SUMMARY
Condominium parcels in most New England jurisdictions are assessed at a single value per unit, with no separate land component itemized on the assessment roll. Single-family and other fee-simple parcels, by contrast, carry an explicit land value and an explicit building (improvement) value. This asymmetry creates two distinct problems: (1) at the state and local level, it makes land value taxation (LVT) or split-rate reform impossible to apply uniformly to condominiums without treating them preferentially; and (2) at the federal level, it creates an assessment-driven depreciation arbitrage in which condominium owners can plausibly claim 100% depreciation of basis under IRS Publication 527’s assessed-value safe harbor; a position that conflicts with Tax Court precedent under Willits and Meiers. The standard remedy used in graded-tax jurisdictions in Pennsylvania, and recommended by the Center for the Study of Economics (CSE), is to assess the condominium project as a whole on the land component, then apportion that land value to units in proportion to each unit’s recorded percentage interest in the common elements. This single fix resolves both the state assessment gap and the federal depreciation arbitrage. The body of this memo lays out the assessment background and the LVT apportionment solution; Appendix B addresses the federal tax consequences.
BACKGROUND: HOW NEW ENGLAND ASSESSES CONDOMINIUMS
Condominium ownership is a creation of state statute. In Massachusetts, the governing law is Chapter 183A, enacted in 1963. Parallel statutes exist in the other New England states. Three features of these statutes drive the assessment asymmetry:
The unit is the parcel. Under M.G.L. c. 183A, § 14, each unit, together with its undivided percentage interest in the common areas and facilities, is treated as a separate parcel of real estate for assessment and taxation. The land, the building shell, and the common elements are not separately taxable parcels; their value is folded into the units.
Common areas are not taxed separately. Assessors may factor common areas into the value of an individual unit, but they cannot assign a separate land assessment to the land beneath the project. The land has no taxpayer of record other than the unit owners collectively.
Valuation defaults to the sales-comparison approach. Because condominium units trade frequently and comparable sales are abundant, assessors almost universally value condos by direct market comparison. That method produces a single total value per unit. It does not produce land and building values as separate outputs, as the cost approach (MV = LV + BV) does for a single-family home.
The town of Merrimack, New Hampshire, describes the result candidly on its assessor’s FAQ: a condominium owner asking why there is land value on the bill is told that unit owners hold a fractional interest in the common land and exterior, and that the components of value are not appealable in any event. Most New England assessors take the same posture — the total figure is what is defensible at the appellate tax board, and the internal split (if any) is administrative.
This produces a structural asymmetry between property types on the assessment roll:
Single-family / two-family / commercial parcels: land and building are itemized. An LVT or split-rate tax can be applied directly.
Condominium parcels: a single total value with no land line, or a nominal placeholder. An LVT applied mechanically would tax these units only on whatever fraction of land value the assessor happened to enter, which, in many municipalities, is zero.
WHY THIS IS A PROBLEM FOR LVT?
Land value taxation depends on a defensible, uniform separation of land from improvements across every parcel in the taxing jurisdiction. The condominium gap creates three problems:
Preferential treatment. A high-density downtown condominium sits on the most valuable land in the jurisdiction, yet under current rolls contributes nothing (or almost nothing) to the land tax base. The adjacent single-family home on a smaller, less valuable lot pays full LVT on its land. This inverts the equity case for LVT, which is premised on taxing the publicly created value of location.
Horizontal inequity within the condo class. Without a uniform apportionment rule, a penthouse and a ground-floor studio in the same building sharing the same land would either pay the same land tax (if apportioned per unit) or wildly different land taxes (if apportioned by unit value), and the choice would vary by municipality.
Assessment equity research is already skeptical. Cohen and Fedele’s 2017 study of New London, New Haven, and Hartford found that even for conventional parcels, the coefficient of dispersion on land ratios was too large to support an equitable split tax without more frequent revaluation. Layering an unaddressed condominium gap on top of that would invite challenge.
THE SOLUTION: PROJECT-LEVEL LAND VALUATION, PRO-RATA APPORTIONMENT
The mechanism is well established in jurisdictions that already operate a graded or split-rate tax. CSE’s impact studies for Pennsylvania municipalities treat condominium projects the same way New York’s Real Property Law § 339-y and parallel provisions handle the inverse problem (preventing condos from being assessed at more than the project would be worth as a single parcel): value the project as an economic entity, then distribute. Applied to LVT, the method has four steps:
Step 1: Value the underlying land as if vacant. The assessor determines the market value of the parcel beneath the condominium project as if it were unimproved, using the same land-value surface, frontage tables, or location-based factors applied to every other parcel in the jurisdiction. This is identical to the land-valuation step already performed for cost-approach assessments of single-family homes.
Step 2: Verify the project ceiling. Confirm that the sum of unit values plus apportioned land does not exceed what the project as a whole would be worth if assessed as a single parcel. This is the protection codified in M.G.L. c. 183A’s parallels and in NY RPL § 339-y(1)(b), and it prevents double-counting between unit sale prices (which already capitalize some land value) and the new land assessment.
Step 3: Apportion land to units by percentage interest. Allocate the project’s land value to each unit in proportion to that unit’s recorded percentage interest in the common elements, as stated in the master deed. This figure already exists on every Massachusetts condominium under c. 183A, § 5, and on every condominium nationwide under the corresponding state act. New York City formalized exactly this allocation method for building value in 2007; the same mechanism applies to land.
Step 4: Reduce the unit’s improvement value accordingly. Subtract the apportioned land value from the sales-comparison total to derive the building component. The unit’s total assessment remains unchanged at the outset; only the split between land and improvement changes. Under a revenue-neutral LVT shift, the unit’s tax bill rises or falls based on the parcel’s land-richness (exactly as intended).
The administrative cost is modest. The land valuation in Step 1 is work the assessor must do anyway for any cost-approach calibration, and the percentage interests in Step 3 are already recorded at the registry of deeds. The only new operational step is reconciliation against the project ceiling, which can be automated against existing CAMA (computer-assisted mass appraisal) systems.
Two further notes on implementation:
Percentage interest vs. square footage. Massachusetts c. 183A, § 6 allows common-expense assessments to be based on either percentage interest or square footage. For LVT apportionment, percentage interest is the better anchor because it is fixed in the master deed and rarely amended, whereas square-foot recalculations invite dispute.
Leasehold and air-rights condos. Where a condominium sits on a ground lease (c. 183A, § 8A), the apportioned land value should attach to the leasehold interest in the same percentages, with the lessor’s residual interest taxed separately. This mirrors how leasehold condominiums are already handled for assessment ceiling purposes.
RECOMMENDATION
Any New England LVT or split-rate proposal should include, as a technical prerequisite, a statutory or regulatory directive to assessors requiring (1) a project-level land valuation for every condominium parcel and (2) pro-rata apportionment to units by recorded percentage interest in the common elements. Without this, an LVT regime would either leave condominiums structurally undertaxed on land (undermining the policy’s equity rationale) or invite a patchwork of municipal workarounds that would not withstand uniformity challenges. The fix is mechanical, not conceptual, and the data infrastructure to implement it already exists in every condominium master deed. As Appendix B explains, the same fix also resolves a parallel federal tax problem that the current assessment practice has quietly created.
APPENDIX A: SOURCES
M.G.L. c. 183A, § 14 — Taxation and Betterment Assessments (the unit-as-parcel rule) https://malegislature.gov/Laws/GeneralLaws/PartII/TitleI/Chapter183a/Section14
M.G.L. c. 183A, § 5 Interest in Common Areas; Percentage; Division https://law.justia.com/codes/massachusetts/2022/part-ii/title-i/chapter-183a/section-1/
Town of Merrimack, NH Assessing Department FAQ (condominium land-value question) https://www.merrimacknh.gov/assessing-department/pages/assessing-information
NY Real Property Law § 339-y Condominium Assessment Ceiling (NY State Dept. of Taxation Opinion of Counsel) https://tax.ny.gov/pubs_and_bulls/orpts/legal_opinions/v8/108.htm
Cohen, J. P. & Fedele, M. J. (2017). Where in Connecticut is the Best Location for a Split Tax? Buildings, MDPI. https://www.business.uconn.edu/wp-content/uploads/sites/969/2016/01/buildings-216898-final.pdf
Center for the Study of Economics — Mission and LVT impact studies https://urbantoolsconsult.org/
Vincent, J. — quoted on LVT mechanics, in Shelterforce (April 2026) https://shelterforce.org/2026/04/08/property-taxes-arent-the-cause-of-our-housing-crisis-theyre-a-solution-to-it/
NYC Department of Finance (Condominium Value Allocation by Percentage Interest (2007 onward) https://www.nyc.gov/assets/finance/downloads/pdf/coop_condo_abatement/condoaffidavit.pdf
APPENDIX B: FEDERAL TAX IMPLICATIONS The condominium assessment gap is not merely a state and local issue. It interacts with federal income tax law in a way that has largely gone unexamined in the LVT literature but meaningfully amplifies the case for reform. The same assessor practice that prevents an LVT from applying uniformly to condominiums also enables an arguable federal depreciation arbitrage for condominium landlords.
B.1 THE FEDERAL DEPRECIATION RULE AND THE PUB. 527 SAFE HARBOR
Under §167 and §168 of the Internal Revenue Code, a rental property owner may depreciate the improvement portion of a property’s basis over 27.5 years (residential rental, MACRS straight-line) but may not depreciate land, which is treated as a non-wasting asset. Every rental owner must therefore allocate the purchase basis between the depreciable building and the non-depreciable land.
IRS Publication 527 provides two methods for that allocation:
Primary method — fair market value (FMV). The taxpayer allocates the basis between the land and the building in proportion to each asset’s FMV at the time of purchase. This is the rule the IRS prefers; an independent appraisal is the strongest evidence.
Safe harbor — assessed values. If FMVs are uncertain, Pub. 527 explicitly permits the taxpayer to divide costs between land and building based on the assessed values for real estate tax purposes. Pub. 527 gives an example: an $80,000 assessment split $68,000 / $12,000 allows 85% of the purchase price to be allocated to the house. This is the method most rental owners and their preparers actually use, because it produces a defensible number directly from the municipal tax card.
The safe harbor is what creates the New England condominium problem. When the assessor’s tax card shows $0 land value (or no land line at all), the safe harbor produces a land-to-total ratio of zero — and therefore a 100% depreciable basis. This is not a hypothetical reading. It is the answer currently being given on tax preparer forums and by major consumer tax-prep platforms to Massachusetts and New Hampshire condo owners who report that their town does not assess any land value. The advice in circulation is that because the assessor has produced no land number, the owner may take full depreciation on the entire purchase price, with the assessor’s record serving as the primary supporting documentation.
B.2 THE TAX COURT PRECEDENT: WILLITS AND MEIERS
The Tax Court has confronted the question of how to allocate condominium purchase basis for depreciation purposes in two well-known California cases. Both are unfavorable to taxpayers attempting to maximize depreciation, but neither addresses the precise New England fact pattern.
Willits v. Commissioner, T.C. Memo 1979-294. The taxpayers owned a rental condominium in Lomita, California, and argued that no amount should be allocated to land for depreciation purposes — that 100% of the purchase price was depreciable as building value. They reasoned that their condominium ownership was effectively an air-rights interest with no fee in the underlying land. The Tax Court rejected the argument. It examined the three sections of the California Civil Code governing condominium ownership, concluded that a condominium unit owner does hold an undivided interest in the land beneath the project, and accepted the allocation shown on the Los Angeles County tax bill, which allocated 54% of the value to land. The taxpayer’s depreciable basis was reduced accordingly.
Meiers v. Commissioner, T.C. Memo 1982-51. The taxpayers owned two rental condominiums in Los Angeles. They allocated 20% of the basis to land. The IRS reallocated 45% to one unit and 51% to the other, based on the local assessor’s relative valuation of land and improvements for each parcel. The Tax Court sided with the IRS allocation.
Two doctrinal rules emerge from these cases. First, the assessor’s land/improvement split is presumptively reasonable evidence of the proper allocation, neither conclusive nor exclusive, but the natural starting point absent better evidence. Second, the burden of proving a different allocation rests on whoever disputes the assessor’s split, and a taxpayer arguing for 100% building allocation faces a particularly steep climb when state condominium law recognizes that unit owners hold a real interest in the underlying land.
Crucially, the New England fact pattern is different from Willits and Meiers in a way that may cut against the taxpayer rather than for them. In the California cases, the assessor had produced a land/improvement split, and the taxpayer was attempting to override it downward. In the New England fact pattern, the assessor has produced no land number. The Pub. 527 safe harbor’s denominator is missing. A taxpayer in audit cannot point to an assessor’s affirmative allocation of zero; they can only point to the absence of an allocation, which is not the same thing. An IRS examiner applying Willits and Meiers would likely conclude that the Pub. 527 safe harbor is simply unavailable on these facts, and that the taxpayer must establish FMV by some other means.
B.3 THREE TAXPAYER POSITIONS AND THEIR EXPOSURE
Aggressive: 100% depreciation. Taxpayer depreciates the full purchase price on the theory that the assessor has recorded no land value, and Pub. 527’s assessed-value method therefore yields a 100% building allocation. This is the most common posture in practice. On audit, the IRS would likely cite Willits and Meiers for the proposition that the absence of an assessor split does not mean land has no value — it merely means the safe harbor is unavailable. The examiner would then impute land value from comparable land sales, from a market study of the underlying parcel, or from a reasonable percentage. Adjustments in the 15–25% range are typical in the secondary literature; tax court precedent has gone as high as 45–54%. Penalties for substantial understatement under §6662 are a realistic concern if the position cannot be supported.
Conservative: appraisal-based FMV allocation. Taxpayer engages an appraiser at acquisition (or shortly after) to allocate FMV between the unit’s improvement value and its imputed share of land value. The appraisal becomes the substantial authority foundation. Pub. 527 expressly recognizes FMV as the primary method; the assessor’s silence is treated as non-dispositive. Typical allocations land in the 10–25% range depending on location and density. This is the defensible posture and what tax CPAs generally recommend.
Hybrid: rule-of-thumb percentage. Taxpayer allocates a fixed percentage (commonly 15–20% for condominiums) without a formal appraisal. This is weaker than an appraisal but stronger than relying on a $0 assessor record. It is the practical middle ground for owners of modestly valued units for whom appraisal costs are prohibitive.
B.4 THE SECTION 1250 RECAPTURE TRAP
There is a second-order consequence that owners taking the aggressive position do not always appreciate. Depreciation reduces the basis dollar-for-dollar. On sale, gain attributable to depreciation previously taken on §1250 property is recaptured at a maximum federal rate of 25%, higher than the long-term capital gains rate that would otherwise apply. Every dollar of “excess” depreciation claimed under the no-land-value posture, therefore, comes back as ordinary-character recapture on disposition.
For a Massachusetts condo owner who depreciated 100% of a $400,000 unit over a 15-year hold rather than 80% (assuming a 20% land allocation), the excess depreciation is roughly $43,600. On sale, that figure is recapture at up to 25% federal plus applicable state tax a contingent liability of $11,000 or more against an aggressive position the taxpayer may not ultimately be able to defend if examined. The position is therefore not merely risky in audit; it is risky on disposition even if never examined.
B.5 THE AGGREGATE FEDERAL REVENUE EFFECT
The per-unit effect is modest; the aggregate effect is not. A representative Massachusetts rental condominium with a $400,000 depreciable basis depreciated at 100% rather than 80% generates excess annual depreciation of roughly $2,900 translating to federal tax deferred (not permanently avoided) of $700 to $1,100 per year per unit depending on the owner’s marginal rate. Across the rental condominium stock of Massachusetts, Connecticut, Rhode Island, New Hampshire, Vermont, and Maine, the deferred federal revenue is non-trivial. It is also unevenly distributed: condominium landlords benefit from a tax position that is structurally unavailable to single-family rental owners, whose tax cards show explicit land values.
From a policy standpoint, this is a federal tax expenditure flowing through a quirk of state condominium assessment practice; created accidentally, operating without congressional sanction, and producing horizontal inequity between rental-property classes.
B.6 THE LVT APPORTIONMENT FIX RESOLVES BOTH PROBLEMS
The four-step apportionment mechanism described in the body of this memo (project-level land valuation, ceiling reconciliation, allocation based on percentage interest in common elements, and reduction of the improvement component) produces an explicit land value for every condominium tax card. Once that number exists:
Pub. 527’s assessed-value safe harbor produces the correct answer. The land-to-total ratio on the tax card is no longer zero. A condominium landlord using the safe harbor allocates basis between land and building the same way a single-family rental owner does. Horizontal equity between property types is restored.
Willits and Meiers become the governing precedent rather than a distinguishable one. The IRS no longer needs to litigate around the absence of an assessor record; the assessor’s allocation simply applies. Aggressive 100% depreciation positions become indefensible.
The federal/state interaction is harmonized. State condominium assessment practice and federal depreciation law point to the same allocation. The accidental tax expenditure closes.
The convergence is striking: a single technical reform, directing assessors to enter an explicit, apportioned land value on every condominium parcel simultaneously enables uniform LVT, restores horizontal equity between rental-property classes, eliminates a federal depreciation arbitrage, and removes a §1250 recapture trap for owners currently taking aggressive positions. The reform is supported by both LVT advocates and a straightforward reading of existing federal tax doctrine. There is no substantial constituency for preserving the status quo, only inertia in assessor practice.
B.7 SOURCES FOR APPENDIX B
IRS Publication 527 (2025), Residential Rental Property — Basis of Depreciable Property; allocation between land and buildings https://www.irs.gov/publications/p527
IRS Publication 527 (PDF, 2025) official text https://www.irs.gov/pub/irs-pdf/p527.pdf
IRS Publication 551, Basis of Assets (allocation rules cross-reference) https://www.irs.gov/publications/p551
Willits v. Commissioner, T.C. Memo 1979-294 (condominium land allocation; Tax Court accepts assessor’s split) https://www.taxprotalk.com/forums/viewtopic.php?t=5418
Meiers v. Commissioner, T.C. Memo 1982-51 (IRS reallocation of condominium basis from 20% land to 45–51% land) https://www.taxprotalk.com/forums/viewtopic.php?t=5418
Intuit TurboTax Community: Massachusetts condo rental, no assessed land value (practitioner discussion) https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/no-land-value-for-condo-rental-in-massachuestts/00/483558
IRC §1250 and §6662 (depreciation recapture and substantial understatement penalty framework )https://www.law.cornell.edu/uscode/text/26/1250