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<p class="MsoNormal">I haven’t had to do one of these transactions for years, but for what it’s worth, if the purchase is structured as Sibs LLC selling to New LLC, then the purchase price is basically going to be 80% of the FMV of the real estate. So pay the
tax on the purchase price, and there’s no need for any exemption at all. The one issue is, if 80% of FMV is below the assessed value of the property, then you might get some pushback from DOR, or might need some narrative explanation attached to the REET Affidavit
as to why the entire parcel is being sold for a below-assessed-value price. See the definition of “selling price” in
<a href="https://app.leg.wa.gov/WAC/default.aspx?cite=458-61A-102">WAC 458-61A-102(22)</a> for the relationship between selling price and true and fair value of the property conveyed.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">This could also be structured as sibling and spouse individually purchase the real property from Sibs LLC for 80% of its FMV, and then they convey the property into New LLC. Again no need for an exemption, but same problem if the purchase
price seems too low in DOR’s eyes.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Alternatively, one way to minimize tax (though it increases transaction costs) I think could be:<o:p></o:p></p>
<p class="MsoNormal"><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">Transfer property out of Sibs LLC to its individual owners. This is exempt under
<a href="https://app.leg.wa.gov/WAC/default.aspx?cite=458-61A-211">WAC 458-61A-211</a> (mere change in identity or form).<o:p></o:p></li><li class="MsoListParagraph" style="margin-left:0in;mso-list:l0 level1 lfo1">Owners sell their interests to the purchasing sibling and their spouse. Tax is paid on their collective 80% TIC interest in the property. Note that if purchaser is getting financing,
it likely would be a refi rather than a purchase loan, because they already own a 20% interest in the property.<o:p></o:p></li><li class="MsoListParagraph" style="margin-left:0in;mso-list:l0 level1 lfo1">Purchasing sibling and their spouse transfer into New LLC, again exempt under -211.<o:p></o:p></li></ol>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">There are some possible halfway solutions to this also. Maybe purchasing sibling alone exits membership in Sibs LLC and is distributed a 20% interest in the real estate in their individual name. That’s exempt under -211. Then sibling can
purchase the remaining 80% from Sibs LLC, for 80% of the FMV, and again no exemption needed.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">I think the worst outcome from a tax perspective would be for purchasing sibling to purchase the others’ interests in Sibs LLC—that is, it’s not a real estate purchase at all, but rather a purchase of LLC interests. In that case, the transfer
of more than 50% interest in the LLC triggers excise tax on the full FMV of the entire real estate owned by the LLC, no exemption for the 20% interest already owned. See
<a href="https://app.leg.wa.gov/WAC/default.aspx?cite=458-61A-101">WAC 458-61A-101</a>.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<div>
<p class="MsoNormal">Sincerely,<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Eric<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Eric C. Nelsen<o:p></o:p></p>
<p class="MsoNormal">Sayre Law Offices, PLLC<o:p></o:p></p>
<p class="MsoNormal">1417 31st Ave South<o:p></o:p></p>
<p class="MsoNormal">Seattle WA 98144-3909<o:p></o:p></p>
<p class="MsoNormal">206-625-0092<o:p></o:p></p>
<p class="MsoNormal"><a href="mailto:eric@sayrelawoffices.com"><span style="color:#0563C1">eric@sayrelawoffices.com</span></a><o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal"><b><span style="background:aqua;mso-highlight:aqua">Covid-19 Update -
</span></b>All attorneys are working remotely during regular business hours and are available via email and by phone. Videoconferencing also is available. Signing of estate planning documents can be completed and will be handled on a case-by-case basis. Please
direct mail and deliveries to the Seattle office.<o:p></o:p></p>
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<p class="MsoNormal"><o:p> </o:p></p>
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<p class="MsoNormal"><b>From:</b> wsbarp-bounces@lists.wsbarppt.com <wsbarp-bounces@lists.wsbarppt.com>
<b>On Behalf Of </b>samuel@meylerlegal.com<br>
<b>Sent:</b> Tuesday, August 30, 2022 11:25 AM<br>
<b>To:</b> 'WSBA Real Property Listserv' <wsbarp@lists.wsbarppt.com>; 'WSBA Probate & Trust Listserv' <wsbapt@lists.wsbarppt.com><br>
<b>Subject:</b> Re: [WSBARP] Excise Tax Exemption?<o:p></o:p></p>
</div>
</div>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Listmates,<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Following up on the inquiry below, I think it is pertinent to add that the New LLC is owned 50/50 by the sibling and their spouse and New LC has its own EIN. Under the circumstances, does WAC 458-61A-211 provide an exemption against 20%
of the purchase price because the purchasing sibling owns 20% of the seller-LLC and will own the buyer-LLC, 50/50, with their spouse? Thanks for any input!<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Sam<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<div>
<p class="MsoNormal"><b><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue"><o:p> </o:p></span></b></p>
<p class="MsoNormal"><b><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue">Samuel M. Meyler</span></b><o:p></o:p></p>
<p class="MsoNormal"><b><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue">Meyler Legal, PLLC </span></b><o:p></o:p></p>
<p class="MsoNormal"><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue">1700 Westlake Ave. N., Ste. 200<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue">Seattle, Washington 98109</span><o:p></o:p></p>
<p class="MsoNormal"><b><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue">Tel:</span></b><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue"> 206.876.7770<o:p></o:p></span></p>
<p class="MsoNormal"><b><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue">Fax:</span></b><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue"> 206.876.7771<o:p></o:p></span></p>
<p class="MsoNormal"><b><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue">Email:</span></b><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue"> </span><a href="mailto:samuel@meylerlegal.com"><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue">samuel@meylerlegal.com</span></a><o:p></o:p></p>
<p class="MsoNormal"><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue"> </span><o:p></o:p></p>
<p class="MsoNormal"><b><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue">NOTICE:</span></b><o:p></o:p></p>
<p class="MsoNormal"><span style="font-size:8.0pt;font-family:"Arial",sans-serif;color:blue"> </span><o:p></o:p></p>
<p class="MsoNormal"><span style="font-size:8.0pt;font-family:"Arial",sans-serif;color:blue">This electronic message contains information which may be Confidential or Privileged and constitutes an electronic communication within the meaning of the Electronic
Communications Privacy Act 18 USC 2510. The information is intended to be for the use of the individual or entity named above. If you are not the intended recipient, please be aware that any disclosure, copying, distribution or use of the contents of this
information is prohibited. If you received this transmission in error, please notify the sender and delete the copy you received together with any attachments. Thank you.</span><o:p></o:p></p>
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<p class="MsoNormal"><o:p> </o:p></p>
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<div style="border:none;border-top:solid #E1E1E1 1.0pt;padding:3.0pt 0in 0in 0in">
<p class="MsoNormal"><b>From:</b> <a href="mailto:samuel@meylerlegal.com">samuel@meylerlegal.com</a> <<a href="mailto:samuel@meylerlegal.com">samuel@meylerlegal.com</a>>
<br>
<b>Sent:</b> Monday, August 29, 2022 6:46 PM<br>
<b>To:</b> 'WSBA Real Property Listserv' <<a href="mailto:wsbarp@lists.wsbarppt.com">wsbarp@lists.wsbarppt.com</a>>; 'WSBA Probate & Trust Listserv' <<a href="mailto:wsbapt@lists.wsbarppt.com">wsbapt@lists.wsbarppt.com</a>><br>
<b>Subject:</b> Excise Tax Exemption?<o:p></o:p></p>
</div>
</div>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Listmates,<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Five siblings each own a 20% share of Sibs LLC, which owns several properties. One of the siblings seeks to purchase the properties from Sibs LLC and forms a new LLC with their spouse for that purpose. What REET exemptions may apply?
Is there a particular way that this could be structured to obtain a favorable, or more favorable, result? Thanks in advance.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Sam<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal"><b><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue"><o:p> </o:p></span></b></p>
<p class="MsoNormal"><b><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue">Samuel M. Meyler</span></b><o:p></o:p></p>
<p class="MsoNormal"><b><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue">Meyler Legal, PLLC </span></b><o:p></o:p></p>
<p class="MsoNormal"><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue">1700 Westlake Ave. N., Ste. 200<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue">Seattle, Washington 98109</span><o:p></o:p></p>
<p class="MsoNormal"><b><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue">Tel:</span></b><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue"> 206.876.7770<o:p></o:p></span></p>
<p class="MsoNormal"><b><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue">Fax:</span></b><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue"> 206.876.7771<o:p></o:p></span></p>
<p class="MsoNormal"><b><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue">Email:</span></b><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue"> </span><a href="mailto:samuel@meylerlegal.com"><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue">samuel@meylerlegal.com</span></a><o:p></o:p></p>
<p class="MsoNormal"><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue"> </span><o:p></o:p></p>
<p class="MsoNormal"><b><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue">NOTICE:</span></b><o:p></o:p></p>
<p class="MsoNormal"><span style="font-size:8.0pt;font-family:"Arial",sans-serif;color:blue"> </span><o:p></o:p></p>
<p class="MsoNormal"><span style="font-size:8.0pt;font-family:"Arial",sans-serif;color:blue">This electronic message contains information which may be Confidential or Privileged and constitutes an electronic communication within the meaning of the Electronic
Communications Privacy Act 18 USC 2510. The information is intended to be for the use of the individual or entity named above. If you are not the intended recipient, please be aware that any disclosure, copying, distribution or use of the contents of this
information is prohibited. If you received this transmission in error, please notify the sender and delete the copy you received together with any attachments. Thank you.</span><o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
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