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April 21, 1970
Honorable Warren W. Russell
San Juan County
Friday Harbor, Washington 98250
Cite as: AGLO 1970 No. 66
We acknowledge receipt of your letter dated April 17, 1970, pertaining to the applicability of the real estate excise tax (chapter 28.45 RCW) to a sale of property from an individual as a sole proprietor to ". . . his family corporation."
We paraphrase the question raised by your letter as follows:
Does a transfer of real property from an individual to a corporation which is wholly owned by the transferor, his spouse or children, in return for the issuance of corporate stock, constitute a "sale" of real property as defined by RCW 28.45.010, to which the real estate excise tax is applicable?
On the basis of the statutory provisions which are presently in effect, this question is clearly answerable in the affirmative. Accord, Christensen v. Skagit County, 66 Wn.2d 95, 401 P.2d 335 (1965). However, from and after July 1, 1970, when the provisions of § 1, chapter 65, Laws of 1970, become effective, the ruling of the court in this case will no longer be determinative of the issue raised by your question, as we have paraphrased it. Instead, the governing law with respect to transactions occurring on or after this date will be as set forth in the following express amendment to RCW 28A.45.010 ‑ as contained in § 1, chapter 65, Laws of 1970:
"The term sale shall not include a transfer to a corporation which is wholly owned by the transferor, his spouse or his children: Provided, That if such transferee corporation or such transferor, his spouse, or his children voluntarily transfer the property or the stock, as the case may be, within five years of the exchange, excise taxes shall become due and payable on the original transfer as otherwise provided by law."
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It would appear to us that the proviso to this 1970 amendatory provision is, essentially, directed to the sort of potential abuse which you have referred to in your letter.
It is hoped that the foregoing will be of assistance to you.
Very truly yours,
FOR THE ATTORNEY GENERAL
Philip H. Austin
Assistant Attorney General