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Volume 1 - Opinions of Counsel SBEA No. 94

Opinions of Counsel index

Aged exemption (income) (capital gains and losses) - Real Property Tax Law, § 467:

For purposes of computing income for the aged exemption, a gain from an investment represents income but a loss resulting from a capital investment does not reduce the income of the owner received from other sources.

We have received an inquiry concerning the treatment of capital gains and losses in the computation of income for purposes of the aged exemption.

In our opinion, capital losses are not an appropriate deduction in the computation of income for purposes of the aged exemption. The primary or governing principle in the computation of income is that of “cash inflow” or actual cash-in-hand available to the homeowner for the payment of the costs of housing and subsistence. The philosophy of the special treatment accorded to capital gains and losses for federal income tax purposes has no relation to this principle of measuring the actual amount of cash available to the property owner.

In computing income for purposes of the aged exemption, gains and losses resulting from capital investments are considered separately. Each transaction which is intended to produce income, whether it be a capital investment in stock or in income-producing property, or an investment such as a savings account, requires a separate computation of gain or loss. The entire amount of gain which is realized by the conversion of the investment into actual cash represents income to the owner.

Losses from one transaction (e.g., a single stock) are not offset against gains from a different transaction (e.g., a second stock) because what is being measured is actual gross income rather than any of the forms of net taxable income which are computed for income tax purposes. While a gain from an investment represents income to the owner, a loss resulting from a capital investment is an erosion of capital rather than a loss of income, and such loss does not reduce the income which the owner has received from other sources.

July 29, 1971

Updated: