[WSBAPT] Excise tax and gift supplemental

[Paul Neumiller]

And therein lies part of the problem.  As real property attorneys, we are supposed to know how to record a document (I mean, just how hard can that be??  People do it every day.) and our clients are starting to look cross-eyed at us when we don't seem to be able to get the job done.


[cid:image002.jpg at 01D61A2D.2A21B170]


From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Candace Wilkerson
Sent: Friday, April 24, 2020 11:33 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] Excise tax and gift supplemental

Yes, I had one rejected multiple times by King County for various reasons including that one (this was an original inheritance of real property between siblings, and one sibling sold his interest to the other for less than market value).  The problem is that each time they reject it, someone new is reviewing it and they contradict each other.  One demanded the supplemental statement.  When we sent that, it was rejected again and we were told we *didn't* need the supplemental statement.  There are other ridiculous reasons for rejection as well, such as (at one point) rejecting my client's check because it didn't have a phone number on it.

The worst part of all this is that the penalties for recording the deed more than 30 days after the date of the deed increase each time it's sent back, and my client is furious with me because he can't understand why this keeps happening.

I was planning to take it into the Recorder's Office myself right before everything shut down.  We can't record electronically for reasons I won't go into at this point.  So I am simply waiting for Rejection No. 4 (or 5).

Candace Wilkerson

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 Stuart Ainsley
Sent: Friday, April 24, 2020 11:09 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

I'm literally facing this issue today where the county rejected the initial filing because the sale between tenants in common was at a price lower than the percentage sold applied to the assessed value.  I may have to bring out the Grumpy old man from the back room.

Stuart


Stuart M. Ainsley
Gourley Law Group
Snohomish Escrow
The Exchange Connection

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

360.568.5065
360.568.8092  fax
stuart at glgmail.com<mailto:stuart at glgmail.com>
1Licensed to practice Law in Washington, Texas and Colorado

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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 Craig Gourley
Sent: Friday, April 24, 2020 10:48 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

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://nam12.safelinks.protection.outlook.com/?url=https%3A%2F%2Fapps.leg.wa.gov%2Fwac%2Fdefault.aspx%3Fcite%3D458-61A%26full%3Dtrue%23458-61A-102&data=02%7C01%7C%7C97b39de28ef048a9cf8808d7e87e7a6e%7C84df9e7fe9f640afb435aaaaaaaaaaaa%7C1%7C0%7C637233502221909119&sdata=wF5NG%2FyTWX8nuwzO4qcCmhnQRHRlMl3usQWVY%2B%2B98Dk%3D&reserved=0>:

(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<https://nam12.safelinks.protection.outlook.com/?url=http%3A%2F%2Fapp.leg.wa.gov%2FRCW%2Fdefault.aspx%3Fcite%3D82.45.030&data=02%7C01%7C%7C97b39de28ef048a9cf8808d7e87e7a6e%7C84df9e7fe9f640afb435aaaaaaaaaaaa%7C1%7C0%7C637233502221909119&sdata=%2Fa1PdpAxlQzn0y9MVHtsPknRilCRuzREd5DWsfGlvuM%3D&reserved=0>.
(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://nam12.safelinks.protection.outlook.com/?url=https%3A%2F%2Fapp.leg.wa.gov%2FRCW%2Fdefault.aspx%3Fcite%3D82.45%26full%3Dtrue%2382.45.030&data=02%7C01%7C%7C97b39de28ef048a9cf8808d7e87e7a6e%7C84df9e7fe9f640afb435aaaaaaaaaaaa%7C1%7C0%7C637233502221909119&sdata=8cQZeaACvGEIuf9K1eUr0TVJ7U%2BxsOLxtGqQ3hute5w%3D&reserved=0>:

"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<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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