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<DIV style="FONT-SIZE: 12pt; FONT-FAMILY: 'Calibri'; COLOR: #000000">
<DIV>my first point says one can fill out the affidavit without reference to
mortgage debt assumption or taking subject to, but my second point, cod, is
consideration, as I say. So one can argue I am fudging a bit. But I
have seen transactions where some matters are handled outside escrow and thus
not part of the closing record, especially perhaps where the borrower and the
lender are the same person. Moreover, we haven’t looked at the comparison
between fair rental and the amount for mortgage payments, tax insurance
etc. I wonder if the trust really owes the client anything or whether the
rental value should be written to full value in exchange for client paying the
freight on the property, so that the note is voided out, all nunc pro tunc of
course. But I suppose the client is not in a position to acknowledge that
he is getting the trust property for zero real consideration. I guess I am
spinning my wheels a bit– but to paraphrase George Mallory on the motive for
climbing mountains “why does a tax lawyer want to avoid taxes? – because they
are there!” </DIV>
<DIV
style='FONT-SIZE: small; TEXT-DECORATION: none; FONT-FAMILY: "Calibri"; FONT-WEIGHT: normal; COLOR: #000000; FONT-STYLE: normal; DISPLAY: inline'>
<DIV style="FONT: 10pt tahoma">
<DIV> </DIV>
<DIV style="BACKGROUND: #f5f5f5">
<DIV style="font-color: black"><B>From:</B> <A title=mike@winslegal.com
href="mailto:mike@winslegal.com">Mike Winslow</A> </DIV>
<DIV><B>Sent:</B> Wednesday, May 18, 2016 5:14 PM</DIV>
<DIV><B>To:</B> <A title=wsbapt@lists.wsbarppt.com
href="mailto:wsbapt@lists.wsbarppt.com">'WSBA Probate & Trust Listserv'</A>
</DIV>
<DIV><B>Subject:</B> Re: [WSBAPT] RE Excise Tax question</DIV></DIV></DIV>
<DIV> </DIV></DIV>
<DIV
style='FONT-SIZE: small; TEXT-DECORATION: none; FONT-FAMILY: "Calibri"; FONT-WEIGHT: normal; COLOR: #000000; FONT-STYLE: normal; DISPLAY: inline'>
<DIV class=WordSection1>
<P class=MsoNormal><SPAN
style='FONT-SIZE: 11pt; FONT-FAMILY: "Calibri","sans-serif"; COLOR: #1f497d; mso-bidi-font-family: "Times New Roman"'>Martin,<o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-SIZE: 11pt; FONT-FAMILY: "Calibri","sans-serif"; COLOR: #1f497d; mso-bidi-font-family: "Times New Roman"'>The
relief from Debt by the trust in exchange for the one half interest conveyed to
the lender is ‘consideration’ under the WACs, regardless of whether the debt is
secured or not. The transfer is not a true gift, <SPAN class=SpellE>bc</SPAN>
there is relief from debt for the transferor.<SPAN
style="mso-spacerun: yes"> </SPAN>YOU might sneak it through <SPAN
class=SpellE>bc</SPAN> there is no record of a loan. But, If the DOR audits this
transaction, without there being excise tax paid, I would wager interest and
penalties will be charged to Transferor Trust.<o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-SIZE: 11pt; FONT-FAMILY: "Calibri","sans-serif"; COLOR: #1f497d; mso-bidi-font-family: "Times New Roman"'><o:p></o:p></SPAN> </P>
<DIV>
<P class=MsoNormal><SPAN
style='FONT-SIZE: 11pt; FONT-FAMILY: "Calibri","sans-serif"; COLOR: #1f497d; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-no-proof: yes'>Michael
A. Winslow<o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-SIZE: 11pt; FONT-FAMILY: "Calibri","sans-serif"; COLOR: #1f497d; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-no-proof: yes'>1204
Cleveland Ave.<o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-SIZE: 11pt; FONT-FAMILY: "Calibri","sans-serif"; COLOR: #1f497d; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-no-proof: yes'>Mount
Vernon, WA 98273<o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-SIZE: 11pt; FONT-FAMILY: "Calibri","sans-serif"; COLOR: #1f497d; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-no-proof: yes'>Ph.
360-336-3321<o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-SIZE: 11pt; FONT-FAMILY: "Calibri","sans-serif"; COLOR: #1f497d; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-no-proof: yes'>Em.
Mike@winslegal.com<o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-SIZE: 11pt; FONT-FAMILY: "Calibri","sans-serif"; COLOR: #1f497d; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-no-proof: yes'><o:p></o:p></SPAN> </P>
<P class=MsoNormal><SPAN
style='FONT-SIZE: 11pt; FONT-FAMILY: "Calibri","sans-serif"; COLOR: #1f497d; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-no-proof: yes'>This
message is from an attorney, so it’s confidential. If you are not the intended
recipient, it’s too late to stop reading this message, but you may not use it
for any improper purpose. Huge Disclaimer available upon
request.<o:p></o:p></SPAN></P></DIV>
<P class=MsoNormal><SPAN
style='FONT-SIZE: 11pt; FONT-FAMILY: "Calibri","sans-serif"; COLOR: #1f497d; mso-bidi-font-family: "Times New Roman"'><o:p></o:p></SPAN> </P>
<DIV>
<DIV
style="BORDER-TOP: #b5c4df 1pt solid; BORDER-RIGHT: medium none; BORDER-BOTTOM: medium none; PADDING-BOTTOM: 0in; PADDING-TOP: 3pt; PADDING-LEFT: 0in; BORDER-LEFT: medium none; PADDING-RIGHT: 0in">
<P class=MsoNormal><B><SPAN
style='FONT-SIZE: 10pt; FONT-FAMILY: "Tahoma","sans-serif"; mso-fareast-font-family: "Times New Roman"'>From:</SPAN></B><SPAN
style='FONT-SIZE: 10pt; FONT-FAMILY: "Tahoma","sans-serif"; mso-fareast-font-family: "Times New Roman"'>
wsbapt-bounces@lists.wsbarppt.com [mailto:wsbapt-bounces@lists.wsbarppt.com]
<B>On Behalf Of </B>Martin Silver<BR><B>Sent:</B> Wednesday, May 18, 2016 4:50
PM<BR><B>To:</B> WSBA Probate & Trust Listserv<BR><B>Subject:</B> Re:
[WSBAPT] RE Excise Tax question<o:p></o:p></SPAN></P></DIV></DIV>
<P class=MsoNormal><o:p></o:p> </P>
<DIV>
<DIV>
<DIV>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black; mso-fareast-font-family: "Times New Roman"'>If
the client is the beneficiary sounds like you just do the deed as an
inheritance/gift, no debt on the property and the affidavit just cites the
inheritance/gift exemption and I don’t know why you would reference debt relief
in the affidavit. <o:p></o:p></SPAN></P></DIV>
<DIV>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black; mso-fareast-font-family: "Times New Roman"'> <o:p></o:p></SPAN></P></DIV>
<DIV>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black; mso-fareast-font-family: "Times New Roman"'>If
client is not the beneficiary and is receiving cod then isn't client
transferring consideration by cancelling the debt, even though there is no
technical debt relief by the transfer because of absence of encumbrance against
the property?<o:p></o:p></SPAN></P></DIV>
<DIV>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black; mso-fareast-font-family: "Times New Roman"'> <o:p></o:p></SPAN></P></DIV>
<DIV>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black; mso-fareast-font-family: "Times New Roman"'>What
I don’t see from the facts is why is the trust giving the client a note each
year? doesn’t the client owe the trust some rent for using its 1/2?
Don’t you have to figure out what the balance between fair rent due the trust
and debt paid by the client for the trust’s 1/2 is to know whether and how much
cod there is, if any? <o:p></o:p></SPAN></P></DIV>
<DIV>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black; mso-fareast-font-family: "Times New Roman"'> <o:p></o:p></SPAN></P></DIV>
<DIV>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black; mso-fareast-font-family: "Times New Roman"'>If
client is the bene, who cares, but if there are other bene’s then the value of
fmv 1/2 compared to 1/2 of expenses paid has to be figured out and that answers
the consideration question for the affidavit. Doesn’t it? Make sense
or am I missing something? <o:p></o:p></SPAN></P></DIV>
<DIV>
<DIV>
<DIV>
<P class=MsoNormal><SPAN
style='FONT-SIZE: 10pt; FONT-FAMILY: "Tahoma","sans-serif"; COLOR: black; mso-fareast-font-family: "Times New Roman"'> <o:p></o:p></SPAN></P></DIV>
<DIV>
<DIV>
<P class=MsoNormal style="BACKGROUND: whitesmoke; mso-outline-level: 1"><B><SPAN
style='FONT-SIZE: 10pt; FONT-FAMILY: "Tahoma","sans-serif"; COLOR: black; mso-fareast-font-family: "Times New Roman"'>From:</SPAN></B><SPAN
style='FONT-SIZE: 10pt; FONT-FAMILY: "Tahoma","sans-serif"; COLOR: black; mso-fareast-font-family: "Times New Roman"'>
<A title=patrick@alsnorthwest.com href="mailto:patrick@alsnorthwest.com">Patrick
J. Galloway</A> <o:p></o:p></SPAN></P></DIV>
<DIV>
<P class=MsoNormal style="BACKGROUND: whitesmoke"><B><SPAN
style='FONT-SIZE: 10pt; FONT-FAMILY: "Tahoma","sans-serif"; COLOR: black; mso-fareast-font-family: "Times New Roman"'>Sent:</SPAN></B><SPAN
style='FONT-SIZE: 10pt; FONT-FAMILY: "Tahoma","sans-serif"; COLOR: black; mso-fareast-font-family: "Times New Roman"'>
Wednesday, May 18, 2016 2:58 PM<o:p></o:p></SPAN></P></DIV>
<DIV>
<P class=MsoNormal style="BACKGROUND: whitesmoke"><B><SPAN
style='FONT-SIZE: 10pt; FONT-FAMILY: "Tahoma","sans-serif"; COLOR: black; mso-fareast-font-family: "Times New Roman"'>To:</SPAN></B><SPAN
style='FONT-SIZE: 10pt; FONT-FAMILY: "Tahoma","sans-serif"; COLOR: black; mso-fareast-font-family: "Times New Roman"'>
<A title=wsbapt@lists.wsbarppt.com href="mailto:wsbapt@lists.wsbarppt.com">WSBA
Probate & Trust Listserv</A> <o:p></o:p></SPAN></P></DIV>
<DIV>
<P class=MsoNormal style="BACKGROUND: whitesmoke"><B><SPAN
style='FONT-SIZE: 10pt; FONT-FAMILY: "Tahoma","sans-serif"; COLOR: black; mso-fareast-font-family: "Times New Roman"'>Subject:</SPAN></B><SPAN
style='FONT-SIZE: 10pt; FONT-FAMILY: "Tahoma","sans-serif"; COLOR: black; mso-fareast-font-family: "Times New Roman"'>
Re: [WSBAPT] RE Excise Tax question<o:p></o:p></SPAN></P></DIV></DIV></DIV>
<DIV>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black; mso-fareast-font-family: "Times New Roman"'> <o:p></o:p></SPAN></P></DIV></DIV>
<DIV>
<DIV>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black; mso-fareast-font-family: "Times New Roman"'>This
one has me curious. I am not sure I understand the fact pattern or the estate
planning strategy that was being implemented. Is there a tax benefit that was
gained from the promissory notes? Is this an attempt to avoid claims of other
beneficiaries of the trust? Is the client not a beneficiary of the trust?
<o:p></o:p></SPAN></P>
<DIV>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black; mso-fareast-font-family: "Times New Roman"'> <o:p></o:p></SPAN></P></DIV>
<DIV>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black; mso-fareast-font-family: "Times New Roman"'>Can
the trust simply make the distribution and dissolve? I am not sure why you would
need to pay REET on a gift/inheritance and what the benefit of making the
transfer for consideration is. Just looking for some education from the group on
this one.<o:p></o:p></SPAN></P></DIV>
<DIV>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black; mso-fareast-font-family: "Times New Roman"'> <o:p></o:p></SPAN></P></DIV>
<DIV>
<P class=MsoNormal style="MARGIN-BOTTOM: 12pt"><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black; mso-fareast-font-family: "Times New Roman"'>Thanks,<o:p></o:p></SPAN></P>
<P class=MsoNormal><STRONG><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'>Patrick J.
Galloway</SPAN></STRONG><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'><o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'>Advance Legal
Services, PLLC<o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'>8113 W. Quinault Ave.
Suite 101<o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'>Kennewick, WA
99336<o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'> <o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'>(509)
851-7884<o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'> <o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'> <A
href="http://www.alsnorthwest.com"
target=_blank>www.alsnorthwest.com</A><o:p></o:p></SPAN></P>
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style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'> <o:p></o:p></SPAN></P>
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<P class=MsoNormal style="MARGIN-BOTTOM: 12pt; mso-outline-level: 1"><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black; mso-fareast-font-family: "Times New Roman"'>From:
<A href="mailto:mike@winslegal.com">mike@winslegal.com</A><BR>To: <A
href="mailto:wsbapt@lists.wsbarppt.com">wsbapt@lists.wsbarppt.com</A><BR>Date:
Wed, 18 May 2016 14:06:27 -0700<BR>Subject: Re: [WSBAPT] RE Excise Tax
question<o:p></o:p></SPAN></P>
<DIV>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: #1f497d'>Under the provisions
of the Real Estate Excise Tax rules the transfer of the interest is for
<I>value</I>, equal to the relief from debt, so would be subject to tax as a
“sale”. If there is remaining debt, that debt is not part of the consideration
paid for the transfer.</SPAN><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'><o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: #1f497d'><A
href="http://app.leg.wa.gov/wac/default.aspx?cite=458-61A-102"
target=_blank>http://app.leg.wa.gov/wac/default.aspx?cite=458-61A-102</A></SPAN><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'><o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: #1f497d'>see the definition
of <I>consideration </I>and <I>sale</I>.</SPAN><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'><o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'> <o:p></o:p></SPAN></P>
<DIV>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: #1f497d'>Michael A.
Winslow</SPAN><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'><o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: #1f497d'>1204 Cleveland
Ave.</SPAN><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'><o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: #1f497d'>Mount Vernon, WA
98273</SPAN><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'><o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: #1f497d'>Ph.
360-336-3321</SPAN><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'><o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: #1f497d'>Em. <A
href="mailto:Mike@winslegal.com">Mike@winslegal.com</A></SPAN><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'><o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'> <o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: #1f497d'>This message is from
an attorney, so it’s confidential. If you are not the intended recipient, it’s
too late to stop reading this message, but you may not use it for any improper
purpose. Huge Disclaimer available upon request.</SPAN><SPAN
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<DIV>
<DIV
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<P class=MsoNormal style="mso-outline-level: 1"><B><SPAN
style='FONT-SIZE: 10pt; FONT-FAMILY: "Tahoma","sans-serif"; COLOR: black'>From:</SPAN></B><SPAN
style='FONT-SIZE: 10pt; FONT-FAMILY: "Tahoma","sans-serif"; COLOR: black'> <A
href="mailto:wsbapt-bounces@lists.wsbarppt.com">wsbapt-bounces@lists.wsbarppt.com</A>
[<A
href="mailto:wsbapt-bounces@lists.wsbarppt.com">mailto:wsbapt-bounces@lists.wsbarppt.com</A>]
<B>On Behalf Of </B>Eden Rubenstein Toner<BR><B>Sent:</B> Wednesday, May 18,
2016 1:28 PM<BR><B>To:</B> WSBA PT list<BR><B>Subject:</B> [WSBAPT] RE Excise
Tax question</SPAN><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'><o:p></o:p></SPAN></P></DIV></DIV>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'> <o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'>I’m trying to figure
out the RE excise tax computation in this situation: Client owns ½
interest in property. A testamentary trust of which client is Trustee owns
the other ½. There are no other assets in the trust. Client occupies
the property and has paid mortgage, taxes, insurance and all expenses for many
years, keeping track of all payments and issuing a promissory note from the
trust to client each year. The trust is now indebted to client for more
than the value of the trust’s interest in the property. Client wants to
deed the property from the trust to client in full satisfaction of the debt,
despite the fact that the debt is greater than the value of the
property.<o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'>Questions—is tax due
on the full amount of the debt being satisfied, or just the actual amount
satisfied? Does it matter that the debt is not secured by the
property? And if client continues to pay the full amount of the mortgage,
is half the outstanding mortgage value part of the excise tax
computation?<o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'>Thank you in advance
for any guidance.<o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
style='FONT-FAMILY: "Calibri","sans-serif"; COLOR: black'>Eden<o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN
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Rubenstein Toner</SPAN></I><SPAN
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<P class=MsoNormal><I><SPAN
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SW Dash Point Road, #163</SPAN></I><SPAN
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