Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Sunday, January 27, 2008

Would a T&E Professor Merit a $4.2 Million Condo?

NyuTo convince Catherine M. Sharkey to leave Columbia University, The New York University purchased for her a $4.2 million condo with 4,000 square feet overlooking Central Park.

The following is from Josh Barbanel, Recruiting With Real Estate, NY Times, Jan. 20, 2008:

The property records show that the foundation spent $4.2 million two weeks ago to buy an 80 percent interest in the turreted apartment. The foundation had $155 million in assets at the end of 2006 and it is dedicated to supporting N.Y.U.’s law school, including the hiring and retention of faculty members.

Ms. Sharkey and her partner, Ina Bort, who practices commercial and maternity law in New York, bought the remaining 20 percent interest in the apartment for $1.05 million, but the foundation provided them with a mortgage to cover $650,000 of their share of the purchase price for up to 30 years (unless Ms. Sharkey leaves the university before then).

John Beckman, an N.Y.U. spokesman, said that the university and its law school provide housing for a “very large percentage” of faculty members, but he could not recall the purchase of such an expensive apartment for other faculty members.

Note that Prof. Sharkey is not a senior faculty member -- she graduated from law school in 1997 and has been teaching for only five years.  I wonder what fancy digs their senior faculty receive and whether  such perks go to their T&E faculty?


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Isn't the annual fair rental value of the 80% interest in the property taxable income to the professor? Offhand, it doesn't strike me as a nontaxable, employer-provided fringe benefit. Will NYU be engaging an appraiser on an annual basis to peg the value that it must report as taxable income to the professor on an annual Form W-2? Is NYU going to gross up the professor for the amount of the federal, New York, and NYC income tax on that amount? Does NYU have any federal, New York, and NYC income tax withholding obligations for this income? If not, I sure hope the professor is monitoring her quarterly estimated tax payments.

Beyond that, to whom does the benefit of the use of the 80% interest in the property run? The professor alone or to the professor and the partner? If it's to the professor and the partner, is one-half of the fair rental value of the 80% interest in the property going to be reported as income or treated as a gift to the partner?

The TaxProf blog reported this story several days ago, but surprisingly there's virtually no discussion of the tax consequences of the arrangement.


Posted by: SAM | Jan 28, 2008 8:36:15 AM

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