[WSBARP] Related party transaction - How much REET?

[Kailei Feeney]

I think perhaps you could still cut the cost and have one deed from the estate to the heir taking the property, and it would be part inheritance and part purchase and then I think you can utilize the 200 K as the consideration amount.

Kailei

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From: wsbarp-bounces at lists.wsbarppt.com <wsbarp-bounces at lists.wsbarppt.com> On Behalf Of Nicholas Pleasants
Sent: Tuesday, September 14, 2021 12:37 PM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
Subject: [WSBARP] Related party transaction - How much REET?

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

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