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

[Eric Nelsen]

I think it is exempt. The purpose of non-pro-rata distribution exemption is to avoid a scenario where the estate incurs tax because it shuffles assets distributed among the heirs without the heirs paying anything extra (which would be consideration and taxable).

Think of your scenario like this: Johnny gets 1/2 Blackacre plus 1/3 residue, total value of what he receives is, say, $300,000. Sally also gets 1/2 Blackacre plus 1/3 residue, total value $300,000. If Blackacre is worth $100,000, then so long as each of them gets $300,000 total value it doesn't matter who gets Blackacre specifically. That is the kind of non-pro-rata that should be exempt. I think your scenario qualifies even if it doesn't quite exactly match any of the examples.

Sincerely,

Eric

Eric C. Nelsen
SAYRE LAW OFFICES, PLLC
1417 31st Ave South
Seattle WA  98144-3909
phone 206-625-0092
fax 206-625-9040

From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Lincoln Miller
Sent: Monday, February 05, 2018 10:19 AM
To: wsbapt at lists.wsbarppt.com
Subject: [WSBAPT] Non-pro rata distribution; real estate excise tax exemption

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

[Description: logo]

19586 10th Ave. NE, Suite 300
P. O. Box 2172, Poulsbo, WA  98370
(360) 779-4500 (phone)
(360) 347-1181 (direct)
(888) 356-8310 (fax)
lincoln at lincolnmillerlaw.com<mailto:lincoln at lincolnmillerlaw.com>
www.lincolnmillerlaw.com<http://www.lincolnmillerlaw.com/>


-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://mailman.fsr.com/pipermail/wsbapt/attachments/20180205/1c9c16af/attachment.html>
-------------- next part --------------
A non-text attachment was scrubbed...
Name: image001.jpg
Type: image/jpeg
Size: 1467 bytes
Desc: image001.jpg
URL: <http://mailman.fsr.com/pipermail/wsbapt/attachments/20180205/1c9c16af/image001.jpg>