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Volume 7 - Opinions of Counsel SBEA No. 63

Opinions of Counsel index

Veterans exemption (generally) (computation-transfer of part of property) - Real Property Tax Law, §§ 458, 520:

If a veteran transfers title to a part of the property on which he is receiving an exemption, his exemption will be reduced only if the assessed value of the retained portion is less than the amount of the eligible funds which were the basis of his exemption. The transferee would be liable for pro rata taxes only on the amount of the reduction in the transferor’s exemption.

Our opinion has been requested regarding the application of section 520 of the Real Property Tax Law to the sale of a portion of a parcel which has been receiving a veterans exemption (Real Property Tax Law, §458).

The facts are as follows: A parcel of 50 unimproved acres was assessed for $2,000. The owner, who had received a $1,200 veterans exemption, sold 10 of the 50 acres subsequent to taxable status date. The assessor apportioned the assessment, $1,600 on the 40 acres retained and $400 on the 10 acres sold.

The question is whether, after the sale, the veteran is still entitled to a $1,200 exemption or whether, by virtue of section 520 of the Real Property Tax Law, a part of the exemption is lost in proportion to either the assessed value or the acreage of the land which was sold. In our opinion, the veteran would retain the full $1,200 exemption to which he was entitled prior to the sale of part of his land.

A veterans exemption is calculated on the basis of the amount of “eligible funds” invested in property (subject to a maximum of $5,000) rather than simply a percentage of assessed value. If there is a partial transfer of the real property receiving such exemption, the exemption should not be reduced in proportion to the assessed value nor in proportion to the acreage of the property sold because the exemption is measured by the amount of eligible funds invested in the property rather than by the property itself.

If the assessed value apportioned to the interest retained by the veteran, for purposes of the imposition of the pro rata tax for the year of the transfer, equals or exceeds his original exemption, no pro rata tax would be due on the transferred portion pursuant to section 520. In the facts presented, the assessed value of the 40 acres retained was $1,600, or $400 greater than the $1,200 exemption. Thus, the veteran is entitled to the original $1,200 exemption, and the new owner of the 10 acres would not be liable for a pro rated tax under section 520.

If, after apportionment, the assessment of the veteran’s share is less than the amount of eligible funds invested, the difference between that assessment and the amount of eligible funds would be the exempt amount liable to a pro rata tax under section 520. This does not mean, however, that in subsequent years those excess eligible funds are lost to the veteran. For example, if the assessor subsequently prepared a full value roll and the veteran’s assessment again equals or exceeds his eligible funds, he would be entitled to an exemption for the full amount of those eligible funds.

This case may be analogized to the mingling of a veteran’s eligible funds with other funds in a bank account, discussed in 1 Op.Counsel SBEA No. 1. Pursuant to subdivision 1(2) of section 458, the mingling of eligible funds with other funds does not bar the granting of a claim for an exemption. If moneys are withdrawn from a bank account containing eligible funds and other funds, it is assumed that the funds remaining in the account are the eligible funds to the extent that eligible funds have been deposited in the account. In other words, the presumption is that the eligible funds are the last to be withdrawn from the account.

This same reasoning can be applied to the investment of eligible funds in real property. It can be presumed that the eligible funds invested are attributable to the last portion of real property owned by the veteran.

November 16, 1979

Updated: