[WSBARP] Related party transaction - How much REET?

[Mark Anderson]

Sorry I’m late to this game.

How are you planning to deal with the consideration given for assumption of the debt on the property?  The child being bought out would not only be receiving $200,000, but would also be relieved of the debt on the property.

Mark B. Anderson
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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 2:47 PM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
Subject: Re: [WSBARP] Related party transaction - How much REET?

This all makes perfect sense. Thanks everyone for your thoughtful responses.
Best,
Nick

From: <wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com>> on behalf of Kailei Feeney <kailei at westseattlelaw.com<mailto:kailei at westseattlelaw.com>>
Reply-To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com<mailto:wsbarp at lists.wsbarppt.com>>
Date: Tuesday, September 14, 2021 at 1:16 PM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com<mailto:wsbarp at lists.wsbarppt.com>>
Subject: Re: [WSBARP] Related party transaction - How much REET?

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

Kailei B. Feeney
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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 Nicholas Pleasants
Sent: Tuesday, September 14, 2021 12:37 PM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com<mailto: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

Nicholas Pleasants
Owner

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