooooooooooooooooooooooooooooooooooooooooooooo. and you certainly arent purchasing another property since you didnt own the first one.
if you did you stood a chance of doing a 1031 exchange .
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Old 06-06-2011, 05:11 AM
 
Location: Manhattan
20,130 posts, read 26,416,255 times
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I cannot imagine that it would be treated as ordinary income but if it is taxable at all, my first guess is that it is as a long term capiital gain. I am NOT certain that I am correct but they seem closer to the profit on the sale of a valuable asset rather than as earned or unearned income income.
Talk to a tax accountant or an attorney.

What you own is a RIGHT to an apartment, and that is the thing the landlord wants to buy back...it has appreciated in value. It is not that different from selling your shares in a coop, the only function of which is to grant you a right to live in an apartment.
I assume there must be established case law on the issue.
(If I see something on the web, I'll post.)


Since the rich are treated very well in the tax code and capital gains are usually a plaything for the rich, the tax is capped out at a max of 15% since the Bush tax cuts of 2003 and their extension by Obama last December. Someone with an income of $10,000,000 this year would pay the same capital gains rate of 15% and when the landlord sells the building that he bought for $100K for $20M he will be taxed at that rate also.

IF the law considers your $50,000 as sale of a house/apartment, the tax breaks are even better, down to zero if you convert the money to another property.

But it all hinges on how this money is interpreted under the tax code.


gradstudent,

Here's a thread you will find interesting:

TenantNet :: View topic - Tax Consequences of Landlord Buyout

ps. The few people who I know in this enviable situation have simply not reported the largesse, period. Risky, but nobody has been tagged. For myself, I'd have trouble sleeping.

This ruling might be spot-on:
[LEFT]
Quote:
The earliest IRS guidance on the issue of relinquishing contract rights was Rev.
Rul. 56-531,
where the relinquishment of “simple contract rights” was held not to
involve the sale or exchange of a capital asset. Although the IRS did not define “simple
contract rights,”they did distinguish such rights from “possessary rights in real estate,”
which was said to be entitled to capital gains treatment
My conclusion: tenant has a long term capital asset on his hands and the landlord want to buy it from him, thus generating a profit taxable at the capital gains rate from 0-15%. That's federal consequence, now onto state and city.

If you want to BUY something, talk to a tax-man, or hit the IRS website, because you might be able to make the transfer of the $50 G's tax free.

Last edited by Kefir King; 06-06-2011 at 06:08 AM..
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