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Volume 1 - Opinions of Counsel SBEA No. 27

Opinions of Counsel index

Veterans’ exemption (repayment of a loan of mustering-out pay) - Real Property Tax Law, § 458:

Money received as repayment of a loan of mustering- out pay is not eligible funds under section 458 of the with such money is not entitled to tax exemption.

Real Property Tax Law, section 458 provides for the exemption of “real property purchased with the proceeds of a pension, bonus or insurance, or dividends or refunds on such insurance, or payments received as prisoner of war compensation from the United States government, heretofore or hereafter received, hereinafter referred to as eligible funds, granted by the United States or by this state for military or naval services, and owned by the person who rendered such services, or by his wife or unremarried widow, or dependent father or mother, or by his minor children . . .”.

Mustering-out pay constitutes a bonus within the meaning of the quoted statute. Accordingly, if such pay has retained its original character after being loaned and the loan has been repaid, the property is entitled to tax exemption.

The Attorney General has ruled that where real property with an established exemption is sold and the proceeds used to purchase other real property, the newly acquired parcel is also entitled to tax exemption (14 St. Dept. 495). At page 496 of said report, he stated:

“The purposes of this law are very manifest. It was the intention of the Legislature to exempt the military and naval veterans from the payment of taxes, except some local taxes, upon property which had been purchased with their pension money and it would not be in keeping with the spirit of the act to hold that they would lose the benefit of such exemption if their personal interests should lead them to sell such property and invest the proceeds in some other. The pension money would be reinvested in the new property and it would still retain its identity as pension money. I can see no good reason why the veteran owner of the second property should not have the same rights and privileges as were accorded to him as the owner of the first property.”

The State Board of Equalization and Assessment has heretofore concluded that where eligible funds were used initially to purchase a trailer home, such trailer home must have qualified as real property if the identity of the money is deemed to have been maintained within the meaning of the quoted opinion of the Attorney General. In other words, the initial investment of eligible funds in personal property destroys its status as such. A like conclusion was reached by the State Tax Commission, predecessor to this Board, where the veteran had invested eligible funds in war bonds.

In light of the foregoing, it is our opinion that the identity of the mustering-out pay has not been maintained so that money received as repayment of a loan of mustering-out pay is not eligible funds under Real Property Tax Law, section 458, and real property purchased with such money is not entitled to tax exemption.

July 14, 1950