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Taxability of funds received from a buyout

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Taxability of funds received from a buyout

Postby sr77 » Tue Apr 16, 2013 1:42 am

I live in a rent-stabilized apartment for which I'm considering a buyout offer from my landlord. I understand that money received in such transactions is considered to be taxable and treated as 'capital gains.'

I've never quite understood this, since a capital gain comes from a financial investment (an entirely different type of transaction), whereas a buyout is really a form of bartering -- i.e., a trade, in this case of desirable living space that one is forfeiting in exchange for financial compensation.

Has the tax liability of 'buyouts' ever been contested in courts?

Also, are there legal ways of structuring a buyout so that a large chunk of it doesn't go right down the drain in taxes (which for a New York City resident means Federal, State and City taxes)?

Thanks. Replies will be appreciated.
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Postby TenantNet » Tue Apr 16, 2013 4:38 am

I do not know if the tax liability of a buyout has ever been challenged. But if it had, it would have been a tax case, not a LL/T case.

You do raise an interesting point. If it is a contract, and if there is consideration on both sides, then what does the LL get in return for his payment, and should be also be taxed?

To get the answers to all this you would need to consult with a tax attorney.
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Postby TenantNet » Tue Apr 16, 2013 11:04 am

With thanks to a tenant attorney who watches this forum, we obtained some additional material on tax liability of buyouts and have posted it at http://tenant.net/phpBB2/viewtopic.php?t=10002
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