[WSBARP] Gift or sale? REET

Thu Sep 28 11:54:06 PDT 2017

I have on several occasions especially among heirs as to distributions from the estate.

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Bryce H. Dille | Attorney at Law

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From: wsbarp-bounces at lists.wsbarppt.com [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Craig Blackmon
Sent: Thursday, September 28, 2017 11:43 AM
To: WSBA Real Property Listserv
Subject: Re: [WSBARP] Gift or sale? REET

I'm curious, has anyone ever formally made this argument? It is the classic hypothetical: A "gift" between family members (the use of quotation marks is, to me, telling) that is reciprocated with another "gift."

If anyone has ever formally argued that each "gift" truly was not an exchange for value, I'd love to hear how it went. I have a hard time seeing it as being well received by any adjudicator. But perhaps I am naive.

Craig

Craig Blackmon, Attorney at Law
Seattle Real Estate Lawyer<http://www.seattlepropertylawyer.com/>
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On Thu, Sep 28, 2017 at 10:42 AM, Bryce Dille <BryceD at cdb-law.com<mailto:BryceD at cdb-law.com>> wrote:
In the scenario presented there was no agreement to exchange so absent an agreement it could reasonably be claimed a gift unless there was an obligation
That was to be assumed by the transferee

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Bryce H. Dille | Attorney at Law

P: 253.848.3513<tel:(253)%20848-3513>| F: 253.845.4941<tel:(253)%20845-4941>
317 South Meridian
Puyallup, WA 98371
bryced at cdb-law.com<mailto:bryced at cdb-law.com>
www.cdb-law.com<http://www.cdb-law.com/>

This transmission contains confidential attorney-client communications and may not be disclosed to any person but the intended recipient(s).  If this matter is transmitted to you in error, please notify the sender immediately.

Business Entity Creation and Management
Business, Government and Tax Law
Real Estate and Land Use, Residential, Commercial and Condominium Development
Real Estate and Commercial Transactions & Closings, Including Performing Services as IRS Section 1031 Exchange Facilitator
Estate Planning, including Wills and Trusts, and Probate Administration
Representation Homeowners/Condominium Association Real Estate Developments
Real Property Foreclosures and Forfeitures

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 John McCrady
Sent: Thursday, September 28, 2017 10:33 AM
To: WSBA Real Property Listserv
Subject: Re: [WSBARP] Gift or sale? REET

I have to agree with Mr. Blackmon’s take

John McCrady
Puget Sound Title Company
5350 Orchard Street West
University Place WA 98467
253-476-5721<tel:(253)%20476-5721>
j.mccrady at pstitle.com<mailto:j.mccrady at pstitle.com>

From: wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com> [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Craig Blackmon
Sent: Thursday, September 28, 2017 9:46 AM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com<mailto:wsbarp at lists.wsbarppt.com>>
Subject: Re: [WSBARP] Gift or sale? REET

So is that all it takes? Call it a "gift" and it's tax free?

If Brother B decided to forego his "gift," would Brother A have any problem with that? The answer should shed some light on whether this is an exchange of gifts (in which case A won't care), or an exchange for value.

I don't see this as a gift. It is an exchange for value, and therefore is taxable. Sometimes you gotta pay the Tax Man...

Craig

Craig Blackmon, Attorney at Law
Seattle Real Estate Lawyer<http://www.seattlepropertylawyer.com/>
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CONFIDENTIALITY NOTICE: This communication is a private, confidential electronic communication encompassed by 18 USC 2510. It is for the sole use of the intended recipient and receipt by anyone other than the intended recipient does not constitute a loss of its confidential or privileged nature.  Any review or distribution by others is strictly prohibited. If you are not the intended recipient please inform the sender and destroy all copies.

On Wed, Sep 27, 2017 at 8:02 PM, Bryce Dille <BryceD at cdb-law.com<mailto:BryceD at cdb-law.com>> wrote:
If it's a gift it's exempt regardless of percentage transferred

Sent from my iPhone

On Sep 27, 2017, at 3:00 PM, Josh Grant <jgrant at accima.com<mailto:jgrant at accima.com>> wrote:
Two brothers own (1) 50% value of real property each and (2) brother “A” owns 1/7th and brother “ B” owns 3/7ths interest in S corp which owns other real estate only.

The two brothers want to transfer by gift their undivided interests to each other without paying REET.  There will be no legal agreement requiring them to do a mutual transfer.

If Brother B gives his brother A an undivided interest of land ; and then simultaneously A gives his 1/7th of S corp stock to brother B (so that B now owns a controlling interest), again as a gift...  Will Department of Revenue want excise tax on either/each transfer?  (based on the assessed value of the real estate)
My guess is yes. although I have seen different answers on this on the list serve recently.

Assume all the above but the land interest is “gifted”  in 2017 and the transfer of the S corp takes place over a year later.. then is the answer “no”?

WAC 458-61A-101 in part says
3) In general. In order for the tax to apply when the controlling interest in an entity that owns real property is transferred, the following must have occurred:
(a) The transfer or acquisition of the controlling interest occurred within a twelve-month period.

(I also wonder if “the controlling interest” means that over 50% is transferred or it means that any interest like 1/7th is transferred which ends up shifting the controlling interest???)

IN THE ALTERNATIVE Then I am wondering IF by waiting a year, that will strenghthen the argument that theses were just gifts, no “consideration for” the transfers...  and also because of the above WAC concerning controlling interest,  exempts the transfer.  Each has acquired their present interests in the S corp longer than a year ago.

thanks

Josh Grant

Joshua F. Grant, PS
Attorney at Law
P. O. Box 619
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