New York Real Estate Broker Exam — All Questions

A New York house sells for $450,000. The state real estate transfer tax under Tax Law § 1402 is:

• a.$1,800, at two dollars for each $500 of consideration✓
• b.$2,250, at two dollars for each $400 of consideration
• c.$900, at one dollar for each $500 of consideration
• d.$4,500, at one percent of the total consideration

Section 1402(a) imposes the tax on each conveyance where the consideration exceeds $500 “at the rate of two dollars for each five hundred dollars or fractional part thereof.” Dividing $450,000 by $500 gives 900 units, and 900 times $2 is $1,800. The statute adds a rule that matters on modest houses: for a one, two or three-family house or an individual residential condominium unit, and for conveyances under $500,000, the consideration excludes the value of any lien or encumbrance remaining at the time of conveyance, so an assumed mortgage does not inflate the base. Tax Law § 1404 makes the tax the grantor's to pay unless the grantor is exempt or fails to pay, in which case it falls on the grantee. Localities, and New York City in particular, impose their own transfer taxes on top of this one.

Tax Law § 1402-a adds a tax on a New York residential conveyance of $1,000,000 or more. That tax is:

• a.half a percent of the consideration, and the grantor pays it
• b.two percent of the consideration, and the grantee pays it
• c.one percent of the consideration, and the grantor pays it
• d.one percent of the consideration, and the grantee pays it✓

The section imposes the additional tax on a conveyance of residential real property “when the consideration for the entire conveyance is one million dollars or more,” at “one percent of the consideration or part thereof attributable to the residential real property.” Subdivision (b) departs from the usual rule: notwithstanding Tax Law § 1404(a), “the additional tax imposed by this section shall be paid by the grantee,” and where the grantee fails to pay or is exempt the duty falls on the grantor, with both jointly and severally liable. Residential real property for this purpose includes a one, two or three-family house, an individual condominium unit and a cooperative apartment unit. The threshold is a cliff rather than a bracket, so the whole consideration is taxed once the sale reaches $1,000,000, which is why contracts near the line are negotiated so carefully.

A New York town's state equalization rate is 50 percent and a house is assessed at $180,000. Its indicated full value is:

• a.$360,000, since the rate is the percentage of full value assessed✓
• b.$90,000, since the rate is the percentage of full value assessed
• c.$270,000, since the rate is the percentage of full value assessed
• d.$180,000, since the rate is the percentage of full value assessed

Real Property Tax Law § 1202 has the commissioner ascertain, for each city, town and village, “the percentage of full value at which taxable real property … is assessed,” and that percentage is the state equalization rate. Full value is therefore assessed value divided by the rate: $180,000 divided by 0.50 is $360,000. Multiplying instead of dividing produces $90,000, which is the error the wrong options are built around. The rate exists because New York lets each assessing unit choose its own level of assessment, so without it a county or school district that spans several towns could not apportion a levy fairly, and a taxpayer could not tell whether an assessment is high or low relative to the market.

Real Property Tax Law § 305(2) requires that all real property in a New York assessing unit be assessed at:

• a.full market value in every assessing unit without exception
• b.a percentage set separately for each parcel by the local assessor
• c.the price paid at the most recent arm's length sale of the parcel
• d.a uniform percentage of value, which may be less than full value✓

The operative sentence is that “all real property in each assessing unit shall be assessed at a uniform percentage of value (fractional assessment),” with an exception for a city of one million or more whose administrative code permitted a classified assessment standard before January 1, 1981. Uniformity is the requirement; full value is not. That is precisely why the state equalization rate exists, and why a parcel's assessment tells you nothing about its market value until you know the level of assessment in that town. Assessing a single parcel at its own recent sale price while neighbors stay at an older level is the practice — sometimes called sales chasing — that the uniform percentage rule forbids.

Real Property Tax Law § 425 provides two variations of the STAR school tax exemption. The enhanced version is for:

• a.veterans who served during a period of declared war
• b.owners of newly built homes in their first three years
• c.senior citizens meeting the income and age conditions✓
• d.owners whose school district raised its levy that year

Subdivision 2(a) sets out both forms: a basic STAR exemption for property owned by persons who satisfy subdivision 3, and an enhanced STAR exemption “for property owned by senior citizens who satisfy the criteria set forth in both subdivisions three and four of this section.” Subdivision 4 is where the age and income conditions live, so enhanced STAR is the senior version and carries a larger exempt amount. The wartime veterans exemption is a different statute, § 458-a, and neither new construction nor a levy increase creates an exemption. A broker should also know that STAR now reaches many owners as a credit against state income tax rather than as a reduction on the school bill, so a buyer cannot assume a seller's exemption simply carries over.