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Volume 5 - Opinions of Counsel SBEA No. 115

Opinions of Counsel index

Veterans’ exemption (eligible funds) (proceeds of sale - income tax savings) - Real Property Tax Law, § 458:

The income tax savings realized by a veteran on the donation of his exempt (Real Property Tax Law, § 458) property does not constitute “proceeds of sale” of such transferred real property, and accordingly such tax savings do not constitute recovered eligible funds which may thereafter be used by the veteran in another purchase of property giving rise to a new exemption.

Our opinion has been requested concerning the veterans’ exemption from real property taxation (Real Property Tax Law, § 458). It is stated that in 1952 the applicant purchased a residence which was later turned into a nursing home. As he used his pension and dividends from G.I. Insurance (i.e., eligible funds) in his purchase, he eventually became entitled to and received a maximum $5,000 veterans’ exemption. Thereafter, he transferred title to the nursing home to a school. Although this transfer was apparently a gift for which he received no compensation, he did receive a federal income tax savings by reason of such gift. The question is whether these savings (of at least $5,000) may be reinvested in other property upon which he wishes to receive a veterans’ exemption.

The veterans’ exemption is available to the veteran and certain other statutorily defined members of the exempt class who can prove that their real property was purchased with eligible funds. It has long been held that the proceeds from the sale of a veteran’s exempt parcel constitute eligible funds which may then be used to purchase a second parcel upon which the exemption can again be claimed (12 Op.State Compt. 155; 1 Op.Counsel SBEA No. 25).

In our opinion, however, the factual situation presented exhibits no recovery of eligible funds. That is, the fact that the gift of the nursing home may generate income tax savings to the veteran is not tantamount to the recovery of eligible funds with which the applicant may later claim a new veterans’ exemption. This conclusion is in conformance with a prior opinion of this office wherein we concluded that where title to a veteran’s real property is transferred to his estranged wife for no consideration, but merely as a part of the settlement agreement between the panics, the veteran has not recovered eligible funds (2 Op.Counsel SBEA No. 101). This is the case despite the fact that the transfer of the property may have been in lieu of a cash settlement.

Accordingly, it is our opinion that the generation of an income tax savings by reason of a gift of a veteran’s real property does not give rise to the recovery of eligible funds.

January 20, 1977

Updated: