<html><head>
<meta http-equiv="Content-Type" content="text/html; charset=us-ascii">
<meta name="Generator" content="Microsoft Word 12 (filtered medium)">
<style><!--
/* Font Definitions */
@font-face
{font-family:"Cambria Math";
panose-1:2 4 5 3 5 4 6 3 2 4;}
@font-face
{font-family:Calibri;
panose-1:2 15 5 2 2 2 4 3 2 4;}
@font-face
{font-family:Tahoma;
panose-1:2 11 6 4 3 5 4 4 2 4;}
/* Style Definitions */
p.MsoNormal, li.MsoNormal, div.MsoNormal
{margin:0in;
margin-bottom:.0001pt;
font-size:11.0pt;
font-family:"Calibri","sans-serif";}
a:link, span.MsoHyperlink
{mso-style-priority:99;
color:#0563C1;
text-decoration:underline;}
a:visited, span.MsoHyperlinkFollowed
{mso-style-priority:99;
color:#954F72;
text-decoration:underline;}
p.MsoAcetate, li.MsoAcetate, div.MsoAcetate
{mso-style-priority:99;
mso-style-link:"Balloon Text Char";
margin:0in;
margin-bottom:.0001pt;
font-size:8.0pt;
font-family:"Tahoma","sans-serif";}
span.EmailStyle17
{mso-style-type:personal;
font-family:"Calibri","sans-serif";
color:windowtext;}
span.EmailStyle18
{mso-style-type:personal;
font-family:"Calibri","sans-serif";
color:#1F497D;}
span.BalloonTextChar
{mso-style-name:"Balloon Text Char";
mso-style-priority:99;
mso-style-link:"Balloon Text";
font-family:"Tahoma","sans-serif";}
span.EmailStyle21
{mso-style-type:personal-reply;
font-family:"Calibri","sans-serif";
color:#1F497D;}
.MsoChpDefault
{mso-style-type:export-only;
font-size:10.0pt;}
@page WordSection1
{size:8.5in 11.0in;
margin:1.0in 1.0in 1.0in 1.0in;}
div.WordSection1
{page:WordSection1;}
--></style><!--[if gte mso 9]><xml>
<o:shapedefaults v:ext="edit" spidmax="1026" />
</xml><![endif]--><!--[if gte mso 9]><xml>
<o:shapelayout v:ext="edit">
<o:idmap v:ext="edit" data="1" />
</o:shapelayout></xml><![endif]-->
<style type="text/css">.style1 {font-family: "Times New Roman";}</style></head><body lang="EN-US" link="#0563C1" vlink="#954F72">
<div class="WordSection1">
<p class="MsoNormal"><span style="color:#1F497D">Hi Phil, welcome to the listserv.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D">You might consider this . . . <o:p>
</o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D">RCW 83.100.040 says that “any intangible property owned by a resident is located in Washington.” Not unreasonable to assume the converse; intangible property owned by a non-resident is not located in Washington.
Several years ago DOR floated to members of the WSBA Estate & Gift Tax Committee this business purpose test to be part of a proposed regulation. We pointed out that there is no statutory support for a business purpose test. We also pointed out that DOR may
be shooting itself in the foot – lots of Washington residents own-out-of-state (CA & AZ desert; ID lakes and ski condos; etc) vacation homes (ie non-business) in LLCs, and all of those would go from WA situs to out of state under the proposed rule. DOR dropped
the idea of its proposed regulation, but a couple of years later the business purpose test showed up in instructions to the return. Obviously a rule of dubious authority as a regulation doesn’t somehow gain authority as an instruction.
<o:p></o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D">Tom<o:p></o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D"><o:p> </o:p></span></p>
<div>
<p class="MsoNormal"><b><span style="color:#1F497D">________________________________________<o:p></o:p></span></b></p>
<p class="MsoNormal"><b><span style="color:#1F497D">THOMAS M. CULBERTSON </span></b><b><span style="font-size:14.0pt;color:#1F497D"> </span></b><span style="font-size:14.0pt;color:#1F497D">I
</span><span style="font-size:10.0pt;color:#1F497D"> Lukins & Annis, PS<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:10.0pt;color:#1F497D">717 W. Sprague Ave, Suite 1600, Spokane, WA 99201<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:10.0pt;color:#1F497D">(509) 455-9555</span><span style="color:#1F497D">
</span><span style="font-size:12.0pt;color:#1F497D"> I </span><span style="font-size:10.0pt;color:#1F497D"> fax (509) 363-2500</span><span style="font-size:12.0pt;color:#1F497D"> I
</span><span style="font-size:10.0pt;color:#1F497D"> </span><span style="color:#1F497D"><a href="mailto:tculbertson@lukins.com"><span style="font-size:10.0pt;color:blue">tculbertson@lukins.com</span></a></span><span style="font-size:10.0pt;color:#1F497D">
<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:10.0pt;color:#1F497D"><o:p> </o:p></span></p>
</div>
<p class="MsoNormal"><span style="color:#1F497D"><o:p> </o:p></span></p>
<div>
<div style="border:none;border-top:solid #B5C4DF 1.0pt;padding:3.0pt 0in 0in 0in">
<p class="MsoNormal"><b><span style="font-size:10.0pt;font-family:"Tahoma","sans-serif"">From:</span></b><span style="font-size:10.0pt;font-family:"Tahoma","sans-serif""> wsbapt-bounces@lists.wsbarppt.com [mailto:wsbapt-bounces@lists.wsbarppt.com]
<b>On Behalf Of </b>Eric Nelsen<br>
<b>Sent:</b> Thursday, March 15, 2018 4:39 PM<br>
<b>To:</b> WSBA Probate & Trust Listserv<br>
<b>Subject:</b> Re: [WSBAPT] estate taxation of LLC interests<o:p></o:p></span></p>
</div>
</div>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal"><span style="color:#1F497D">Yikes--nice first post! I have no wisdom to offer but am looking forward to other responses.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D"><o:p> </o:p></span></p>
<div>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D">Sincerely,<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D">Eric<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D">Eric C. Nelsen<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D">SAYRE LAW OFFICES, PLLC<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D">1417 31st Ave South<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D">Seattle WA 98144-3909<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D">phone 206-625-0092<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D">fax 206-625-9040<o:p></o:p></span></p>
</div>
<p class="MsoNormal"><span style="color:#1F497D"><o:p> </o:p></span></p>
<div>
<div style="border:none;border-top:solid #B5C4DF 1.0pt;padding:3.0pt 0in 0in 0in">
<p class="MsoNormal"><b><span style="font-size:10.0pt;font-family:"Tahoma","sans-serif"">From:</span></b><span style="font-size:10.0pt;font-family:"Tahoma","sans-serif"">
<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>Philip N. Jones<br>
<b>Sent:</b> Thursday, March 15, 2018 4:26 PM<br>
<b>To:</b> <a href="mailto:wsbapt@lists.wsbarppt.com">wsbapt@lists.wsbarppt.com</a><br>
<b>Subject:</b> [WSBAPT] estate taxation of LLC interests<o:p></o:p></span></p>
</div>
</div>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">I have been an Oregon-resident member of the WSBA for decades (I practice estate planning in Portland), and a member of this section for decades, but I have only now joined the estate/probate listserv. I look forward to the future discussions.<o:p></o:p></p>
<p class="MsoNormal">So here is my first post. This is a hypothetical; I do not really have this client.<o:p></o:p></p>
<p class="MsoNormal">Ralph lives in Washington. He owns a vacation house in Bend, Oregon. He puts the house in a single-member LLC.<o:p></o:p></p>
<p class="MsoNormal">Ralph promptly and expeditiously dies.<o:p></o:p></p>
<p class="MsoNormal">The Washington Department of Revenue states on their website and in their instructions to Addendum #4 of the Washington estate tax return that real estate in a non-true-business-purpose LLC will be taxed at its physical real estate location,
which is Oregon. So Washington does not include the vacation home in the Washington numerator of the fraction.<o:p></o:p></p>
<p class="MsoNormal">Oregon, on the other hand, in its regulations, honors LLCs regardless of business purpose, or lack thereof. LLCs are intangible, Oregon says. And Oregon does not tax intangibles of nonresidents.<o:p></o:p></p>
<p class="MsoNormal">So Ralph pays no Oregon or Washington estate tax on the vacation house. Zero. Zip. Nada.<o:p></o:p></p>
<p class="MsoNormal">Or am I missing something here?<o:p></o:p></p>
<p class="MsoNormal">That’s the good news. Now let’s reverse the situation. George lives in Oregon and puts his Wenatchee vacation house in an LLC and then dies. Washington will disregard the LLC and tax the Washington real estate. Oregon will honor the
LLC as an intangible and tax it to its resident decedent.<o:p></o:p></p>
<p class="MsoNormal">So it gets taxed in both states. Which makes George unhappy. Even though he is dead.<o:p></o:p></p>
<p class="MsoNormal">Or am I missing something here?<o:p></o:p></p>
<p class="MsoNormal">The mind reels.<o:p></o:p></p>
<p class="MsoNormal">Thanks,<o:p></o:p></p>
<p class="MsoNormal">Phil Jones<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal"><span style="font-size:13.0pt;color:#365F91">Philip N. Jones</span><span style="color:#1F497D"> |</span><span style="font-size:13.0pt;color:black">Duffy Kekel LLP</span><span style="color:#1F497D"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:10.0pt;color:black">111 SW 5th Ave, Suite 1500, Portland OR 97204<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:10.0pt;color:black">(503) 226-1371 (main)| (503) 226-3574 (fax)<o:p></o:p></span></p>
<p class="MsoNormal"><a href="mailto:pjones@duffykekel.com"><span style="color:black">pjones@duffykekel.com</span></a><o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
</div>
<br /><br /><p style="font-family: Verdana; font-size:10pt; color:#666666;"><b>Disclaimer</b></p>
<p style="font-family: Verdana; font-size:8pt; color:#666666;">
This message has been scanned for viruses
and dangerous content by Lukins & Annis, P.S.
<br /><br />
NOTICE: This email may contain confidential or
privileged material, and is intended solely
for use by the above referenced recipient. Any
review, copying, printing, disclosure, distri-
bution, or any other use, is strictly prohibited.
<br /><br />
If you are not the recipient, and believe that
you have received this in error, please notify
the sender and delete the copy you received.
<br /><br />
Thank You!</p></body></html>