[WSBARP] Recording a Deed with Two Excise Tax Exemptions

[Shaun Watchie Perry]

The one thing I wanted to point out (if it hasn't already been pointed 
out) is whether the County Recorder would accept an excise tax affidavit 
with 2 exceptions listed in  the REET?  In the past, I have had problems 
with getting a deed recorded, when I have listed more than one excise 
tax exemption, and I have been forced to pick one, in order to 
successfully record. Just my two cents.

-Shaun

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On 2022-10-27 12:28 pm, Robert Pampell wrote:

> Note that if the estate is the only member of the new LLC, it would not 
> be a partnership, but rather a disregarded entity (unless it elected to 
> be taxed as a corporation - unlikely).  So the question would be:  does 
> the transfer to a disregarded entity constitute a nonrecognition 
> transfer as contemplated under Rule 212?
> 
> Bob Pampell
> 
> From: wsbarp-bounces at lists.wsbarppt.com 
> <wsbarp-bounces at lists.wsbarppt.com> On Behalf Of John J. Sullivan, Esq.
> Sent: Thursday, October 27, 2022 12:35 AM
> To: 'WSBA Real Property Listserv' <wsbarp at lists.wsbarppt.com>
> Subject: Re: [WSBARP] Recording a Deed with Two Excise Tax Exemptions
> 
> Don't forget that as long as the LLC is a partnership for federal 
> income tax purposes, a contribution of real property to it by a Member 
> ( especially a sole Member) is exempt from recognition of gain under 
> Sec. 721 of the Code, and therefore the conveyance is exempt from the 
> REET. WAC 458-61A-212.
> 
> I just finished a years long clean up of a multi-generational disregard 
> of the Torrens System on a commercial property. I quieted title in the 
> names of the estates of H&W. Previously I had the estates form a LLC 
> (partnership) and contribute the first property in formation of the LLC 
> in exchange for all of the Member Units. REET Affidavit claimed the 
> exemption under Rule 212. Then I distributed the Member Units to their 
> son, my client and the sole beneficiary, filing the entity REET return 
> claiming the inheritance exemption under 458-61A-202.
> 
> Finally, when I at long last withdrew the second adjacent parcel from 
> Torrens I had the two estates quitclaim it at the beneficiary Member's 
> instruction directly to the LLC, claiming the Rule 212 exemption again.
> 
> So far no problem. The county accepted the deed. On review I doubt the 
> DOR will pick it for audit, since even if they make me jump through the 
> two step hoop both steps remain exempt.
> 
> John J. Sullivan
> 
> From: wsbarp-bounces at lists.wsbarppt.com 
> <wsbarp-bounces at lists.wsbarppt.com> On Behalf Of Jeanne Dawes
> Sent: Wednesday, October 26, 2022 5:31 PM
> To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
> Subject: Re: [WSBARP] Recording a Deed with Two Excise Tax Exemptions
> 
> Mark,  The estate would be the sole member, until it distributed the 
> membership interest to the heirs.  The assets transferred to the LLC 
> are still part of the decedent's estate, which will be distributed to 
> the heirs.  I haven't had to use this, but I think it should be 
> possible.  I can see where a PR may want to handle a distribution in 
> this manner outside of saving a recording fee.  If the property is 
> problematic (environmental issues or the like), it may be beneficial 
> for the heirs to receive an LLC membership interest as opposed to the 
> real property itself to protect other property owned by the heirs.  Or 
> if there are heirs that do not get along, the PR can avoid an obstinate 
> heir by creating the LLC and transferring the property to it.      If I 
> was going to structure this type of distribution I'd run it by DOR to 
> get an opinion that the distribution from the estate is still 
> considered an inheritance.
> 
> _Jeanne_
> 
> _Jeanne J._ _Dawes_
> 
> Attorney at Law
> 
> Gore & Grewe, P.S.
> 
> 103 E. Indiana Avenue, Suite A
> 
> Spokane, WA 99207-2317
> 
> Voice:  509-326-7500
> 
> Fax:      509-326-7503
> 
> jjdawes at goregrewe.com
> 
> INFORMATION CONTAINED IN THIS E-MAIL TRANSMISSION IS PRIVILEGED AND 
> CONFIDENTIAL.
> 
> From: wsbarp-bounces at lists.wsbarppt.com On Behalf Of Mark Anderson
> Sent: Wednesday, October 26, 2022 5:14 PM
> To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
> Subject: Re: [WSBARP] Recording a Deed with Two Excise Tax Exemptions
> 
> Yes, a probate estate can form an LLC and transfer the property into 
> the name of the LLC.  This conveyance would be exempt as a change in 
> form or identity so long as the sole member of the LLC is the Estate 
> itself.  The probate estate is a different person from its collective 
> heirs.
> 
> So now what?  For the heirs to ultimately have a beneficial interest in 
> the property, the Estate would then need to transfer its membership 
> interests to the heirs (pro rata according to how they would have taken 
> if they received the property directly from the Estate as a 
> distribution).  In this case, I'm not confident that there is any 
> exemption on point to avoid excise on this transfer of a controlling 
> interest in an LLC other than characterizing it as a gift.  In any 
> case, this still looks like two transactions.
> 
> Mark B. Anderson
> ANDERSON LAW FIRM PLLC
> 821 Dock St  Ste 209  PMB 4-12
> Tacoma, Washington 98402
> +1 253-327-1750
> +1 253-327-1751 (fax)
> marka at mbaesq.com
> www.mbaesq.com [1]
> 
> CONFIDENTIALITY NOTICE
> This transmission is confidential and is intended solely for the use of 
> the individual named recipient. It may be protected by the 
> attorney-client privilege, work product doctrine, or other 
> confidentiality protection. If you are not the intended recipient, or 
> the person responsible to deliver it to the intended recipient, be 
> advised that any dissemination, distribution, or copying of this 
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> error, please immediately notify the sender via e-mail or by telephone 
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> 
> From: wsbarp-bounces at lists.wsbarppt.com 
> <wsbarp-bounces at lists.wsbarppt.com> On Behalf Of Jeanne Dawes
> Sent: 10/26/2022 12:07 PM
> To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
> Subject: Re: [WSBARP] Recording a Deed with Two Excise Tax Exemptions
> 
> RCW 25.15.006 Definitions.
> 
> (13) "Person" means an individual, corporation, business trust, estate, 
> trust, partnership, limited partnership, limited liability company, 
> association, joint venture, government, governmental subdivision, 
> agency, or instrumentality or any other legal or commercial entity.
> 
> RCW 25.15.071 [2]
> 
> Formation--Certificate of formation.
> 
> (1) In order to form a limited liability company, one or more persons 
> must execute a certificate of formation. The certificate of formation 
> must be delivered to the office of the secretary of state for filing in 
> accordance with Article 2 of chapter 23.95 [3] RCW and set forth:
> 
> Mark,
> 
> An estate can create an LLC,  What basis is this not a mere change of 
> form or identity?
> 
> _Jeanne_
> 
> _Jeanne J._ _Dawes_
> 
> Attorney at Law
> 
> Gore & Grewe, P.S.
> 
> 103 E. Indiana Avenue, Suite A
> 
> Spokane, WA 99207-2317
> 
> Voice:  509-326-7500
> 
> Fax:      509-326-7503
> 
> jjdawes at goregrewe.com
> 
> INFORMATION CONTAINED IN THIS E-MAIL TRANSMISSION IS PRIVILEGED AND 
> CONFIDENTIAL.
> 
> From: wsbarp-bounces at lists.wsbarppt.com On Behalf Of Mark Anderson
> Sent: Wednesday, October 26, 2022 11:48 AM
> To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
> Subject: Re: [WSBARP] Recording a Deed with Two Excise Tax Exemptions
> 
> Here is the response I just got from the King County recorder's office. 
>  Although I think they misunderstood the identity of the grantors and 
> grantees in my situation (and as inartfully worded their response is), 
> it is clear they want two transactions.
> 
> That is a 2 part transaction. Since it'll first need to be transferred 
> from the persons to the LLC then LLC to the probated estate. It will be 
> rejected if its in one transaction saying the same thing I've mention 
> which is that is a 2 part transaction. 2 different transactions and 2 
> different wac exemptions cannot be provided on 1 REETA and Deed.
> 
> As to Jeanne's comment, there is a Controlling Interest Transfer Return 
> (Form 84 0001Be) that is submitted to the Department of Revenue when an 
> LLC (or other entity) conveys 50% or more of its beneficial interest.
> 
> Follow-up question: would a transfer from the probate estate directly 
> to the LLC _really_ be a mere change in a form or identity such that it 
> is exempt from excise tax under WAC 458-618-211?  I would not think 
> that that exemption would cover that conveyance.
> 
> Mark B. Anderson
> ANDERSON LAW FIRM PLLC
> 821 Dock St  Ste 209  PMB 4-12
> Tacoma, Washington 98402
> +1 253-327-1750
> +1 253-327-1751 (fax)
> marka at mbaesq.com
> www.mbaesq.com [1]
> 
> CONFIDENTIALITY NOTICE
> This transmission is confidential and is intended solely for the use of 
> the individual named recipient. It may be protected by the 
> attorney-client privilege, work product doctrine, or other 
> confidentiality protection. If you are not the intended recipient, or 
> the person responsible to deliver it to the intended recipient, be 
> advised that any dissemination, distribution, or copying of this 
> communication is prohibited. If you have received this transmission in 
> error, please immediately notify the sender via e-mail or by telephone 
> at (253) 327-1750 that you have received the message in error, and then 
> delete it. Thank you.
> 
> From: wsbarp-bounces at lists.wsbarppt.com 
> <wsbarp-bounces at lists.wsbarppt.com> On Behalf Of Jeanne Dawes
> Sent: 10/26/2022 10:57 AM
> To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
> Subject: Re: [WSBARP] Recording a Deed with Two Excise Tax Exemptions
> 
> I believe there is a special form to use when an LLC conveys 50% or 
> more of its membership interest.  There will not be a deed to record, 
> and I believe the inheritance exemption will work on the form the LLC 
> is to use to notify DOR of the conveyance.  So on the deed from the 
> estate to the estate created LLC it will just be one exemption the mere 
> change of identity exemption.
> 
> _Jeanne_
> 
> _Jeanne J._ _Dawes_
> 
> Attorney at Law
> 
> Gore & Grewe, P.S.
> 
> 103 E. Indiana Avenue, Suite A
> 
> Spokane, WA 99207-2317
> 
> Voice:  509-326-7500
> 
> Fax:      509-326-7503
> 
> jjdawes at goregrewe.com
> 
> INFORMATION CONTAINED IN THIS E-MAIL TRANSMISSION IS PRIVILEGED AND 
> CONFIDENTIAL.
> 
> From: wsbarp-bounces at lists.wsbarppt.com On Behalf Of michael 
> westseattleattorney.com
> Sent: Wednesday, October 26, 2022 10:31 AM
> To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
> Subject: Re: [WSBARP] Recording a Deed with Two Excise Tax Exemptions
> 
> In King, I had a REETA rejected with two exemptions ☹
> 
> -------------------------
> 
> From: wsbarp-bounces at lists.wsbarppt.com 
> <wsbarp-bounces at lists.wsbarppt.com> on behalf of Jeanne Dawes 
> <jjdawes at goregrewe.com>
> Sent: Wednesday, October 26, 2022 10:18 AM
> To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
> Subject: Re: [WSBARP] Recording a Deed with Two Excise Tax Exemptions
> 
> I believe you can have the estate establish the LLC, then distribute 
> the property to the LLC using the mere change of identity exemption, 
> and then distribute membership interests to the heirs using the 
> inheritance exemption.
> 
> _Jeanne_
> 
> _Jeanne J._ _Dawes_
> 
> Attorney at Law
> 
> Gore & Grewe, P.S.
> 
> 103 E. Indiana Avenue, Suite A
> 
> Spokane, WA 99207-2317
> 
> Voice:  509-326-7500
> 
> Fax:      509-326-7503
> 
> jjdawes at goregrewe.com
> 
> INFORMATION CONTAINED IN THIS E-MAIL TRANSMISSION IS PRIVILEGED AND 
> CONFIDENTIAL.
> 
> From: wsbarp-bounces at lists.wsbarppt.com On Behalf Of Mark Anderson
> Sent: Wednesday, October 26, 2022 9:58 AM
> To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
> Subject: [WSBARP] Recording a Deed with Two Excise Tax Exemptions
> 
> Dear All:
> 
> I have posed this question to the King County Recorder and am still 
> waiting for an answer.  Because recording issues have been on your 
> minds lately as a topic of discussion on this listserv, I thought I 
> would run it by all of you.
> 
> A probate estate plans to make a distribution of a single piece of real 
> property to the heirs.  I am aware that a distribution to the heirs as 
> tenants-in-common would be exempt from excise tax as an inheritance 
> under WAC 458-61A-202.
> 
> Instead of distributing the property to the heirs as individuals, 
> however, the heirs have requested that the property ultimately be 
> conveyed into an LLC owned by all of the heirs in the same proration as 
> they would have otherwise taken as tenants-in-common.  I am aware that, 
> so long as the owners have the same proportional interests in the 
> property, conveyance from tenants-in-common into an LLC would be exempt 
> from excise tax as a change in identity or form under WAC 458-618-211.
> 
> I am trying to do this as one transaction, i.e., one deed from the 
> probate estate into the LLC.  How would you annotate the exemption(s) 
> on the real estate excise tax affidavit?  Or should I just do this as 
> two successive transactions?
> 
> Thanks in advance.
> 
> Mark B. Anderson
> ANDERSON LAW FIRM PLLC
> 821 Dock St  Ste 209  PMB 4-12
> Tacoma, Washington 98402
> +1 253-327-1750
> +1 253-327-1751 (fax)
> marka at mbaesq.com
> www.mbaesq.com [1]
> 
> CONFIDENTIALITY NOTICE
> This transmission is confidential and is intended solely for the use of 
> the individual named recipient. It may be protected by the 
> attorney-client privilege, work product doctrine, or other 
> confidentiality protection. If you are not the intended recipient, or 
> the person responsible to deliver it to the intended recipient, be 
> advised that any dissemination, distribution, or copying of this 
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> delete it. Thank you.
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