[WSBAPT] Excise tax and gift supplemental

Fri Apr 24 11:16:47 PDT 2020

I looked this up once because I had the same thought-we need to be able to record promptly regardless of tax disputes-and I think the problem is RCW 82.45.090, which effectively makes the Treasurer (or the Auditor acting for the Treasurer) a gatekeeper to recording even over the Auditor. As the law currently stands, I think the procedural steps would be to pay the tax and then apply for a refund. Of course when the transaction is such that there is no money to pay the tax that isn't owed, that does get to be a problem.

I think we need a legislative fix, because this does potentially put the Auditor in a bind with regard to RCW 65.04.110.

RCW 82.45.090<http://app.leg.wa.gov/RCW/default.aspx?cite=82.45.090>
Payment of tax and fee-Evidence of payment-Recording-Sale of beneficial interest.
(1) Except for a sale of a beneficial interest in real property where no instrument evidencing the sale is recorded in the official real property records of the county in which the property is located, the tax imposed by this chapter must be paid to and collected by the treasurer of the county within which is located the real property that was sold. In collecting the tax the county treasurer must act as agent for the state. The county treasurer must cause a verification of payment evidencing satisfaction of the lien to be affixed to the instrument of sale or conveyance prior to its recording or to the real estate excise tax affidavit in the case of used mobile home sales and used floating home sales. A receipt issued by the county treasurer for the payment of the tax imposed under this chapter is evidence of the satisfaction of the lien imposed in this section and may be recorded in the manner prescribed for recording satisfactions of mortgages. No instrument of sale or conveyance evidencing a sale subject to the tax may be accepted by the county auditor for filing or recording until the tax is paid and the verification of payment affixed thereto; in case the tax is not due on the transfer, the instrument may not be so accepted until suitable notation of such fact has been made on the instrument by the treasurer. At the sale of a used mobile home, used manufactured home, used park model, or used floating home that has not been title eliminated, property taxes must be current in order to complete the processing of the real estate excise tax affidavit or other documents transferring title. Verification that the property taxes are current must be noted on the mobile home real estate excise tax affidavit or on a form approved by the county treasurer. For the purposes of this subsection, "mobile home," "manufactured home," and "park model" have the same meaning as provided in RCW 59.20.030<http://app.leg.wa.gov/RCW/default.aspx?cite=59.20.030>.
(2) For a sale of a beneficial interest in real property where a tax is due under this chapter and where no instrument is recorded in the official real property records of the county in which the property is located, the sale must be reported to the department of revenue within five days from the sale date on such returns or forms and according to such procedures as the department may prescribe. Such forms or returns must be signed or electronically signed by both the transferor and the transferee and must be accompanied by payment of the tax due.
(3) Any person who intentionally makes a false statement on any return or form required to be filed with the department under this chapter is guilty of perjury under chapter 9A.72<http://app.leg.wa.gov/RCW/default.aspx?cite=9A.72> RCW.

RCW 65.04.110<http://app.leg.wa.gov/RCW/default.aspx?cite=65.04.110>
Liability of auditor for damages.
If any county auditor to whom an instrument, proved or acknowledged according to law, or any paper or notice which may by law be recorded is delivered or electronically transmitted for record: (1) Neglects or refuses to record such instrument, paper or notice, within a reasonable time after receiving the same; or (2) records any instruments, papers or notices untruly, or in any other manner than as directed in this chapter; or, (3) neglects or refuses to keep in his or her office such indexes as are required by *this act, or to make the proper entries therein; or, (4) neglects or refuses to make the searches and to give the certificate required by *this act; or if such searches or certificate are incomplete and defective in any important particular affecting the property in respect to which the search is requested; or, (5) alters, changes, or obliterates any records deposited in his or her office, or inserts any new matter therein; he or she is liable to the party aggrieved for the amount of damage which may be occasioned thereby. However, if the name or names and address hand printed, printed, or typewritten on any instrument, proved or acknowledged according to law, or on any paper or notice which may by law be filed or recorded, is or are incorrect, or misspelled or not the true name or names of the party or parties appearing thereon, the county auditor shall not, by reason of such fact, be liable for any loss or damage resulting therefrom.

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>

Covid-19 Update - Sayre Law Offices remains available to serve our clients and the public during this time, subject to the orders and recommendations of government authority. Please do not hesitate to contact us if we may be of service to you, your family, or your business.

All attorneys are working remotely during regular business hours and are available via email and by phone; please call the Seattle office. Videoconferencing also is available. Signing of estate planning documents can be completed and will be handled on a case-by-case basis; please call the Seattle office.

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From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Craig Gourley
Sent: Friday, April 24, 2020 10:48 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] Excise tax and gift supplemental

Grumpy old man here. The counties are out of control, as they have been for years.  In Snohomish County I have even had them CHANGE the affidavit signed by my client under penalty of perjury and make it completely wrong.  I have threatened to sue them several times and even got the County prosecuting attorney involved.  It was better for a while then went back to the same ol same ol.  I have yet to find their authority to deny my recordings based on the excise tax affidavit.  If they think it is wrong they should tag it for audit and record.  We do a lot of 1031 exchanges and sometimes we are recording on the 180th day.  I had Snohomish County reject a recording based on the WAC we cited in the affidavit (and they were wrong) . One day delay would have cost the client $400,000 in tax.  After assuring them that if it was not recorded that day, their name would be appearing in the upper left hand side of paper with numbers down the side, they recorded.  We, as a group need to talk to the state and have them give guidance to the counties to knock it off.  Has anyone seen statutory authority for a county to deny a recording that meets all the physical requirements of document to be recorded?

Gourley Law Group
Snohomish Escrow
The Exchange Connection

1002 10th Street / PO Box 1091
Snohomish, WA 98291

360.568.5065
360.568.8092  fax
Craig at glgmail.com<mailto:Craig at glgmail.com>

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From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> On Behalf Of Eric Nelsen
Sent: Friday, April 24, 2020 10:24 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: Re: [WSBAPT] Excise tax and gift supplemental

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>

Covid-19 Update - Sayre Law Offices remains available to serve our clients and the public during this time, subject to the orders and recommendations of government authority. Please do not hesitate to contact us if we may be of service to you, your family, or your business.

All attorneys are working remotely during regular business hours and are available via email and by phone; please call the Seattle office. Videoconferencing also is available. Signing of estate planning documents can be completed and will be handled on a case-by-case basis; please call the Seattle office.

MAIL AND DELIVERIES can be received at the Seattle office. For any other needed arrangements, please call the Seattle office.

Be assured that we will continue to advise and support our clients throughout this health emergency.

From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto: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<mailto: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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