[WSBARP] Excise Tax on D/T

Mon Oct 24 14:22:36 PDT 2016

You are a lifesaver. Thanks!

From: wsbarp-bounces at lists.wsbarppt.com [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Michael Safren
Sent: Monday, October 24, 2016 1:42 PM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
Subject: Re: [WSBARP] Excise Tax on D/T

Hi Scott,

I would suggest doing the full reconveyance because it will be a simpler series of transactions to complete (2 simple transactions vs. 1 a bit more complicated) and  will make getting title insurance on both the parcels much easier to obtain.  Down the line, one of the  parties are going to want to sell Property #1 and it could be difficult to provide clear title if there is no reconveaynce associated with Property #1 only a change in the note.

If the parties go with the modification route, the parties will have to modify the existing Deed of Trust as well as the note to secure the obligation against property #2.  Again this can cause complications for title insurance as well as drafting errors, because the terms of the Deed of Trust for property #1 may differ from the intended terms for property #2.

My suggestion is to have two simple transactions - a reconveyance on property #1 and create a note and Deed of Trust secured against Property #2 rolling in the existing indebtedness vs. drafting modifications to the note and Deed of Trust, but I think both would accomplish the intend goals of the parties.

I hope this helps.  

Kind regards, 

On Mon, Oct 24, 2016 at 12:40 PM, Jay Goldstein <Jay at jaglaw.net <mailto:Jay at jaglaw.net> > wrote:

If it’s just the note being transferred, you could do note modification, reciting the modification and everyone signs. 

Jay A. Goldstein

1800 Cooper Point RD SW NO. 8  |  Olympia, WA 98502  

Telephone 360.352.1970 <tel:360.352.1970>   |  Fax 360.357.0844 <tel:360.357.0844>  |  www.jaglaw.net <http://www.jaglaw.net/>   

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From: wsbarp-bounces at lists.wsbarppt.com <mailto:wsbarp-bounces at lists.wsbarppt.com>  [mailto:wsbarp-bounces at lists.wsbarppt.com <mailto:wsbarp-bounces at lists.wsbarppt.com> ] On Behalf Of Scott Hildebrand
Sent: Monday, October 24, 2016 12:34 PM

To: 'WSBA Real Property Listserv' <wsbarp at lists.wsbarppt.com <mailto:wsbarp at lists.wsbarppt.com> >
Subject: Re: [WSBARP] Excise Tax on D/T

Michael-

Here’s another one for you on the same fact pattern.

I am transferring an encumbrance from one property to another. Same parties, just need to transfer the note. Can I do that with just a transfer of note or something simple like that? Do I need to reconvey??

From: wsbarp-bounces at lists.wsbarppt.com <mailto:wsbarp-bounces at lists.wsbarppt.com>  [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Michael Safren
Sent: Monday, October 24, 2016 10:43 AM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com <mailto:wsbarp at lists.wsbarppt.com> >
Subject: Re: [WSBARP] Excise Tax on D/T

Hi Scott:

Craig beat me to the response, but Excise Tax does not apply to a reconveyance because it is not a "Taxable Sale" under the Administrative Code.

See WAC 458-61A-102(17)(e) which lists examples of non-taxable transfers

"

(e) Examples. The following examples, while not exhaustive, illustrate some of the circumstances in which a transfer may or may not be taxable. These examples should be used only as a general guide. The status of each situation must be determined after a review of all of the facts and circumstances.

(i) John paid off his home mortgage and wants to get a loan to make improvements and buy a new car. John obtains an equity loan, secured by his home as collateral. This transaction is not subject to the real estate excise tax.

(ii) Bob purchased real property from Sam pursuant to a real estate contract. Real estate excise tax was paid on the purchase price at the time of the sale. Bob has now paid off the property, and Sam is issuing a fulfillment deed to Bob indicating that the real estate contract has been satisfied. The fulfillment deed from Sam to Bob is not subject to the real estate excise tax.

(iii) Diane has made the final payment on her mortgage, and the bank issues a full reconveyance of her property, indicating that the mortgage is paid in full. The reconveyance is not subject to the real estate excise tax."

Hope this helps. 

Kind regards,

Michael Safren

On Mon, Oct 24, 2016 at 8:35 AM, Scott Hildebrand <scott at starboard-strategies.com <mailto:scott at starboard-strategies.com> > wrote:

Colleagues:

PC is beneficiary of a D/T on property 1.

Grantor on property 1 wants to buy another property and PC would transfer encumbrance to property 2.

Property 1 would then be free and clear and could be sold. D/T would have to be reconveyed.

Can I accomplish this without paying excise tax, or, because there is a reconveyance, excise tax would have to be paid on property 1?

Thank you,

Scott Hildebrand

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