[WSBARP] Excise Tax Question

[Bickel, Dwight]

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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