Cooperatives Will Soon Be Subject to Transfer and Recordation Taxes

Historically, cooperatives have been exempt from paying a transfer and a recordation tax upon sale.

 

Beginning October 1, 2009, the transfer of shares in a cooperative will be taxed by the District of Columbia. The current tax rate is 1.45% of the sales price for cooperatives selling for $400,000 or more. If the price is under $400,000, the tax is 1.1% of the sales price.

 

Even if you're not planning to sell your unit, you could be subject to the transfer and recordation tax if you plan to add someone to your shares after September 30, 2009. 

 

Adding someone to your shares is not subject to the transfer and recordation taxes if your the relationship is husband and wife, parent and child, grandparent and grandchild, or domestic partners, as defined in 32-701(3) and there is no consideration (i.e., money or something of value) exchanged.

 

If you're considering adding someone to your shares and your relationship is outside one of those listed, acting before October could save you a significant amount of transfer and recordation taxes.

 

There could be income tax or capital gains tax implications, and it would be prudent to consult with your tax advisor.