[WSBARP] Excise Tax Question

Tue Nov 1 16:48:04 PDT 2016

In 2006, the parents and the child were all on the DOT and SWD. In 2011 the
parents refinance the mortgage so that only the parents are on the DOT.
Because there was no transfer by deed, no excise tax was paid. 

I called the DOR today and spoke with a lady who seems to be very
knowledgeable. I didn't tell her about the 2011 refinancing to narrow the
issues.  Now with your comment, I will call back DOR again tomorrow.  The
DOR representative told me that in fact the consideration is 50% of the
current mortgage balance because the current deed states: "grantees, Child
A, an unmarried person, Father and Mother, Husband and Wife" without stating
the TIC interest. Therefore, Child A owns 50% interest.

Had there not been a refinancing in 2011; or had there been a refinancing
and a new deed removing the child's name; or had the parents been the only
ones on the mortgage from 2006; then for sure there's no consideration.  The
REET Supplemental Statement has a check box: "Gift without consideration:
Grantor has made and will continue to make 100% of payment on the total debt
and has not received any consideration towards equity. No tax due."  

Common sense says Child received consideration because she was on the
mortage in 2006, and she was relieved of her debt in 2011. Now in 2016, she
wants her name off the title as well.   If no excise tax was paid in 2011
because no transfer by deed, does that mean now excise tax is due because
Child now wants to quit claim the real estate to parents?  Thank you for
your input.     

Regards, 

Doris Eslinger
Attorney at Law
Eslinger Law Office, PLLC 
2200 112th Ave NE | Suite 200 | Bellevue, WA 98005 | Phone: (425) 451-3237 |

Fax: (425) 633-2468 |  <mailto:doris at eslingerlawoffice.com>
doris at eslingerlawoffice.com |  <http://www.eslingerlawoffice.com/>
eslingerlawoffice.com  

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From: Bickel, Dwight [mailto:Dwight.Bickel at fntg.com] 
Sent: Monday, October 31, 2016 3:27 PM
To: WSBA Real Property Listserv
Cc: doris at eslingerlawoffice.com
Subject: RE: [WSBARP] Excise Tax Question

The transaction described by Doris might not be taxable as an assumption of
the Child's liability on the underlying debt. The posted question does not
state, but I presume the Child was a person who signed as grantor on the
2011 Deed of Trust. That does not determine taxability.

Was Child a borrower who signed the promissory note (and other loan
documents)? The posted question suggests the Parents did that without the
Child. It is common for the loan documents not to include one of the
property owners, who sign only to agree to the mortgage. If so, there is no
excise tax due. See 458-61A-103
<http://apps.leg.wa.gov/wac/default.aspx?cite=458-61A-103> :

(2) Transfers where grantor has no personal liability for the underlying
debt. Real estate excise tax does not apply to transfers of real property
subject to an underlying debt when the grantor has no personal liability for
the debt and receives no other consideration for the transfer.

On the other hand, if Child signed all 2011 loan documents as a borrower,
then the excise tax will be due based upon the amount of the remaining debt
at the present time of the deed from Child to Parents. I do not know if the
DOR will accept that Child was only liable for 1/3 of the debt, since
technically the liability of each is the total. It is worth trying. RCW
82.45.030:

(3) As used in this section, "total consideration paid or contracted to be
paid" includes money or anything of value, paid or delivered or contracted
to be paid or delivered in return for the sale, and shall include the amount
of any lien, mortgage, contract indebtedness, or other incumbrance, either
given to secure the purchase price, or any part thereof, or remaining unpaid
on such property at the time of sale.

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