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.