The ‘% of profits’ format for a Flip Tax is calculated by deducting the cost basis from the sale price and multiplying the result by a predetermined percentage which varies by building. Cost basis consists of the purchase price plus any qualifying capital improvements, closing costs or other factors deemed appropriate by the co-op board.
The ‘$ per share’ format for a Flip Tax is calculated by multiplying the number of shares assigned to an individual co-op apartment by a predetermined dollar amount per share. Since there is no relationship between the number of shares held by co-op apartments in different buildings, there is no average range for the ‘$ per share’ flip tax amount. That being said, most ‘$ per share’ flip taxes amount to no more than a few percentage points of a sale price.
Each individual co-op apartment is assigned a number of shares by the co-op corporation. Larger units as well as more desirable apartments (higher floor, better exposure, etc.) typically have a higher number of shares assigned to them. Operating costs and assessments for a co-op are proportionally allocated to units based on the share count. It’s important to note that while share count may be analyzed between units in the same co-op, there’s no way to draw any meaningful conclusions from the number of shares assigned to units in different co-op buildings.
Cost basis consists of the purchase price plus any qualifying capital improvements, closing costs or other factors deemed appropriate by the co-op board. Cost basis usually comes into play when a Flip Tax is based on the size of a seller’s profit as opposed to the sale price itself.