Legal Question in Real Estate Law in Massachusetts

multifamily sales tax

We own a 3 family that we also have occupied for the last 10 years. We are converting all of the units to condo. Does anything change tax-wise as opposed to selling as just a multifamily? I know we have to pay a 2/3 tax on the other 2 properties of maybe 22%(?), if we convert them, that still applies right? Someone mentioned forming an LLC as a way to avoid that high tax, is this untrue?


Asked on 6/08/05, 8:05 am

1 Answer from Attorneys

Re: multifamily sales tax

Without reviewing your facts in detail no definitve advice can be given to you.

I think the LLC was mentioned to you to distinguish between a sale at capital gain and a sale as part of a business enterprise.

Sale of a primary residence is allowed to exempt $500,000 of profit from tax (250 each for you and your spouse). Sale of the multi-family would be at capital gains rates except for certain depreciation recapture rules which would be at income tax rates. A conversion to condo could be deemed as entry into a business and therefor the entire portion from the sale of 2 units could be treated at least in part as ordinary profit.

You should meet with an accountant or an attorney who can assist you in making such a decision. Also, make sure you have someone who knows how to create a Condo Association and master deed if you elect to convert to condos.

Please feel free to contact me if you have more questions.

Read more
Answered on 6/08/05, 9:14 am


Related Questions & Answers

More Real Estate and Real Property questions and answers in Massachusetts