Category Archives: Moblogged

Moblogged —> Postings made from my Cellphone

NY Mortgage Recording Tax and “related” parties

    Recently, a relative asked me about a tax that went into effect last year and I had never heard of; it’s called the a Recording Tax, and applies to certain types of mortgages presented for recording to the county clerk. If you what to look it up it’s in the NY code, Title 11, Chapter 26, Administrative Code, Tax Law § 253. What caused me concern is that a practitioner may be somewhat overwhelmed by the list of mortgages which this is applicable to that they may never reach the information contain in the following subsection. I am refering to NY Tax Law § 253a (this citation, should bring up the correct statute in Westlaw).
    I believe that part of the motivation for the creation of this tax is the taxation of transaction which are engineered to avoid paying income taxes by parties engaging in various forms of self-dealing. Traditionally, the money which came from a loan that was secured by a mortgage, or security interest on the real property, was not considered income as to the recipient of the loan because the recipient also incurred an equal and opposite obligation to repay the loan. google cloud . The most pertinent information for determining which mortgages are subject to this tax is subsection 2 of 253a, which states:

"2. (a) For the purpose of determining whether a mortgage is subject to the tax authorized to be imposed by paragraph (B) or (C) of subdivision one of this section ……. , where such mortgages form part of the same or related transactions and have the same or related mortgagors. …… For purposes of this subdivision, there shall be a presumption that all mortgages offered for recording within a period of twelve consecutive months having the same or related mortgagors are part of a related transaction, and such presumption may be rebutted only with clear and convincing evidence to the contrary. The commissioner of taxation and finance may require such affidavits and forms, and may prescribe such rules and regulations, as he determines to be necessary to enforce the provisions of this subdivision. "

The statute then goes on to specify in §253a(2)(b), what the term "related" means:

"(b) The term "related", when used in this subdivision with reference to mortgagors, shall include, but shall not be limited to, the following relationships:

(i) members of a family, including spouses, ancestors, lineal descendants, and brothers and sisters (whether by the whole or half blood);

(ii) a shareholder and a corporation more than fifty percent of the value of the outstanding stock of which is owned or controlled directly or indirectly by such shareholder;

(iii) a partner and a partnership more than fifty percent of the capital or profits interest in which is owned or controlled directly or indirectly by such partner;

(iv) a beneficiary and a trust more than fifty percent of the beneficial interest in which is owned or controlled directly or indirectly by such beneficiary;

(v) two or more corporations, partnerships, associations, or trusts, or any combination thereof, which are owned or controlled, either directly or indirectly, by the same person, corporation or other entity, or interests; and

(vi) a grantor of a trust and such trust."

The list of relationships, noted above, are ones in which self- dealing can occur. This observation is what lead me to believe that the policy which motivated it’s creation was not so much revenue generating as the purposeful closing of a perceived income tax loop hole.
    Though, I have yet to familiarize myself with the reset of the statute, practicing lawyers should note that the above section can be used, potentially, to save their clients in the taxes they will incur. Afterall, why look for an exemption to the statute, if the statute is inapplicable to your clients particular situation. So make a note, if the parties to a mortgage are not related, then this may apply to you. NY Tax Law § 253a(2)(a), even specifies that a presumption of "relatedness" may be rebutted by affidavit.

We use our constitution

After year of Constitutional law, and a semester of Criminal Procedure 1, where I and another 150 of my fellow classmates spent 4 months studying the 4th 5th and 6th Amendments, I can say a few things about our constitution. First, it’s not prefect. However, when it comes to constitutions, they really don’t have to be. What matters the most is that we use ours. Unlike other countries that praise the sanctity of human life in there constitution only to put it aside for a "real politik" approach to resolving disputes, i.e. might makes right, like China; we use ours. In the 2000 election, in the case of Bush v. Eschipemertu Gore, in a situation which would have undoubtedly caused a civil war in other countries, each side got their lawyers, and not militias, and went to court to show how the constitution applied to this situation. Each tried to find the right, which gave them the might, in the Constitution. Criminal Procedure 2 next semester promises to be more lessons in applying and using it.

Musings on Implied Warranty of Habitability

Musings on Implied Warranty of Habitability I was reflecting on an argument that was put forth last week as to why a jurisdiction would adopt the implied warranty of habitability. It was a way for society to have all it’s members internalize one of the costs associated with keeping a person alive in this world, i.e. shelter! However, this was done to improve the quality of life in an area so that the externalities which are projected by the poor aren’t felt by the higher echelons of society . Now couple that idea with this fact; that most jurisdictions have adopted the implied warranty of habitability. It appeared to me that this gave rise to a slight paradox, mainly that an area had to have a certain population density in order to justify the adoption of the implied warranty of habitability. Why the requirement of a certain population density before the acceptance of the implied warranty of habitability? Very simple, if the purpose of the legal rule is to counteract the externalizes of the poor, then that presupposes that they are being felt by the other members of society. Yet, that statement itself presupposes that the proximity between these echelons is such that each is capable of feeling the others externalizes. Fore, if each were far removed from the other then their externalizes would not be felt by the other, which would render the adoption of the implied warranty of habitability a waste of judicial resources, because it would not remedy anything. This lead me to conclude that a certain population density is a necessary condition to justify the adoption of the implied warranty of habitability. Yet again, as I refer back to the previous observation, most jurisdictions have adopted the implied warranty of habitability, even the ones with LOW POPULATION DENSITY! How can this be; after all that was said above! Well in my attempt to resolve this paradox I came upon another reason at work in this legal calculus, which is counterintuitive and yet remarkable. The adoption of the implied warranty of habitability was moved to preserve the STATUS QUO. Visualize, If you will, that jurisdiction adopting the implied warranty of habitability is like throwing a stone into a puddle. What happens? Waves caused by the stone propagate out in circular pattern disrupting the clam waters in the vicinity of the puddle where it was dropped, except in our analysis it’s not water which is the medium of transmission for the change; it’s market forces. Slumlords and their unfortunate client s pull up stakes and move to a jurisdiction where the law is such that they can conduct themselves as they were use to be able to do before the adoption of the implied warranty of habitability. However, this upsets the equilibrium which existed in the jurisdiction which neighbored the one which adopted the implied warrant of habitability originally. The only viable solution is for the jurisdictions thus affected to adopt the implied warranty of habitability themselves, for the purpose of forcing the transients who have crossed into their jurisdiction to keep moving and not become domicile there. This measure prevents the establishment of a new equilibrium which would be adverse to the desire and wishes of the middle-class, i.e. the creation of slums. However, though that choice maybe effective at returning things to the way they were before, a jurisdiction is choosing, as a collective conscious in effect, NOT TO ABSORB THE CHANGE created by the other; a necessary corollary to that decision is that the wave (of humanity?) will continue to propagate out this time affecting the neighbors of the neighbors of the original jurisdiction who first adopted the implied warranty of habitability. This pattern will continue, a self perpetuating legal chain reaction, until every jurisdiction is enveloped. The only possible exception exception are jurisdictions with very, very, very low populations, such that as the waves of change bring people, they are willing to let them stay because the people already there don’t feel their presence. So from afar it may appear that our society is idealistic or progressive for so widely accepting the implied warranty of habitability, but a more careful analysis tells us otherwise. If anyone has a formal rebuttal to this argument and it’s logic please post it. I’d really like to be a rational optimist.