[WSBARP] Related party transaction - How much REET?

[Nicholas Pleasants]

Hi Listmates,
Let’s say I have a probate where the parents are deceased, two children are inheriting 50/50, and only probate asset is a home worth $800,000 with a $400,000 mortgage. One child wants to buy out the other, assume the mortgage (if possible under Garn St Germain) or just refinance into their own name.
My typical practice is to deed the property to the two kids by PR deed, then have a second transaction where one kid buys out the other. When I’ve done this in the past, I have not had to deal with the mortgage issue. In this example, the amount of consideration would be $200,000 (half the equity), so can we just pay tax on the $200,000 changing hands? Or does DOR tax the FMV 50% interest that is being transferred, worth $400,000? Or does DOR tax on $600,000 ($400,000 mortgage assumed + $200,000 consideration to sibling)?
I don’t think I can do a non-pro rata distribution because there are no other probate assets. Thanks in advance for any thoughts.
Best,
Nick

Nicholas Pleasants
Owner

[(Logo) Pleasants Law Firm]<http://www.pleasantslaw.com/>

Pleasants Law Firm, P.S.
2300 130th Ave NE, Suite A-101
Bellevue, WA 98005-1755
(425) 615-7070 tel/fax
nick at pleasantslaw.com<mailto:nick at pleasantslaw.com>
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