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</o:shapelayout></xml><![endif]--></head><body lang=EN-US link="#0563C1" vlink="#954F72"><div class=WordSection1><p class=MsoNormal>Hello Fellow Listservs,<o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>I would like to pick your collective brains regarding how to structure a potential transaction so as to qualify for Washington’s Real Estate Excise Tax various exemptions.<o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>Hypo:<o:p></o:p></p><p class=MsoNormal>LLC #1 owns raw land in Washington and wants to convey 50% ownership to LLC#2 and create a new combined entity in which both LLC #1 and LLC#2 have an equal interest in exchange for payment. Raw land will be jointly developed hence the need for a combined LLC. Both LLC# 1 and LLC #2 wants to avoid Real Estate Excise Tax due to the value of the land. <o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>Potential exemptions:<o:p></o:p></p><ol style='margin-top:0in' start=1 type=1><li class=MsoListParagraph style='margin-left:0in;mso-list:l0 level1 lfo1'>WAC 458-61A-101 (Controlling Interest) Convey less than 50% ownership to LLC #2 to avoid triggering this scenario. This is less than ideal for a number of reasons<o:p></o:p></li><li class=MsoListParagraph style='margin-left:0in;mso-list:l0 level1 lfo1'>WAC 458-61A-212 (Not recognized as gain by IRS) –Transfer under 721- LLC #1 transfers real property into a Partnership between LLC #1 and LLC#2. Partners then transfer land into joint LLC in which is owned in same percentage as the partnership and thus qualify as a mere change in identity under WAC 458-61A-211. So long as there is no gain from the transfer from partnership to joint LLC, the partnership should not have any tax liability. <o:p></o:p></li></ol><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>Situation #2 surely lends itself for the State to look through the transaction and so there is certainly a concern that even if such actions may meet the requirements of a Transfer under section 721, that the state may look through the form of the transaction to assess the excise tax based on the substance of the potentially connected transactions. <o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>If you see any flaws in these potential exemptions or can identify other potential strategies to qualify for exemptions, please let me know. <o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal><span style='color:black'>Warmest regards,<br><br></span><b><span style='font-size:12.0pt;color:purple'>Michael S. Safren, Esq.</span></b> <b><br></b><i>Attorney at Law</i> <br><br>14900 Interurban Ave. S., Ste. 280 | Seattle, WA 98168 <br>11900 NE 1st St., Bldg. G - Ste. 300 | Bellevue, WA 98005 <br>P: (206) 859-5098 | E: <a href="mailto:msafren@jennylinglaw.com" target="_blank"><span style='color:blue'>msafren@jennylinglaw.com</span></a> <br><u><a href="http://www.jennylinglaw.com" target="_blank"><span style='color:blue'>www.jennylinglaw.com</span></a></u> | <u><a href="http://www.facebook.com/jennylinglaw/" target="_blank"><span style='color:blue'>facebook.com/jennylinglaw/</span></a></u> <o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal><br><span style='font-size:8.0pt'>This communication, including attachments, may contain information that is confidential and protected by the attorney/client or other privileges. It constitutes non-public information intended to be conveyed only to the designated recipient(s). If the reader or recipient of this communication is not the intended recipient, an employee or agent of the intended recipient who is responsible for delivering it to the intended recipient, or you believe that you have received this communication in error, please notify the sender immediately by return e-mail and promptly delete this e-mail, including attachments without reading or saving them in any manner. The unauthorized use, dissemination, distribution, or reproduction of this e-mail, including attachments, is prohibited and may be unlawful. Receipt by anyone other than the intended recipient(s) is not a waiver of any attorney/client or other privilege.</span> <o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p></div></body></html>