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Chicago Increases Real Estate Transfer Tax

Chicago has increased to 1.05% its tax on real property transfers. This tax is imposed on the transfer of title to, or beneficial interest in, real property located in Chicago, and applies whether or not the transfer resulted in a gain or loss.

The tax increase was originally to be paid by the buyer, but in a last-second change, the city council decided that the increase would be paid from the seller's proceeds.

What is beneficial interest in real property?

Beneficial interest in real property includes, but is not limited to:

• The beneficial interest in an Illinois land trust
• The lessee interest in certain ground leases
• The indirect interest in real property as reflected by a controlling interest in a real estate entity (such as a partnership owning real property).
• An ownership interest in a real estate cooperative

The transfer tax has two tiers

• The first tier is at a rate of $3.75 per $500 (0.75%) of the transfer price, which is termed the "city portion." This tax is imposed on the buyer. This portion of the tax is not new.
• The second tier is at a rate of $1.50 per $500 (0.30%) of the transfer price, which is termed the "CTA (Chicago Transit Authority) portion." This tax is imposed on the seller and represents the tax increase effective April 1, 2008.

Which transfers are subject to the tax?

The tax applies to transfers:

• Incident to divorce
• Considered a Section 1031 exchange
• Of units via exchange of stock certificate in a cooperative building

Which transfers are exempt?

Exemptions from this tax are transfers:

• For less than $500
• Under a confirmed plan under bankruptcy
• Of real property acquired by or from a governmental body
• Changes related solely to transactions in which the deed secures debt or other obligations
• Changes related solely to transactions in which the deed releases property that secures debt

Also exempt are transfers in enterprise zones where the property is used primarily for commercial or industrial purposes.

No transfer is exempt unless a declaration describes the facts supporting the exemption along with supporting documentation.

Form 7551 must be completed for all transfers

Form 7551 is utilized to report transfers of real estate to the City of Chicago Department of Revenue. A report should be completed even if an exemption is allowed. These forms may be obtained on the city's Web site at http://egov.cityofchicago.org/city/webportal/home.do.

For more information, please contact Amber Larsen at 312-980-2964 or your Blackman Kallick representative.

This publication is part of Blackman Kallick’s marketing of professional services, and is not written tax advice directed at the specific facts and circumstances of any person and/or entity. Contents of this publication are of a general nature, and you should not act on this information without obtaining professional advice from your business advisor that is appropriately tailored to your individual needs and circumstances. This written advice is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.