[WSBARP] Recording a Deed with Two Excise Tax Exemptions
Shaun Watchie Perry
shaunwperry at swp-law.com
Thu Oct 27 12:54:50 PDT 2022
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
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> attorney-client privilege, work product doctrine, or other
> confidentiality protection. If you are not the intended recipient, or
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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
> 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.
>
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