Memorandum in Response to NYS Department of Taxation and Finance Advisory Opinion relating to single-member limited liability companies and New York’s Estate Tax

SUMMARY

The Estate & Gift Taxation Committee responded to a New York State Department of Taxation and Finance advisory opinion (TSB-A-15(1)M), requesting that it be revised to take into account state property law principles. The advisory opinion found that where a single-member limited liability company (“SMLLC”) is disregarded for federal tax purposes, the member is deemed to own the underlying property. Accordingly, where the SMLLC (with a non-New York domiciliary member) owns New York real estate, the underlying real estate is subject to State estate tax. The Committee found that this opinion departs from applicable state and federal precedent and ignores Section 601 of the State Limited Liability Company Law. The Committee urged that the opinion be revised to confirm that an interest in a SMLLC recognized under applicable state law would constitute intangible personal property pursuant to Section 601 of the State LLC Law and therefore would not be subject to the State estate tax for a non-New York domiciliary.