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Tax Consequences of Landlord Buyout

NYC Rent Regulation: Rent Control/Rent Stabilized, DHCR Practice/Procedures

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Tax Consequences of Landlord Buyout

Postby eddie1002 » Tue Jan 23, 2007 9:43 am

My landlord has offered me a buyout. Does anyone know how that would be taxed? I told his representative on the telephone that I would take the buyout, but I have not yet received any contract, nor have I signed anything. And now that I've been looking around at what's out there, I'm having second thoughts. As long as I haven't signed anything, I'm not obligated to take the buyout, am I?
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Postby cestmoi123 » Tue Jan 23, 2007 9:57 am

No signature, no deal. As for tax consequences, it's generally taxed as a long-term capital gain (if you've lived there over a year), so that's 15% federal plus our onerous state and local, so about 25-28% overall.
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Buyout calculator

Postby alcatraz » Tue Jan 23, 2007 2:30 pm

FYI, the Shalom Tenants Alliance has a "buyout calculator" on their website:

http://www.shalomtenants.org/listings/STAcalculator.php
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tax on buyout

Postby taj301 » Wed Apr 04, 2007 1:15 pm

I have a similar buyout question. I understand that a buyout is usually taxed as a long-term capital gain, but i also have heard that sometimes landlords report buyout money as their own "damages", and not as income to an individual. I have not received a 1099, so i don't know what my landlord did. also, i didn't receive the money solely as part of an agreement. the landlord wanted it to go through the courts to make sure we didn't back out (which apparently you can even if you sign an agreement, because the lease rights overrule any agreement??). Anyway, now what we got is part of a court settlement, which has other conditions for taxability. Basically, if the settlement amount is less than the "basis" of the property, then no tax is owed. If it's more, then it is considered capital gains.

so my question is, what is the "basis" of my lease rights to the property? and, if they reported the money as "damages" and I don't have a 1099, then do I have to worry about this at all?
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Postby cestmoi123 » Wed Apr 04, 2007 1:55 pm

Not a tax accountant, but...

1. As I understand it, lease rights aren't regarded as having a cost basis, so your gain would be the entire buyout.

2. If you haven't gotten a 1099, you might be able to skate under the radar, but you're still liable for the tax. Whether or not you decide to pay or try to get away with not paying is your call.
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Postby firstandfirst » Thu Apr 05, 2007 11:27 am

I also recently called my old landlord to ask when I'll be receiving a 1099 for a buyout I received last year. She basically says the same thing as above - that the buyout money is reported as a cost associated with the building, not as individual payments to tenants. She said that nobody she knows of ever claimed these buyouts in all the years her firm has been buying out tenants. She said I won't be getting a 1099. I looked back at all of the legal documents from the buyout and we tenants never gave our social security numbers to the landlord.

It is indeed a dilemma - I have a lot of money put aside to pay the tax on this and I know I'm technically liable for the tax, but it might be very easy to skate on this one. I'm tempted to just put the money away in a high-yielding savings account and wait it out a few years.
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Buyout

Postby Emeraldstar » Thu Apr 05, 2007 8:18 pm

Hi All
I have no tax experience but it seems to me if I had the reason to have these questions, I would create a hypothetical senerio then call Fed,State/City and ask them what their guidelines are for an approx. You may find the LL's are correct or you may find other info. Please share if you get info to clairify for others. These questions come up often. Good Luck & Thanks :wink:
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Re: Tax Consequences of Landlord Buyout

Postby Beauregard » Wed Jan 31, 2018 2:10 am

firstandfirst wrote:I also recently called my old landlord to ask when I'll be receiving a 1099 for a buyout I received last year. She basically says the same thing as above - that the buyout money is reported as a cost associated with the building, not as individual payments to tenants. She said that nobody she knows of ever claimed these buyouts in all the years her firm has been buying out tenants. She said I won't be getting a 1099. I looked back at all of the legal documents from the buyout and we tenants never gave our social security numbers to the landlord.

It is indeed a dilemma - I have a lot of money put aside to pay the tax on this and I know I'm technically liable for the tax, but it might be very easy to skate on this one. I'm tempted to just put the money away in a high-yielding savings account and wait it out a few years.


My question is do you still feel this way about your situation ? Has this worked out for you?
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Re: Tax Consequences of Landlord Buyout

Postby TenantNet » Wed Jan 31, 2018 2:34 am

You just posted on a thread from eleven years ago. It's doubtful the OP will see it, or reply.
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