<html xmlns:v="urn:schemas-microsoft-com:vml" xmlns:o="urn:schemas-microsoft-com:office:office" xmlns:w="urn:schemas-microsoft-com:office:word" xmlns:m="http://schemas.microsoft.com/office/2004/12/omml" xmlns="http://www.w3.org/TR/REC-html40"><head><meta http-equiv=Content-Type content="text/html; charset=utf-8"><meta name=Generator content="Microsoft Word 14 (filtered medium)"><!--[if !mso]><style>v\:* {behavior:url(#default#VML);}
o\:* {behavior:url(#default#VML);}
w\:* {behavior:url(#default#VML);}
.shape {behavior:url(#default#VML);}
</style><![endif]--><style><!--
/* Font Definitions */
@font-face
{font-family:Calibri;
panose-1:2 15 5 2 2 2 4 3 2 4;}
@font-face
{font-family:Tahoma;
panose-1:2 11 6 4 3 5 4 4 2 4;}
@font-face
{font-family:"Arial Black";
panose-1:2 11 10 4 2 1 2 2 2 4;}
/* Style Definitions */
p.MsoNormal, li.MsoNormal, div.MsoNormal
{margin:0in;
margin-bottom:.0001pt;
font-size:11.0pt;
font-family:"Calibri","sans-serif";}
h1
{mso-style-priority:9;
mso-style-link:"Heading 1 Char";
mso-margin-top-alt:auto;
margin-right:0in;
mso-margin-bottom-alt:auto;
margin-left:0in;
font-size:24.0pt;
font-family:"Times New Roman","serif";}
h2
{mso-style-priority:9;
mso-style-link:"Heading 2 Char";
mso-margin-top-alt:auto;
margin-right:0in;
mso-margin-bottom-alt:auto;
margin-left:0in;
font-size:18.0pt;
font-family:"Times New Roman","serif";}
a:link, span.MsoHyperlink
{mso-style-priority:99;
color:blue;
text-decoration:underline;}
a:visited, span.MsoHyperlinkFollowed
{mso-style-priority:99;
color:purple;
text-decoration:underline;}
p.MsoAcetate, li.MsoAcetate, div.MsoAcetate
{mso-style-priority:99;
mso-style-link:"Balloon Text Char";
margin:0in;
margin-bottom:.0001pt;
font-size:8.0pt;
font-family:"Tahoma","sans-serif";}
span.Heading1Char
{mso-style-name:"Heading 1 Char";
mso-style-priority:9;
mso-style-link:"Heading 1";
font-family:"Times New Roman","serif";
font-weight:bold;}
span.Heading2Char
{mso-style-name:"Heading 2 Char";
mso-style-priority:9;
mso-style-link:"Heading 2";
font-family:"Times New Roman","serif";
font-weight:bold;}
span.BalloonTextChar
{mso-style-name:"Balloon Text Char";
mso-style-priority:99;
mso-style-link:"Balloon Text";
font-family:"Tahoma","sans-serif";}
span.EmailStyle21
{mso-style-type:personal;
font-family:"Times New Roman","serif";
color:windowtext;}
span.apple-converted-space
{mso-style-name:apple-converted-space;}
span.EmailStyle23
{mso-style-type:personal-reply;
font-family:"Arial","sans-serif";
color:#1F497D;}
.MsoChpDefault
{mso-style-type:export-only;
font-size:10.0pt;}
@page WordSection1
{size:8.5in 11.0in;
margin:1.0in 1.0in 1.0in 1.0in;}
div.WordSection1
{page:WordSection1;}
--></style><!--[if gte mso 9]><xml>
<o:shapedefaults v:ext="edit" spidmax="1027" />
</xml><![endif]--><!--[if gte mso 9]><xml>
<o:shapelayout v:ext="edit">
<o:idmap v:ext="edit" data="1" />
</o:shapelayout></xml><![endif]--></head><body lang=EN-US link=blue vlink=purple><div class=WordSection1><p class=MsoNormal><span style='font-family:"Arial","sans-serif";color:#1F497D'>Rob, haven’t had that one. But seems to me he could have gifted 50% to his lady by deed without excise and then both contributed as capital to LLC as mere change in identity and that would be exempt from excise. So in effect, isn’t that what happened? Just that he didn’t convey by deed the 50% to her prior to the deed to LLC. Seems like it is implicit within the substance of the transaction given the relationship. One does not have to be a spouse or registered domestic partner to receive an excise tax free gift of real property. <o:p></o:p></span></p><p class=MsoNormal><span style='font-family:"Arial","sans-serif";color:#1F497D'><o:p> </o:p></span></p><div><p class=MsoNormal><span style='font-family:"Arial","sans-serif";color:#1F497D'>Sincerely,<o:p></o:p></span></p><p class=MsoNormal><span style='font-family:"Arial","sans-serif";color:#1F497D'><o:p> </o:p></span></p><p class=MsoNormal><span style='font-family:"Arial","sans-serif";color:#1F497D'>Tom<o:p></o:p></span></p><p class=MsoNormal><span style='font-family:"Arial","sans-serif";color:#1F497D'><o:p> </o:p></span></p><p class=MsoNormal><span style='font-family:"Arial","sans-serif";color:#1F497D'>Thomas J. Westbrook<o:p></o:p></span></p><p class=MsoNormal><span style='font-family:"Arial","sans-serif";color:#1F497D'>Attorney at Law<o:p></o:p></span></p><p class=MsoNormal><span style='font-family:"Arial","sans-serif";color:#1F497D'><o:p> </o:p></span></p><p class=MsoNormal><span style='color:#1F497D'><img width=136 height=54 id="_x0000_i1029" src="cid:image007.jpg@01D06D2A.ABE10810" alt="cid:image001.jpg@01CFC835.0D3988D0"></span><span style='font-family:"Arial","sans-serif";color:#1F497D'><o:p></o:p></span></p><p class=MsoNormal><span style='font-family:"Arial","sans-serif";color:#1F497D'> <o:p></o:p></span></p><p class=MsoNormal><span style='font-family:"Arial","sans-serif";color:#1F497D'>Rodgers, Kee & Card, P.S.<o:p></o:p></span></p><p class=MsoNormal><span style='font-family:"Arial","sans-serif";color:#1F497D'>324 West Bay Drive NW, Suite 201<o:p></o:p></span></p><p class=MsoNormal><span style='font-family:"Arial","sans-serif";color:#1F497D'>Olympia, Washington 98502<o:p></o:p></span></p><p class=MsoNormal><span style='font-family:"Arial","sans-serif";color:#1F497D'><o:p> </o:p></span></p><p class=MsoNormal><span style='font-family:"Arial","sans-serif";color:#1F497D'>Phone: 360-352-8311<o:p></o:p></span></p><p class=MsoNormal><span style='font-family:"Arial","sans-serif";color:#1F497D'>Facsimile: 360-352-8501<o:p></o:p></span></p><p class=MsoNormal><span style='font-family:"Arial","sans-serif";color:#1F497D'>Email: tjw@buddbaylaw.com<o:p></o:p></span></p><p class=MsoNormal><span style='font-family:"Arial","sans-serif";color:#1F497D'>Skype: thomas.westbrook<o:p></o:p></span></p><p class=MsoNormal><span style='font-family:"Arial","sans-serif";color:#1F497D'>www.buddbaylaw.com<o:p></o:p></span></p><p class=MsoNormal><span style='font-family:"Arial","sans-serif";color:#1F497D'><o:p> </o:p></span></p><p class=MsoNormal><span style='font-family:"Arial","sans-serif";color:#1F497D'>The information contained in this email and attachment(s) are for the exclusive use of the addressee(s) and may contain private, privileged and/or confidential information. If you are not the addressee, you are strictly prohibited from reading, photocopying, distributing or otherwise using this email or its contents in any way. If you have received this communication in error, please notify us immediately by telephone at 360-352-8311 or by e-mail to reception@buddbaylaw.com, and destroy the original message from your electronic files.<o:p></o:p></span></p></div><p class=MsoNormal><span style='font-family:"Arial","sans-serif";color:#1F497D'><o:p> </o:p></span></p><div><div style='border:none;border-top:solid #B5C4DF 1.0pt;padding:3.0pt 0in 0in 0in'><p class=MsoNormal><b><span style='font-size:10.0pt;font-family:"Tahoma","sans-serif"'>From:</span></b><span style='font-size:10.0pt;font-family:"Tahoma","sans-serif"'> wsbarp-bounces@lists.wsbarppt.com [mailto:wsbarp-bounces@lists.wsbarppt.com] <b>On Behalf Of </b>Rob Rowley<br><b>Sent:</b> Thursday, April 02, 2015 9:41 AM<br><b>To:</b> WSBA RPPT<br><b>Subject:</b> [WSBARP] Mere Change In Identity (WAC 458-61A-211) & A Committed Intimate Relationship - DOR Audit Letter<o:p></o:p></span></p></div></div><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'>Has anyone had any experience in responding to a DOR audit letter where DOR is challenging a transfer of residential rental properties from an individual into a Washington State LLC where the grantor is still in a 15+ year, committed intimate relationship with his spouse (but held title solely in his name and properties were acquired during C-I-R) and the new LLC has equally split ownership (50/50 member interests) between the two C-I-R individuals. </span><o:p></o:p></p><p class=MsoNormal><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'> </span><o:p></o:p></p><p class=MsoNormal><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'>DOR is taking the position that because they were not married or in a registered domestic partnership that it is not exempt, and as such wants lots and lots of money.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'> </span><o:p></o:p></p><p class=MsoNormal><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'>Thoughts?</span><o:p></o:p></p><p class=MsoNormal style='line-height:12.0pt'><b><span style='font-size:10.0pt;font-family:"Times New Roman","serif"'> </span></b><o:p></o:p></p><p class=MsoNormal style='line-height:12.0pt'><b><span style='font-size:10.0pt;font-family:"Times New Roman","serif"'> </span></b><o:p></o:p></p><p class=MsoNormal style='line-height:12.0pt'><!--[if gte vml 1]><v:shapetype id="_x0000_t75" coordsize="21600,21600" o:spt="75" o:preferrelative="t" path="m@4@5l@4@11@9@11@9@5xe" filled="f" stroked="f">
<v:stroke joinstyle="miter" />
<v:formulas>
<v:f eqn="if lineDrawn pixelLineWidth 0" />
<v:f eqn="sum @0 1 0" />
<v:f eqn="sum 0 0 @1" />
<v:f eqn="prod @2 1 2" />
<v:f eqn="prod @3 21600 pixelWidth" />
<v:f eqn="prod @3 21600 pixelHeight" />
<v:f eqn="sum @0 0 1" />
<v:f eqn="prod @6 1 2" />
<v:f eqn="prod @7 21600 pixelWidth" />
<v:f eqn="sum @8 21600 0" />
<v:f eqn="prod @7 21600 pixelHeight" />
<v:f eqn="sum @10 21600 0" />
</v:formulas>
<v:path o:extrusionok="f" gradientshapeok="t" o:connecttype="rect" />
<o:lock v:ext="edit" aspectratio="t" />
</v:shapetype><v:shape id="_x0000_s1026" type="#_x0000_t75" alt="" style='position:absolute;margin-left:0;margin-top:0;width:64.5pt;height:97.5pt;z-index:251658240;mso-wrap-distance-left:9pt;mso-wrap-distance-top:0;mso-wrap-distance-right:9pt;mso-wrap-distance-bottom:0;mso-position-horizontal:left;mso-position-horizontal-relative:text;mso-position-vertical-relative:line' o:allowoverlap="f">
<v:imagedata src="cid:image001.jpg@01D06D29.D2A46420" o:title="image002.jpg@01D06D29" />
<w:wrap type="square"/>
</v:shape><![endif]--><![if !vml]><img width=86 height=130 src="cid:image001.jpg@01D06D29.D2A46420" align=left hspace=12 v:shapes="_x0000_s1026"><![endif]><b><span style='font-size:10.0pt;font-family:"Times New Roman","serif"'>Robert R. Rowley</span></b><span style='font-size:10.0pt;font-family:"Times New Roman","serif"'> | Attorney at Law</span><o:p></o:p></p><p class=MsoNormal style='line-height:12.0pt'><span style='font-size:10.0pt;font-family:"Times New Roman","serif"'>505 W. Riverside Ave, Suite 500</span><o:p></o:p></p><p class=MsoNormal style='line-height:12.0pt'><span style='font-size:10.0pt;font-family:"Times New Roman","serif"'>Spokane, WA 99201</span><o:p></o:p></p><p class=MsoNormal style='line-height:12.0pt'><span style='font-size:10.0pt;font-family:"Times New Roman","serif"'>Telephone: (509) 252-5074</span><o:p></o:p></p><p class=MsoNormal style='line-height:12.0pt'><span style='font-size:10.0pt;font-family:"Times New Roman","serif"'>Mobile: (509) 994-1143</span><o:p></o:p></p><p class=MsoNormal style='line-height:12.0pt'><span style='font-size:10.0pt;font-family:"Times New Roman","serif"'>Facsimile: (509) 928-3084</span><o:p></o:p></p><p class=MsoNormal style='line-height:12.0pt'><span style='font-size:10.0pt;font-family:"Times New Roman","serif"'>Email: </span><a href="mailto:rob@rowleylegal.com"><span style='font-size:10.0pt;font-family:"Times New Roman","serif"'>rob@rowleylegal.com</span></a><o:p></o:p></p><p class=MsoNormal><span style='font-size:10.0pt;font-family:"Times New Roman","serif"'>Web Site: </span><a href="http://www.rowleylegal.com/"><span style='font-size:10.0pt;font-family:"Times New Roman","serif"'>www.rowleylegal.com</span></a><o:p></o:p></p><p class=MsoNormal><span style='font-size:10.0pt;font-family:"Times New Roman","serif"'> </span><o:p></o:p></p><p class=MsoNormal><span style='font-size:10.0pt;font-family:"Times New Roman","serif"'>Practice concentrated on business, real estate and general legal matters in Washington and Idaho.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:10.0pt;font-family:"Times New Roman","serif"'> </span><o:p></o:p></p><p class=MsoNormal><a href="https://www.facebook.com/rowleylegal"><span style='font-size:10.0pt;font-family:"Times New Roman","serif";color:windowtext;text-decoration:none'><img border=0 width=24 height=24 id="Picture_x0020_2" src="cid:image002.gif@01D06D29.D2A46420"></span></a><a href="https://www.linkedin.com/pub/rob-rowley/11/172/b20"><span style='font-size:10.0pt;font-family:"Times New Roman","serif";color:windowtext;text-decoration:none'><img border=0 width=24 height=24 id="Picture_x0020_3" src="cid:image003.gif@01D06D29.D2A46420"></span></a><a href="https://twitter.com/ROBERTRROWLEY"><span style='font-size:10.0pt;font-family:"Times New Roman","serif";color:windowtext;text-decoration:none'><img border=0 width=24 height=24 id="Picture_x0020_4" src="cid:image004.gif@01D06D29.D2A46420"></span></a><a href="http://www.yelp.com/biz/robert-r-rowley-spokane"><span style='font-size:10.0pt;font-family:"Times New Roman","serif";color:windowtext;text-decoration:none'><img border=0 width=43 height=21 id="Picture_x0020_5" src="cid:image005.jpg@01D06D29.D2A46420"></span></a><o:p></o:p></p><p class=MsoNormal><span style='font-size:10.0pt;font-family:"Times New Roman","serif"'> </span><o:p></o:p></p><p class=MsoNormal><span style='font-size:10.0pt;font-family:"Times New Roman","serif"'>NOTICE: The contents of this message and any attachments may be protected by the attorney-client privilege, work product doctrine or other applicable protections. If you are not the intended recipient or have received this message in error, please notify the sender and promptly delete the message. Thank you for your assistance.</span><o:p></o:p></p><p class=MsoNormal style='background:white'><span style='font-size:10.0pt;font-family:"Times New Roman","serif";color:#222222'>DISCLAIMER: You should recognize that responses provided by e-mail means are akin to ordinary telephone or face-to-face conversations and do not reflect the level of factual or legal inquiry or analysis which would be applied in the case of a formal legal opinion. A formal opinion may very well reach a different conclusion.</span><o:p></o:p></p><p class=MsoNormal> <o:p></o:p></p><p class=MsoNormal> <o:p></o:p></p><table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width="100%" style='width:100.0%'><tr><td valign=top style='padding:0in 3.75pt 0in 0in'><h2 style='margin:0in;margin-bottom:.0001pt'><span style='font-size:13.5pt;font-family:"Arial Black","sans-serif";color:black;font-weight:normal'>WAC 458-61A-211</span><o:p></o:p></h2></td><td valign=top style='padding:0in 3.75pt 0in 0in'><p class=MsoNormal align=right style='text-align:right'><span style='font-family:"Arial","sans-serif";color:black'><a href="http://app.leg.wa.gov/WAC/registerfiling.aspx?cite=458-61A-211" id="ctl00_ContentPlaceHolder1_hlRegisterFilings"><span style='color:#2B674D;background:#EFEBA5;text-decoration:none'>Agency filings affecting this section</span></a></span><o:p></o:p></p></td></tr><tr><td colspan=2 valign=top style='padding:0in 3.75pt 0in 0in'><h1 style='margin-bottom:7.5pt'><span style='font-size:18.0pt;font-family:"Arial Black","sans-serif";color:black;font-weight:normal'>Mere change in identity or form—Family corporations and partnerships.</span><o:p></o:p></h1></td></tr></table><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(1)<span class=apple-converted-space> </span><b>Introduction.</b><span class=apple-converted-space> </span>A transfer of real property is exempt from the real estate excise tax if it consists of a mere change in identity or form of ownership of an entity. This exemption is not limited to transfers involving corporations and partnerships, and includes transfers of trusts, estates, associations, limited liability companies and other entities. If the transfer of real property results in the grantor(s) having a different proportional interest in the property after the transfer, real estate excise tax applies.</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(2)<span class=apple-converted-space> </span><b>Qualified transactions.</b><span class=apple-converted-space> </span>A mere change in form or identity where no change in beneficial ownership has occurred includes, but is not limited to:</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(a) The transfer by an individual or tenants in common of an interest in real property to a corporation, partnership, or other entity if the entity receiving the ownership interest receives it in the same pro rata shares as the individual or tenants in common held prior to the transfer. (See also WAC<span class=apple-converted-space> </span><a href="http://app.leg.wa.gov/WAC/default.aspx?cite=458-61A-212"><span style='color:#2B674D;text-decoration:none'>458-61A-212</span></a>, Transfers where gain is not recognized under the Internal Revenue Code.)</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(b) The transfer by a corporation, partnership, or other entity of its interest in real property to its shareholders or partners, who will hold the real property either as individuals or as tenants in common in the same pro rata share as they owned the corporation, partnership, or other entity. To the extent that a distribution of real property is disproportionate to the interest the grantee partner has in the partnership, it will be subject to real estate excise tax.</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(c) The transfer by an entity of its interest in real property to its wholly owned subsidiary, the transfer of real property from a wholly owned subsidiary to its parent, or the transfer of real property from one wholly owned subsidiary to another.</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(d) The transfer by a corporation, partnership or other entity of its interest in real property to another corporation, partnership, or other entity if the grantee owner(s) receives it in the same pro rata shares as the grantor owner(s) held prior to the transfer.</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(e) Corporate mergers and consolidations that are accomplished by transfers of stock or membership, and mergers between corporations and limited partnerships as provided in chapters<span class=apple-converted-space> </span><a href="http://app.leg.wa.gov/RCW/default.aspx?cite=25.10"><span style='color:#2B674D;text-decoration:none'>25.10</span></a><span class=apple-converted-space> </span>and<span class=apple-converted-space> </span><a href="http://app.leg.wa.gov/RCW/default.aspx?cite=24.03"><span style='color:#2B674D;text-decoration:none'>24.03</span></a><span class=apple-converted-space> </span>RCW.</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(f) A transfer of real property to a newly formed, beneficiary corporation from an incorporator to the newly formed corporation, provided:</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(i) The proper real estate excise tax was paid on the original transfer to the incorporator; and</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(ii) It was documented on or before the original transfer that the incorporator received title to the property on behalf of that corporation during its formation process.</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>This tax exemption does not apply to a transaction in which a property owner acquires title in his or her own name and later transfers title to the corporation upon its formation.</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(g) A transfer into any revocable trust.</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(h) A conveyance from a trustee of a revocable trust to the original grantor or to a beneficiary if no valuable consideration passes, or if the transaction is otherwise exempt under this chapter (for example, a gift or inheritance). A sale of real property by the trustee to a third party, or to a beneficiary for valuable consideration, is subject to the real estate excise tax.</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(3)<span class=apple-converted-space> </span><b>Examples.</b><span class=apple-converted-space> </span>The following examples, while not exhaustive, illustrate some of the circumstances in which a grant of an interest in real property may or may not qualify for this exemption. These examples should be used only as a general guide. The taxability of each transaction must be determined after a review of all the facts and circumstances.</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(a) Andy owns a 100% interest in real property. He transfers his property to his solely owned corporation. The transfer is exempt from real estate excise tax because there has been no change in the beneficial ownership interest in the property.</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(b) Elizabeth owns a 100% interest in real property, and is the sole owner of Zippy Corporation. She transfers her property to Zippy. The corporation pays $5,000 to Elizabeth and agrees to make payments on the underlying debt on the property. Despite the fact that there was consideration involved in the transfer, it is still exempt from tax because there was no change in beneficial ownership.</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(c) Jim, Kathie, and Tim own real property as joint tenants. They transfer their property to their LLC in the same pro rata ownership. The transfer is exempt from real estate excise tax because there has been no change in beneficial ownership.</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(d) Pat, Liz, and Erin own Stage Corporation. They also own Song & Dance Partnership, in the same pro rata ownership percentages as their interests in the corporation. Stage Corporation transfers real property to Song & Dance Partnership. The transfer is exempt from real estate excise tax, because there has been no change in beneficial interest.</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(e) Morgan owns real property. Brea owns Sparkle Corporation. Morgan transfers real property to Sparkle in exchange for an interest in the corporation. The transfer is subject to real estate excise tax because there has been a change in the beneficial interest in the real property. The tax applies to the extent that the transfer of real property results in the grantor having a different proportional interest in the property after it is transferred. (Note, however, that Morgan and Brea may be able to structure their transaction in a manner that would qualify for exemption under WAC<span class=apple-converted-space> </span><a href="http://app.leg.wa.gov/WAC/default.aspx?cite=458-61A-212"><span style='color:#2B674D;text-decoration:none'>458-61A-212</span></a>.)</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(f) Dan owns property as sole owner. Jill owns property as sole owner. Dan and Jill each transfer their property to Rhyming LLC, which they form together. The transfers are taxable because there has been a change in the beneficial ownership interest in the real property. To the extent that the transfer of real property results in the grantor having a different proportional interest in the property after the transfer, it is taxable. (Note, however, that Dan and Jill may qualify for an exemption under WAC<span class=apple-converted-space> </span><a href="http://app.leg.wa.gov/WAC/default.aspx?cite=458-61A-212"><span style='color:#2B674D;text-decoration:none'>458-61A-212</span></a>.)</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(g) Fred and Steve are equal partners in Jazzy Partnership. They decide to transfer real property from the partnership to themselves as individuals. Based on its true and fair value, the partnership transfers 60% of the real property to Fred and 40% to Steve. This distribution is not in proportion to their ownership interest in Jazzy Partnership, and the transfer is not exempt because there has been a change in the beneficial ownership interest. To the extent that the transfer of property results in the grantor having a different proportional interest in the property after the transfer, it is taxable. (Note, however, that Fred and Steve may qualify for an exemption under WAC<span class=apple-converted-space> </span><a href="http://app.leg.wa.gov/WAC/default.aspx?cite=458-61A-212"><span style='color:#2B674D;text-decoration:none'>458-61A-212</span></a>.)</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(4)<span class=apple-converted-space> </span><b>Disparate treatment of ownership interests.</b></span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(a) Where the ownership of real property is different for financial accounting purposes than for federal tax purposes, the beneficial ownership interest in the real property is deemed the entity which is the owner for financial accounting purposes. Any transfer from the entity that is the owner for federal tax purposes to the owner for financial accounting purposes, or vice versa, is subject to the real estate excise tax.</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(b) For example, Giant Company wants to expand its business. It identifies some real property, but is unable to finance the purchase through a normal loan. It contracts with Mega Loans Inc. to enter into a "synthetic lease" for the purchase of the real property. Under the terms of the synthetic lease, Mega Loans will take title to the real property, and Giant Company will lease it from Mega Loans. Real estate excise tax is paid on the purchase of the real property by Mega Loans. The terms of the lease also provide that Giant Company will be the owner for federal tax purposes and Mega Loans will be the owner for financial accounting purposes. Per the lease agreement, after a specified time Mega Loans will transfer title to the real property to Giant Company. The transfer of title from Mega Loans to Giant Company is subject to real estate excise tax.</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(5)<span class=apple-converted-space> </span><b>Family corporations, partnerships, or other entities.</b><span class=apple-converted-space> </span>This exemption applies to transfers to an entity that is wholly owned by the transferor and/or the transferor's spouse, state registered domestic partner, children, or state registered domestic partner's children regardless of whether the transfer results in a change in the beneficial ownership interest. However, real estate excise taxes will become due and payable on the original transfer as otherwise provided by law if:</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(a) The partnership or corporation thereafter voluntarily transfers the property; or</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(b) The transferor, spouse, state registered domestic partner, children, or state registered domestic partner's children voluntarily transfer stock in the corporation, or interest in the partnership capital to other than:</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(i) The transferor and/or the transferor's spouse, state registered domestic partner, children, or state registered domestic partner's children;</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(ii) A trust having the transferor and/or the transferor's spouse, state registered domestic partner, children, or state registered domestic partner's children as the only beneficiaries at the time of transfer to the trust; or</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(iii) A corporation or partnership wholly owned by the original transferor and/or the transferor's spouse, state registered domestic partner, children, or state registered domestic partner's children within three years of the original transfer to which this exemption applies, and the tax on the subsequent transfer is not paid within sixty days of becoming due.</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>For example, parents own real property as individuals. They create an LLC that is owned by themselves and their three children. The parents transfer the real property to the LLC. Despite the fact that there was a change in beneficial ownership interest, it is still exempt from tax, because the LLC is owned by the grantor and/or the grantor's spouse, state registered domestic partner, children, or state registered domestic partner's children.</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>(6)<span class=apple-converted-space> </span><b>Transfers when there is not a change in identity or form of ownership of an entity.</b><span class=apple-converted-space> </span>This exemption applies to transfers of real property when the grantor and grantee are the same.</span><o:p></o:p></p><p class=MsoNormal style='text-indent:.25in'><span style='font-family:"Arial","sans-serif";color:black'>For example, John and Megan own real property as tenants in common. They decide that they prefer to hold the property as joint tenants with rights of survivorship. John and Megan, as tenants in common, convey the property to John and Megan as joint tenants with rights of survivorship. The transfer is exempt from real estate excise tax.</span><o:p></o:p></p><p class=MsoNormal><span style='font-family:"Arial","sans-serif";color:black'>[Statutory Authority: 2009 c 521. WSR 10-07-133, § 458-61A-211, filed 3/23/10, effective 4/23/10. Statutory Authority: RCW<span class=apple-converted-space> </span><a href="http://app.leg.wa.gov/RCW/default.aspx?cite=82.32.300"><span style='color:#2B674D;text-decoration:none'>82.32.300</span></a>, 82.04.150, and 82.01.060(2). WSR 06-20-036, § 458-61A-211, filed 9/25/06, effective 10/26/06. Statutory Authority: RCW<a href="http://app.leg.wa.gov/RCW/default.aspx?cite=82.32.300"><span style='color:#2B674D;text-decoration:none'>82.32.300</span></a>, 82.01.060(2), and 82.45.150. WSR 05-23-093, § 458-61A-211, filed 11/16/05, effective 12/17/05.]</span><o:p></o:p></p><p class=MsoNormal> <o:p></o:p></p></div></body></html>