[WSBARP] Excise tax exemption LLC to member of LLC Member

Fri Aug 20 12:28:27 PDT 2021

I spoke with DOR and they said that the two step process is the way to go. I was told that if the deed was straight to the members of the parent, they would consider it as 2 transfers in one transaction where only one exemption applies per transfer.

In my scenario I will have the first transfer under 211(c) from subsidiary to parent and the second under 211(b) from parent entity to members.

Thank you one and all.

Nestor Gorfinkel, Attorney at Law
Licensed in Florida & Washington State
Florida Civil-Law (International) Notary

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From: wsbarp-bounces at lists.wsbarppt.com <wsbarp-bounces at lists.wsbarppt.com> On Behalf Of Mark Anderson
Sent: Friday, August 20, 2021 3:00 PM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
Subject: Re: [WSBARP] Excise tax exemption LLC to member of LLC Member

I agree with respect to using a two-step process.  I’ve done this successfully in the past where an LLC wanted to convey two lots with different values to the LLC’s two members.  We first transferred title from the LLC to the two members as tenants in common (applying WAC 458-61A-211(b)), and then transferred one lot to one member and the other lot to the other member pursuant to a partition agreement (applying WAC 458-61A-204(2)).

Mark B. Anderson
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From: wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com> <wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com>> On Behalf Of John J. Sullivan
Sent: Thursday, August 19, 2021 5:08 PM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com<mailto:wsbarp at lists.wsbarppt.com>>
Subject: Re: [WSBARP] Excise tax exemption LLC to member of LLC Member

Nestor:

Whatever it takes in terms of structuring the form of the transaction, there is no way anything more than the $10 per affidavit processing fee should be paid, assuming pro rats distribution to the Members and no additional consideration.

From your description, the title holding LLC is a disregarded entity (assuming both are taxed as partnerships).  Essentially this is a liquidating distribution to the individual members, right?

If so, wouldn’t it be exempt under IRC Section 731, and therefore under WAC 458-61A-212(2)(f)?

If you distribute the downstream Member unit to the individual Members you file an entity level return with the DOR and it’s exempt. Then you deed the property to the Members and it’s also exempt.

Worst case you have two steps instead of one, but there should be no REET.

John J. Sullivan
Sent from my iPhone

On Aug 19, 2021, at 3:45 PM, Nestor Gorfinkel <esq at gorfinkel-law.com<mailto:esq at gorfinkel-law.com>> wrote:

As it stands now, it doesn’t appear on its face to be exempt from Excise tax.

Nestor Gorfinkel, Attorney at Law
Licensed in Florida & Washington State
Florida Civil-Law (International) Notary

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From: wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com> <wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com>> On Behalf Of Nestor Gorfinkel
Sent: Thursday, August 19, 2021 6:38 PM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com<mailto:wsbarp at lists.wsbarppt.com>>
Subject: Re: [WSBARP] Excise tax exemption LLC to member of LLC Member

I See your point or if we simply assign the membership interest in the Member LLC directly to the individual members.

I am not sure why there is a second layer for the LLC, and I requested that they ask their financial advisor or CPA, before I start mucking up the works.

Nestor Gorfinkel, Attorney at Law
Licensed in Florida & Washington State
Florida Civil-Law (International) Notary

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From: wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com> <wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com>> On Behalf Of Athena Dickerson
Sent: Thursday, August 19, 2021 6:19 PM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com<mailto:wsbarp at lists.wsbarppt.com>>
Subject: Re: [WSBARP] Excise tax exemption LLC to member of LLC Member

Maybe a 2 step process, the first transfer to the member LLC using the exemption and the 2nd being a move to its members using the same exemption?  I assume the “members” of both LLC’s are the same and in the same percentages.

Athena Makratzakis Dickerson
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From: wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com> <wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com>> On Behalf Of Nestor Gorfinkel
Sent: Thursday, August 19, 2021 2:57 PM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com<mailto:wsbarp at lists.wsbarppt.com>>
Subject: [WSBARP] Excise tax exemption LLC to member of LLC Member

An LLC owns a house where its only member is an LLC, and the transfer is going to individual members of the “LLC member”.

Is this exempt under WAC 458-61A-211(2)? I am looking to see where this scenario falls (b) or (d) fall short.
None of the exemption appear to apply even though the end result is no change in beneficial interest.

Nestor Gorfinkel, Attorney at Law
Licensed in Florida & Washington State
Florida Civil-Law (International) Notary

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