New York Law Review

Matter of F.W. Woolworth Co. v. Tax Commission, 20 N.Y.2d 561 (1967): Sale Price as Evidence of Property Value for Tax Assessment

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Matter of F.W. Woolworth Co. v. Tax Commission of City of New York, 20 N.Y.2d 561 (1967)

The sale price of a property, particularly in an arm’s-length transaction, is strong evidence of its true value for tax assessment purposes, but the assessment must reflect the property’s value as of the taxable status date.

Summary

F.W. Woolworth Co. challenged the tax assessments on its property for several years. The Appellate Division reinstated the assessments, relying heavily on Woolworth’s purchase of the property in 1954 after significant alterations. The Court of Appeals affirmed the Appellate Division’s decision for tax years 1955-56 through 1958-59, holding that the sale price was indeed strong evidence of value. However, for the 1954-55 tax year, the court found that the assessment needed further review to determine the property’s value specifically on the taxable status date.

Facts

In 1951, Equitable Life Assurance Society purchased property at 14-22 Cortlandt Street for $2,137,500 and leased it to Woolworth for 40 years. The lease stipulated that Equitable would lend Woolworth up to $1,000,000 for alterations. The lease also gave Woolworth an option to purchase the property. Woolworth altered the building in 1953-54 for $1,329,946 and exercised its option to purchase the property in November 1954 for $2,993,000, giving Equitable a purchase-money mortgage.

Procedural History

Woolworth challenged the real property tax assessments for the years 1954-55 through 1958-59. The Supreme Court reduced the assessments. The Appellate Division reversed, reinstating the original assessments. Woolworth appealed to the New York Court of Appeals.

Issue(s)

1. Whether the Appellate Division erred in relying heavily on the 1954 sale price to determine the property’s value for tax assessment purposes.

2. Whether the Appellate Division’s finding that substantial alterations were completed before the 1954-55 tax year was supported by the record.

3. Whether property can be assessed at a higher value than its worth on the tax status date based on anticipated future improvements.

Holding

1. No, because the sale price in an arm’s-length transaction is strong evidence of the property’s true value.

2. No, because the record shows the alterations were in progress on the 1954-55 taxable status date.

3. No, because property should be assessed at its value on the tax status date, not based on potential future value.

Court’s Reasoning

The Court of Appeals held that the Appellate Division did not err in relying on the 1954 sale price, as it represented an arm’s-length transaction between knowledgeable parties and established prima facie value. The court cited Matter of Lane Bryant v. Tax Comm. of City of N. Y. (19 Y 2d 715), stating that an arm’s length sale of property, if unexplained, is evidence of the “highest rank” to determine the true value of the property. The court dismissed Woolworth’s argument that the sale was a “no cash transaction” designed to allow them to acquire the property at a discounted rate, noting that the $1,000,000+ spent improving the structure enhances the property’s value. However, regarding the 1954-55 tax year, the court found that the Appellate Division’s finding that alterations were completed before the taxable status date was incorrect. The court emphasized that the property should be assessed based on its value on the tax status date, not on anticipated future value. Since the record was unclear regarding the city’s assessment on the 1954-55 tax status date, the Court remanded the matter to Special Term to take further proof and make a proper determination.

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