[WSBAPT] Excise tax and gift supplemental

[Eric Nelsen]

Marcus-I started to write something similar to your own response, and you beat me to it. I completely agree. This again is a case of a County Auditor or Treasurer employee giving legal advice with ramifications they obviously have not thought about.

In practice it appears that when price is below assessed value, the County regards the County Assessor's value as rebutting the presumption that the price is true and fair value for purposes of the tax.

WAC 458-61A-102<https://apps.leg.wa.gov/wac/default.aspx?cite=458-61A&full=true#458-61A-102>:

(22) "Selling price" means the true and fair value of the property conveyed. There is a rebuttable presumption that the true and fair value is equal to the total consideration paid or contracted to be paid to the seller or to another person for the seller's benefit.
(a) When the price paid does not accurately reflect the true and fair value of the property, one of the following methods may be used to determine the true and fair value:
(i) A fair market appraisal of the property; or
(ii) An allocation of assets by the seller and the buyer made under section 1060 of the Internal Revenue Code of 1986, as amended.
(b) When the true and fair value of the property at the time of sale cannot reasonably be determined by either of the methods in (a) of this subsection, the market value assessment for the property maintained in the county property tax rolls at the time of sale will be used as the selling price. RCW 82.45.030<http://app.leg.wa.gov/RCW/default.aspx?cite=82.45.030>.
(c) When the sale is of a partial interest in real property, the principal balance of any debt remaining unpaid at the time of sale will be multiplied by the percentage of ownership transferred, and that amount added to any other consideration to determine the selling price.
(d) In the case of a lease with option to purchase, the selling price is the true and fair value of the property conveyed at the time the option is exercised.

RCW 82.45.030<https://app.leg.wa.gov/RCW/default.aspx?cite=82.45&full=true#82.45.030>:

"Selling price," "total consideration paid or contracted to be paid," defined.
(1) As used in this chapter, the term "selling price" means the true and fair value of the property conveyed. If property has been conveyed in an arm's length transaction between unrelated persons for a valuable consideration, a rebuttable presumption exists that the selling price is equal to the total consideration paid or contracted to be paid to the transferor, or to another for the transferor's benefit.
...
(4) If the total consideration for the sale cannot be ascertained or the true and fair value of the property to be valued at the time of the sale cannot reasonably be determined, the market value assessment for the property maintained on the county property tax rolls at the time of the sale shall be used as the selling price.


So, it appears to me that the alternatives would be:

  1.  Pay REET based on assessed value even though sale price was lower-maybe this is the cheapest way out of the issue.
  2.  Provide an appraisal or CMA/BPO showing value is truly lower than assessed.
  3.  Get the legislature and/or the Treasurer to adopt a WAC allowing the sworn statement that you suggest. I think that kind of statement makes the most sense, though I can imagine that the Treasurer doesn't want to put the additional resources into its audit division to follow up on all the below-assessed-value transfers.

Sincerely,

Eric

Eric C. Nelsen
Sayre Law Offices, PLLC
1417 31st Ave South
Seattle WA 98144-3909
206-625-0092
eric at sayrelawoffices.com<mailto:eric at sayrelawoffices.com>

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From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Marcus Fry
Sent: Friday, April 24, 2020 9:54 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] Excise tax and gift supplemental

The problem is that the gift statement is not truthful and could create IRS gift tax reporting issues.  I can see the IRS now, you filled out this form claiming that you were gifting the excess (difference between assessed and purchase price).  The response: "the county told me to complete it."

I get the point that the DOR's objective is to ensure that nothing additional is being given in consideration, but it should be use a sworn affidavit signed by the seller that he/she/they received nothing additional in consideration beyond the purchase price.  That is the plan I will take based upon Ms. Feeney's email.  The DOR should just adopt a form for this type of situation rather than asking for this nonsensical gift supplement.

Marcus J. Fry
Lyon, Weigand & Gustafson, P.S.
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From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Mike Winslow
Sent: Friday, April 24, 2020 9:43 AM
To: 'WSBA Probate & Trust Listserv'
Subject: Re: [WSBAPT] Excise tax and gift supplemental

Yep. I ran into this with Skagit County Treasurer. This is all about preventing collusion to defraud the DOR and Counties of their excise tax revenue.

My issue was with a QCD to clear title. We recited consideration of $10.00. Treasurer said this is a sale for less than assessed value, even though the deed clearly recited it was to clear title.

The options were to prepare the Gift Supplement or a narrative about the reason for clearing title. I did the narrative with the reasons for clearing title. It was a stretch to have that approach approved, be the gift affidavit would have required going back to the Grantor. I signed the narrative as agent for the Grantee.

I expect that if you provide a broker's opinion showing the reduced value that could work, but that is probably more trouble than the gift affidavit.

Michael A. Winslow
1204 Cleveland Ave.
Mount Vernon, WA 98273
Ph. 360-336-3321
Em. Mike at winslegal.com<mailto:Mike at winslegal.com>

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From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Marcus Fry
Sent: Friday, April 24, 2020 8:57 AM
To: WSBA Probate & Trust Listserv (wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>)
Subject: [WSBAPT] Excise tax and gift supplemental

Arms-length negotiation of sale of real property.  Purchase price is less than excise tax.  County is requiring a gift supplement because purchase is below County tax assessed value.

This seems crazy.  Anyone experience this?

Marcus J. Fry
Lyon, Weigand & Gustafson, P.S.

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