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<p class="MsoNormal"><span style="font-size:16.0pt;font-family:"Times New Roman",serif">John is correct. Even though a single-member LLC might be disregarded for income tax purposes under IRC §7701 and the regulations adopted thereunder, an LLC is respected
for estate and gift tax <span style="color:black">purposes, <i>Pierre v. Commissioner</i>, 133 T.C. 24 (2009; reviewed by the court), and is even respected for purposes of the charitable income tax deduction.
<i>RERI Holdings v. Commissioner</i>, 143 T.C. 41 (2014).<o:p></o:p></span></span></p>
<p class="MsoNormal"><span style="font-size:16.0pt;font-family:"Times New Roman",serif;color:black">Phil Jones</span><span style="font-size:16.0pt;font-family:"Times New Roman",serif"><o:p></o:p></span></p>
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<p class="MsoNormal"><span style="font-size:14.0pt;font-family:"Times New Roman",serif">Philip N. Jones<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:14.0pt;font-family:"Times New Roman",serif">Duffy Kekel LLP<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:14.0pt;font-family:"Times New Roman",serif">900 S.W. Fifth Ave. Suite 2500<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:14.0pt;font-family:"Times New Roman",serif">Portland, OR 97204<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:14.0pt;font-family:"Times New Roman",serif"><a href="mailto:pjones@duffykekel.com"><span style="color:#0563C1">pjones@duffykekel.com</span></a><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:14.0pt;font-family:"Times New Roman",serif">(503) 226-1371 – office<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:14.0pt;font-family:"Times New Roman",serif">(503) 853-1482 – cell<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:14.0pt;font-family:"Times New Roman",serif">(503) 226-3574 - fax<o:p></o:p></span></p>
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<p class="MsoNormal"><b>From:</b> wsbapt-bounces@lists.wsbarppt.com <wsbapt-bounces@lists.wsbarppt.com>
<b>On Behalf Of </b>Roger Hawkes<br>
<b>Sent:</b> Wednesday, May 31, 2023 1:41 PM<br>
<b>To:</b> WSBA Probate & Trust Listserv <wsbapt@lists.wsbarppt.com><br>
<b>Subject:</b> Re: [WSBAPT] Out of State Property in LLC<o:p></o:p></p>
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<p class="MsoNormal">Thanks, John; well stated.<o:p></o:p></p>
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<p class="MsoNormal"><b>From:</b> <a href="mailto:wsbapt-bounces@lists.wsbarppt.com">
wsbapt-bounces@lists.wsbarppt.com</a> <<a href="mailto:wsbapt-bounces@lists.wsbarppt.com">wsbapt-bounces@lists.wsbarppt.com</a>>
<b>On Behalf Of </b>JOHN J SULLIVAN<br>
<b>Sent:</b> Wednesday, May 31, 2023 1:18 PM<br>
<b>To:</b> WSBA Probate & Trust Listserv <<a href="mailto:wsbapt@lists.wsbarppt.com">wsbapt@lists.wsbarppt.com</a>>; Brent Williams-Ruth <<a href="mailto:brent@williams-ruthlaw.com">brent@williams-ruthlaw.com</a>><br>
<b>Subject:</b> Re: [WSBAPT] Out of State Property in LLC<o:p></o:p></p>
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<p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Helvetica",sans-serif;color:#333333">Brent:
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<p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Helvetica",sans-serif;color:#333333">You were given faulty advice. The state under whose law the LLC is created is irrelevant. In addition, an interest in a legal entity (other than a beneficial
interest in a revocable trust), even one that is a "disregarded entity" in the eyes of the IRS, is characterized as intangible personal property. It is sourced under WA's estate tax law to the state of the decedent's domicile. It is not "located" in CA just
because it is created under its laws and holds real property there. <o:p></o:p></span></p>
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<p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Helvetica",sans-serif;color:#333333">The advice that this structure avoids inclusion of the value of the CA real property in the WA estate tax base is faulty because it does the opposite - it ensures
inclusion in the base of a decedent domiciled in WA at the time of death. Same result if it's held in a WA LLC, except then you might need to register it in CA as a foreign LLC if it's "doing business." <br>
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To avoid inclusion in the WA estate tax base and ancillary probate under CA's more expensive and intrusive probate system, the real property should not be held directly, with the PC on title. Instead, it should end up in a single purpose (or full purpose if
you want) revocable living trust. Then it is sourced under WA's estate tax law to where the dirt is - CA - and eliminated from the numerator for apportionment purposes here. (Last time I checked CA still has not enacted a stand-alone estate tax.) <br>
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One last issue. I call it the tax tail that wags the dog. If you advise the client to restructure how the CA realty is owned, keep an eye on Prop 13. There are nuances that may limit how to transfer the realty from the LLC to the RLT without triggering a revaluation
for property tax purposes. And by the way, another reason you might want to hold the realty in a trust with its situs (locus of management) in WA is to avoid CA's income tax down the road if and when the RLT becomes irrevocable and no longer a "disregarded
entity.<br>
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Cheers. <o:p></o:p></span></p>
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<p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Helvetica",sans-serif;color:#333333">John J. Sullivan
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<p class="MsoNormal">On 05/30/2023 1:55 PM PDT Brent Williams-Ruth <<a href="mailto:brent@williams-ruthlaw.com">brent@williams-ruthlaw.com</a>> wrote:
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<p class="MsoNormal"><span style="font-family:"Arial",sans-serif">Greetings List Members -
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<p class="MsoNormal"><span style="font-family:"Arial",sans-serif">I am growing excited for the Mid-Year in Walla Walla coming up this weekend.
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<p class="MsoNormal"><span style="font-family:"Arial",sans-serif">I recall the DOR changing the rules regarding LLC ownership of property in 2020 (link to guidance for ease of reference - <a href="https://dor.wa.gov/sites/default/files/2022-03/sn_20_EstateTaxTreatment.pdf" target="_blank">https://dor.wa.gov/sites/default/files/2022-03/sn_20_EstateTaxTreatment.pdf</a>
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<p class="MsoNormal"><span style="font-family:"Arial",sans-serif">Maybe I am reading too much into the words that are not present on the DOR guidance - but does it matter if the LLC is NOT a Washington LLC? Example, lets say we have a Washington resident, who
inherited 100% interest in a California LLC that holds four different parcels of land/homes scattered around California.
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<p class="MsoNormal"><span style="font-family:"Arial",sans-serif">Would that still be treated as intangible property? The guidance does not differentiate on the location of the LLC.
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<p class="MsoNormal"><span style="font-family:"Arial",sans-serif">For my hypothetical - because my PC is a Washington resident, even if deemed intangible, an out of state LLC holding properties out of State will still be taxed under the Washington estate tax.
Yes? <o:p></o:p></span></p>
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<p class="MsoNormal"><span style="font-family:"Arial",sans-serif">What is catching me is WAC 458-57-125 (link for ease of reference) - <a href="https://apps.leg.wa.gov/wac/default.aspx?cite=458-57-125">https://apps.leg.wa.gov/wac/default.aspx?cite=458-57-125</a></span>
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<p class="MsoNormal"><span style="font-family:"Arial",sans-serif">Because the properties are held by the LLC, and now under the 2020 DOR guidance that LLC is deemed to be intangible property and 458-57-125(3)(c) states <span style="color:black">Intangible personal
property of a decedent is located in Washington if the decedent was a resident of this state at death.</span></span>
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<p class="MsoNormal"><span style="font-family:"Arial",sans-serif;color:black">Just seeking confirmation that I am tracking this right....I am thrown off because this came to my office by someone writing and stating (to start) that by having it as an LLC they
can avoid the Washington Estate Tax.</span> <o:p></o:p></p>
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<p class="MsoNormal"><span style="font-family:"Arial",sans-serif;color:black">Thank you! </span>
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<p><strong><span style="font-family:"Calibri",sans-serif">Brent Williams-Ruth</span></strong><span style="font-family:"Times New Roman",serif"> (pronouns: he/him)<br>
<em>Attorney-At-Law</em></span><o:p></o:p></p>
<p><strong><span style="font-family:"Calibri",sans-serif">Law Offices of Brent Williams-Ruth, </span></strong><strong><span style="font-size:7.5pt;font-family:"Calibri",sans-serif">a division of BWR Consulting, PLLC</span></strong><o:p></o:p></p>
<p><strong><span style="font-family:"Calibri",sans-serif">Physical Address: 500 S 336th Street, Suite 214; Federal Way, WA 98003</span></strong><o:p></o:p></p>
<p><strong><span style="font-family:"Calibri",sans-serif;color:red">**EFFECTIVE IMMEDIATELY**</span></strong><strong><span style="font-family:"Calibri",sans-serif"> All mail sent through the USPS should be sent to the following address: PO BOX 3319; Federal
Way, WA 98063 </span></strong><o:p></o:p></p>
<p><span style="font-family:"Times New Roman",serif">Office/Scheduling Phone:<span style="color:#004080"> </span><span style="color:red">(253) 285-7751</span></span><o:p></o:p></p>
<p><span style="font-family:"Times New Roman",serif">Direct:<span style="color:red"> (253) 285-7453</span></span><o:p></o:p></p>
<p> <o:p></o:p></p>
<p><span style="font-family:"Times New Roman",serif"><a href="mailto:Brent@Williams-RuthLaw.com" target="_blank">e-mail</a> / <a href="http://www.williams-ruthlaw.com/" target="_blank">website</a> /</span><span style="font-size:9.5pt;font-family:"Times New Roman",serif"> </span><span style="font-family:"Times New Roman",serif"><a href="http://www.facebook.com/bwrlaw" target="_blank"><span style="font-size:9.5pt">facebook</span></a></span><span style="font-size:9.5pt;font-family:"Times New Roman",serif"> / </span><o:p></o:p></p>
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