[WSBAPT] Non-pro rata distribution; real estate excise tax exemption

[Lincoln Miller]

Hypothetical: Decedent's Will provides for Blackacre to pass equally to Johnny and Sally, with balance of estate to Johnny, Sally and Betty. Blackacre is worth $100,000. Johnny and Sally agree that Johnny will receive all of Blackacre and Sally will receive an extra $50,000 of assets out of Johnny's 1/3rd share of the residuary. Assume sufficient assets in the estate to accomplish the foregoing.

Question: Is this transaction exempt from excise tax under WAC 458-61A-202 as a nonpro rata distribution?

The situation is slightly different than Examples 1 and 4 from the WAC exemption, as follows:

Example 1. Aunt Mary wills her entire estate equally to her three nieces, Meg, Beth, and Jo. The estate consists of her primary residence, a cottage at the ocean, and significant cash assets, among other things. Rather than take title to the two parcels of real estate in all three names, the estate may be distributed by deeding the primary residence to Meg, the oceanfront property to Beth, and the majority of the cash assets to Jo.

Example 4. Sheri and her two sisters inherit their father's home, valued at $180,000, in equal portions. Sheri wants sole ownership of the home, but there are not "in-kind" assets of sufficient value to be distributed by the personal representative to her two sisters in a nonpro rata distribution. In order to take title directly from the personal representative, Sheri pays each of her sisters $60,000, and they quitclaim their right to the property under the will. Real estate excise tax is due on the total of $120,000 paid for the property.

Lincoln Miller

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