[WSBARP] Excise Tax Question

Fri Jan 14 17:14:44 PST 2022

Umar:

I believe Kathleen is right that WAC 458-61A-214(3) should be available to
exempt the second conveyance from the REET. 

A in your hypothetical would not have to disclose his intent to reconvey B’s
interest to C in the first deed. It will look like the straight sale it is.
I’m not a dirt attorney but it might make sense to place some self-serving
language in the first deed indicating the intent of both parties to sever
and terminate the JTWROS. 

The second deed – A’s conveyance of a percentage interest as TIC, would I
think describe the agency relationship, therefore not containing any
description of consideration and probably affirming that the conveyance is
for no consideration at all. Kathleen is right that A and C would want the
documentation described in (5) to be in place ahead of time. Hopefully this
won’t be a problem because C has cash and does not require bank financing
that is only available with a first position in the property. 

I think that should work to avoid a second REET.

John J. Sullivan

From: wsbarp-bounces at lists.wsbarppt.com <wsbarp-bounces at lists.wsbarppt.com>
On Behalf Of Kathleen Hopkins
Sent: Friday, January 14, 2022 4:31 PM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
Subject: Re: [WSBARP] Excise Tax Question

I am not a tax attorney so you want to do your own research to confirm, but
consider if the nominee (aka strawman) exception WAC 458-61A-214 might work
if A uses C’s money to buy out B’s interest. 

NOTE: under subpart (5) of the WAC you will be required to obtain a
notarized statement from C, dated BEFORE the date of the transfer from B to
A, stating that A is using C’s money to acquire the TIC interest on C’s
behalf. 

Kathleen J. Hopkins 

Real Property Law Group, PLLC 

1326 Fifth Avenue, Suite 654 

Seattle, WA 98101 

Phone & Fax: (206) 625-0404 

Home (please use during pandemic): 425-844-2749

email:  <mailto:khopkins at rp-lawgroup.com> khopkins at rp-lawgroup.com 

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From: wsbarp-bounces at lists.wsbarppt.com
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<wsbarp-bounces at lists.wsbarppt.com
<mailto:wsbarp-bounces at lists.wsbarppt.com> > On Behalf Of Umar Gebril
Sent: Friday, January 14, 2022 12:18 PM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com
<mailto:wsbarp at lists.wsbarppt.com> >
Subject: Re: [WSBARP] Excise Tax Question

No debt on the property. 

Umar Gebril | Attorney | Partner

Cascade Law, PLLC

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From: "wsbarp-bounces at lists.wsbarppt.com
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<wsbarp-bounces at lists.wsbarppt.com
<mailto:wsbarp-bounces at lists.wsbarppt.com> > on behalf of John McCrady
<j.mccrady at pstitle.com <mailto:j.mccrady at pstitle.com> >
Reply-To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com
<mailto:wsbarp at lists.wsbarppt.com> >
Date: Friday, January 14, 2022 at 12:14 PM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com
<mailto:wsbarp at lists.wsbarppt.com> >
Subject: Re: [WSBARP] Excise Tax Question

If there is debt on the property, and C is taking on part of the debt, then
excise tax is owing on any consideration C is paying to B, and also on ½ the
amount of debt owing.

John McCrady

Counsel

Puget Sound Title Company

5350 Orchard Street West

University Place WA 98467

253-476-5721

j.mccrady at pstitle.com <mailto:j.mccrady at pstitle.com> 

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From: wsbarp-bounces at lists.wsbarppt.com
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<mailto:wsbarp-bounces at lists.wsbarppt.com> > On Behalf Of Umar Gebril
Sent: Friday, January 14, 2022 11:32 AM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com
<mailto:wsbarp at lists.wsbarppt.com> >
Subject: [WSBARP] Excise Tax Question

Listmates, 

Here’s a scenario I’d be interested in getting your opinions on:

A and B are both unmarried and currently own Property in joint tenancy WROS.

A wants to remove B from title, and then add C to title and own Property
together as TIC. B is amenable to being bought out, and has agreed to sell
her interest in the Property back to A for $350k. B does not know that C
exists and B is not aware that A intends to add C to title after B is
removed. 

My initial thought is to first utilize a QCD to break the joint tenancy and
remove B from title (thereby triggering excise tax liability on the part of
B for the transfer in interest), and then subsequently completing a 2nd deed
(QCD, WD
?) in order to add C to title. 

However, by proceeding this way, I believe that in executing the 2nd deed
(from A to C, as TIC), A will incur excise tax – which we want to avoid. 

Aside from having B transfer her interest directly to C (and thereby finding
out about C’s existence), can you think of another way or means that would
allow us to complete this without having A incur excise tax?

Thoughts and comments appreciated. 

Umar

Umar Gebril | Attorney | Partner

Cascade Law, PLLC

www.cascade-law.com
<https://f.xdref.com/?id=20EJddVK026247&from=wsbarp-bounces@lists.wsbarppt.c
om&to=j.mccrady at pstitle.com&url=http://www.cascade-law.com>  

1604 Hewitt Ave, Suite 515

Everett, WA 98201

425.300.5616

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