The opinion of the court was delivered by: ROBERT P. PATTERSON, JR.
ROBERT P. PATTERSON, JR., U.S.D.J.
Defendants Morton L. Weitzner and Dorothea M. Weitzner, individually and as trustees of the Estate of Henry M. Weitzner, (the "Movants"), move for an order: (1) pursuant to § 303 of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 ("URA"), 42 U.S.C. § 4653, requiring plaintiff National Railway Passenger Corporation ("Amtrak") to pay any tax due, or to reimburse the Movants for any taxes incurred, as a result of this condemnation and which are required to be paid under New York State Tax Law Article 31-B, Section 1400, et seq. (the "Transfer Gains Tax"), on the ground that the Transfer Gains Tax is a "transfer tax"; and (2) requiring Amtrak to reimburse the Movants for the registry fee of $ 25,394.16 imposed pursuant to Local Civil Rule 8(c) on the funds deposited with this Court by Amtrak at the outset of this condemnation action. Argument of this motion was heard on April 8, 1992.
"The head of a Federal Agency . . . shall reimburse the owner, to the extent the head of such agency deems fair and reasonable, for expenses he necessarily incurred for
(1) recording fees, transfer taxes, and similar expenses incidental to conveying such real property to the United States; . . .
42 U.S.C. § 4653 (emphasis added). Movants argue that because the Transfer Gains Tax is a "transfer tax" within the meaning of the section, it should be paid by Amtrak.
Movants rely heavily on the decision in In re 995 Fifth Avenue Assoc., L.P. v. N.Y. State Dep't of Taxation and Finance, 127 Bankr. 553 (S.D.N.Y. 1991), in which the Court held the Transfer Gains Tax to be "a stamp or similar tax," i.e., a transfer tax and not an income tax, in connection with sales by a bankrupt for the benefit of creditors, which sales are statutorily exempted from bearing stamp or similar taxes. 11 U.S.C. § 1146(c). After the parties briefed and argued this motion, however, that holding was reversed by the Court of Appeals. In re 995 Fifth Avenue Assoc., L.P. v. N.Y. State Dep't of Taxation and Finance, 963 F.2d 503 (2d Cir. 1992).
Although the Transfer Gains Tax is ordinarily imposed at the time of completing legal title and recording a new deed, the Tax is not based on the total value of the property as are traditional transfer taxes, but only on the seller's capital gain. See Collins v. U.S., 946 F.2d 864 (Fed. Cir. 1991). Thus, the Transfer Gains Tax is more in the nature of an income tax. In Heller v. State of New York, No. 81735 (N.Y. Ct. of Cl. filed Aug. 7, 1991), and Matter of Great Neck Water Pollution Control District, No. 7660/87 (N.Y. Sup. Ct., Nassau Co. filed October 28, 1991), two New York courts determined the Transfer Gains Tax to be an income tax.
The federal regulation promulgated under URA § 303, 49 C.F.R. 24.106(a), provides that "The owner of real property shall be reimbursed for all reasonable expenses the owner necessarily incurred for . . transfer taxes . . . and similar expenses incidental to conveying the real property to the agency." Although at oral argument plaintiff's counsel was unable to explain the scope of this federal regulation, it is the Court's opinion that transfer taxes as referred to therein and in URA § 303 are traditional transfer taxes, and that the drafters of the statute and the regulation did not contemplate within that term the Transfer Gains Tax imposed by Governor Cuomo.
Accordingly, this Court holds that the Transfer Gains Tax on the transfer of the condemned property should be borne by Movants as the former owners of the condemned property. The Movants are in no different position than the owners of comparable property whose sales were utilized to value the condemned property. Those owners were required to pay the Transfer Gains Tax on such sales, and Movants have shown no reason why they should be treated differently.
Applying the same analysis, the registry fee imposed by Local Rule 8(c) has deprived the Movants of a significant portion of the interest earned on the proceeds due to them since the time of taking. In contrast, the owners of the comparable properties used by this Court to value the condemned property did not have to bear such a loss. Plaintiff admitted at oral argument that if the Court finds that the Movants were a prevailing party, it has discretion to award this fee as costs to the Movants pursuant to 28 U.S.C. 1920. The Court finds the Movants to be a prevailing party since the awards to Movants and to the other defendant are substantially in excess of the deposit made by the plaintiff. Accordingly, the Court awards costs to the defendants, including Movants, as the prevailing parties. The plaintiff is ordered to pay costs ...