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Volume 11 - Opinions of Counsel SBRPS No. 24

Opinions of Counsel index

Senior citizens exemption (income requirement) (nominee interest) - Real Property Tax Law, § 467:

Interest received by a nominee which is then distributed in the proper manner to others is not included in computing the nominee's income for purposes of determining income eligibility for the senior citizens exemption.

We have received an inquiry concerning the senior citizens exemption (Real Property Tax Law, § 467), specifically the statutory income requirement (RPTL, § 467(3)(a)). The assessor questions the interest amount listed on Schedule B of the applicant’s Federal income tax return (Form 1040). The applicant lists numerous bank names and the interest paid by each. She apparently received total interest of some $24,400: the interest amount of some $12,700 listed on Form 1040, line 8a, seems accurate after some $11,700, denominated as “nominee distribution, is deducted. The applicant also provided IRS Form 1096 and four accompanying 1099-INT forms. Adding the amounts in box one on the 1099-INT forms totals the $11,700 in question. In our opinion, the $12,700 is the correct amount of interest income to be considered in determining exemption eligibility.

That is, “income” for purposes of section 467 includes items such as “social security and retirement benefits, interest [and] dividends . . . (RPTL, § 467(3)(a)). With respect to the interest in question here, we note IRS Publication 550 (for 2001 Returns) that discusses nominee distributions: {1}

If you received a Form 1099-INT that includes an amount you received as a nominee for the real owner, report the full amount shown as interest on the Form 1099-INT on . . . Schedule B (Form 1040). Then, below a subtotal of all interest income listed, write “Nominee Distribution and the amount that actually belongs to someone else. Subtract that amount from the interest income subtotal. Enter the result on line 2 and also line 8a of Form . . . 1040 (Pub. 550, p.18).

The publication goes on to state the requirement that the nominee file copies of the 1099-INTs in question and Form 1096 with the IRS. The nominee must provide the actual owner of the interest with a copy of Form 1099-INT, and that owner is required to include such interest in his or her tax return (ibid.).

It appears that the applicant properly reported her nominee distribution. As we discussed in 5 Op.Counsel SBEA No. 79, while a Form 1099-INT is presumptive evidence that the person listed thereon is the owner of the indicated interest income, that presumption may be rebutted by a nominee. The applicant in question appears to have done so. In our opinion then, the interest she received as a nominee and which she then apparently distributed in the proper manner to others is not her income for purposes of section 467 of the RPTL.

April 30, 2002

{1}  The Glossary to Publication 550 defines a nominee as “A person who receives, in his or her name, income that actually belongs to someone else (IRS Publication 550 (for 2001 Returns), p.70).