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Landlord buyouts of Rent Regulated Apartments

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Landlord buyouts of Rent Regulated Apartments

Postby TenantNet » Tue Apr 16, 2013 10:47 am

When landlords offer buyouts to tenants of rent regulated apartments, the money received by the tenant is typically considered a long term capital gain for tax purpose.

In addition, while it is advisable to have an experienced attorney negotiate the actual buyout, the agreement with the attorney might require that up to one-third of the total amount be paid to the attorney for his or her services.

If the tenant is represented, the tax liability could depend on whether the check from the landlord goes first to the tenant, or to the tenant's attorney. From what we've heard, if the check goes first to the tenant's lawyer, he/she takes their cut and sends the remainder to the tenant, who is then liable for taxes on the amount less the attorney's fee.

But if the check goes to the tenant, and the tenant pays the attorney, then the tenant would likely be liable for taxes on the entire amount.

Either way, it's good to get professional advice. While it is always advisable to consult with a tax attorney on tax issues -- and beyond the scope of a landlord/tenant forum -- we have obtained some material that can be useful.
Last edited by TenantNet on Tue Apr 16, 2013 5:25 pm, edited 2 times in total.
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Postby TenantNet » Tue Apr 16, 2013 10:49 am

Q AND A
New York Times
By SHAWN G. KENNEDY
Published: July 13, 1986

Tax on a Co-op Buyout

Question: I live in a building that is about to be converted to a cooperative. The sponsor is offering to buy out tenants who are willing to give up their leases and leave. Will this money be taxed as regular income or as a capital gain? If I were to reinvest the money in another residence would the same tax rules apply? Are the elderly exempt from this tax? . . .
M. R., Brooklyn

Answer: The Internal Revenue Service will tax the income you receive in a buyout as a capital gain in accordance with the Internal Revenue Service Code, Section 1241.

According to Anita Ireland, a spokesman for the Manhattan office of the I.R.S., there are no provisons in the law that would exempt you from this tax if you are elderly or if you reinvest it in another residence.
Last edited by TenantNet on Tue Apr 16, 2013 1:35 pm, edited 1 time in total.
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Postby TenantNet » Tue Apr 16, 2013 11:01 am

The Tenant Network(tm) for Residential Tenants
Information from TenantNet is from experienced non-attorney tenant
activists and is not considered legal advice.

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Location: New York City


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