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Volume 1 - Opinions of Counsel SBEA No. 25

Opinions of Counsel index

Veterans’ exemption (proceeds from sale of exempt real property) - Real Property Tax Law, § 458:

Proceeds from the sale of veteran’s exempt real property used to purchase other real property are “eligible funds”.

Section 458, subdivision 1 of the Real Property Tax Law provides that real property shall be subject to an exemption from taxation if purchased with “eligible funds”. Proceeds from the sale of exempt real property or from the sale of real property entitled to exemption used to purchase another parcel of real property to the extent of “eligible funds” used in the original purchase, continues to constitute such “eligible funds” (12 Op.State Compt., 155 (1956) ). The foregoing would be true whether the original property was purchased in New York State or a foreign state. Exchange of real property would likewise preserve the right to an exemption to the extent of “eligible funds” used in the original purchase (14 St.Dept., 495).

However, other property purchased prior to the sale of property to which an exemption had been granted would not be eligible for an exemption, since actual “eligible funds” must be used to purchase the property. If the veteran can prove his use of actual “eligible funds”, he would qualify for the exemption. For example, while a veteran may have an existing exemption on real property (parcel “A”) to the statutory limit of $5,000, he may have used other “eligible funds” to purchase parcel “B”, even though he cannot claim an additional exemption. Once he removes the original exemption by sale of parcel “A”, he could then claim an exemption on parcel “B”, purchased prior to the sale, if actual “eligible funds” were used in the purchase.

Proceeds from the sale of exempt real property or from the sale of real property entitled to exemption will still retain their identity as “eligible funds” to the extent of “eligible funds” used in the original purchase. Therefore, where such funds are used to purchase a second parcel or to improve a second parcel, they would qualify for an exemption from taxation. Of course, such exemption has a statutory limitation of $5,000 for each veteran on all real property owned in New York State.

September 12, 1960

Updated: