TAXATION ‑- REAL ESTATE EXCISE ‑- APPLICABILITY TO CREATION OF JOINT TENANCY.
Where in accordance with a prior agreement an individual transfers separately owned real estate to a grantee by a deed reciting consideration of love and affection and the grantee pursuant to the same agreement then executes a deed setting forth the same consideration and transferring the title back to the grantor and another person as joint tenants the real estate excise tax does not apply.
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December 28, 1961
Honorable Charles O. Carroll
County City Building
Seattle 4, Washington
Cite as: AGO 61-62 No. 86
You have requested an opinion of this office on the application of the real estate excise tax to the following factual situation:
A widow transfers real estate to a grantee by a deed expressing a consideration of love and affection. The grantee then executes a deed setting forth the same consideration and transferring the title back to the first grantor and her son as joint tenants in accordance with an oral agreement made at the time of the first conveyance.
We conclude that neither transfer is subject to the real estate excise tax.
The real estate excise tax is imposed upon every sale of real property. The term "sale" is defined in RCW 28.45.010 which reads in material part as follows:
"As used in this chapter, the term 'sale' shall have its ordinary meaning and shall include any conveyance, grant, assignment, quitclaim, or transfer of the ownership of or title to real property, including standing timber, or any estate or interest therein for a valuable consideration, . . .
[[Orig. Op. Page 2]]
"The term shall not include a transfer by gift, devise, or inheritance, . . ."
This statute contains other exclusions, none of which are pertinent to this discussion.
The transfers here involved are clearly taxable if they were made for "valuable consideration."
Obviously, the purpose of the entire transaction is to create a joint tenancy. At common law two requisites of a joint tenancy are that the interest must accrue by one and the same conveyance, and at one and the same time. In other words, if the owner of real property makes a conveyance to himself and another, a joint tenancy cannot be created; thus, in order to create a joint tenancy at common law, the use of a "strawman" grantee was required. 4 Thompson on Real Property (Perm. ed.) § 1776. While it has not been determined by the courts or clarified by the legislature, it is thought by many lawyers that these common-law principles apply to the creation of a joint tenancy under Initiative Measure 208 (1960), chapter 1, Laws of 1961.
As for the first transfer above described, the question to be determined is whether or not there is any valuable consideration passing from the "strawman" grantee to the grantor. We are unable to find any such consideration.
In the first place, the recited consideration (love and affection) clearly does not constitutevaluable consideration within the meaning of the statute. RCW 28.45.050 establishes the real estate excise tax at ". . . not exceeding one per cent of the selling price. . . ." "Selling price" is defined by RCW 28.45.030 to mean ". . . the consideration, including money or anything of value, paid or delivered or contracted to be paid or delivered in return for the transfer of the real property or estate or interest in real property, . . ." Obviously then,valuable consideration is that consideration which can be given a monetary value, thus excluding love and affection as such valuable consideration.
Secondly, while the strawman-grantee's promise to reconvey to the grantor and her son as joint tenants may be said to constitute a form of consideration, it is notvaluable consideration. For it is obvious that there was intended to be transferred and was transferred to the strawman-grantee only bare legal title, and not any equitable ownership in the property. It is also obvious that bare legal title, divorced from equitable ownership, is not anything of measurable value. Accordingly, the promise to reconvey this bare legal title cannot constitute anything of measurable value, and thus cannot constitute valuable consideration.
[[Orig. Op. Page 3]]
Similarly we do not find valuable consideration for the second transfer back to the first grantor and a third party as joint tenants. The change in title in this instance is simply the performance of a duty previously imposed on the grantee and vests in the joint tenants' rights which had already accrued to them by virtue of the first transfer. See,Deer Park Pine Industry v. Stevens County, 46 Wn. (2d) 852, 286 P. (2d) 98 (1955);The Doric Company v. King County, 157 Wash. Dec. 546 [[57 Wn. 2d 640]], 358 P. (2d) 972 (1961).
It should be noted that the above conclusions are intended to apply only to transfers involving separate property. Where the transfers involve community property, different questions may well be presented.
We trust that the foregoing will be of assistance to you.
Very truly yours,
JOHN J. O'CONNELL
TIMOTHY R. MALONE
Assistant Attorney General