A New Jersey real estate broker is representing a seller whose property is under contract for $999,999. The buyer's attorney suggests increasing the contract price to $1,000,001 to allow the seller to receive more proceeds, but the broker notices this would trigger an additional tax obligation. Which of the following MOST accurately describes the tax consequence of crossing the $1,000,000 threshold in this New Jersey transaction?
Correct Answer
B) The buyer becomes obligated to pay an additional 1% mansion tax on the entire purchase price of $1,000,001
New Jersey's mansion tax is 1% of the entire purchase price (not just the amount above $1,000,000) when the residential property sells for $1,000,000 or more. The obligation falls entirely on the buyer. If the price is increased to $1,000,001, the buyer owes 1% × $1,000,001 = $10,000.01 in mansion tax. This is a significant cost that did not exist at $999,999, making the $1 increase potentially very costly for the buyer. The broker should alert the buyer's agent to this consequence.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
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