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Bob Ferguson

AGO 1962 No. 133 -
Attorney General John J. O'Connell


Where a corporation transfers property owned by it in trust for its own use and benefit under the terms of which trust agreement the trust may be terminated by the beneficiary at any time, the transfer by the trustee to the beneficiary on termination of the trust is not subject to the real estate excise tax or the conveyance tax.

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                                                                   May 11, 1962

Honorable Sid Buckley
Prosecuting Attorney
Stevens County
County Court House
Colville, Washington

                                                                                                              Cite as:  AGO 61-62 No. 133

Dear Sir:

            You have requested our opinion on the application of the real estate excise tax and the tax on conveyances to the following factual situation:

            A corporation owning certain timber and timberlands transferred the same in trust for its own use and benefit.  The trust agreement provided that it could be terminated at any time by the beneficiary.  You ask whether the real estate excise tax and/or the conveyance tax is to be imposed upon the transfer from the trustee to the beneficiary on termination of the trust.

            We conclude that the transfer is not subject to either tax.


            The real estate excise tax is imposed by chapter 28.45 RCW.  Taxability is conditioned upon two essentials:  (1) Transfer of an interest in land, including standing timber, or any estate or interest therein, and (2) valuable consideration.  See, RCW 28.45.010.

            Under the facts as presented there is a transfer of an interest in real estate but there is no valuable consideration.  InDeer Park Etc. v. Stevens County, 46 Wn. (2d) 852, 286 P. (2d) 98 (1955), the court was considering a transaction wherein the title to real property was transferred to the stockholders of a solvent corporation in the process  [[Orig. Op. Page 2]] of dissolution.  The court held that there was no valuable consideration and that the transfer therefore was not subject to the real estate excise tax, except to the extent that the stockholders had agreed to assume corporate liabilities.  The court said:

            "The fact that the dissolution of the corporation is the act which terminates the right to participate in the management of the corporation, and makes operative the right to share in the distribution of assets, does not make the termination of the first, the consideration for the execution of the second.  There is no conveyance for a valuable consideration, taxable under the ordinance and statutes we are considering, where a change of title to real property is effected solely as a result of its distribution to stockholders of a solvent corporation in the process of dissolution, except as hereafter noted. . . . The change in title is but the fruition of a right which accrued to the stockholder at the time the stock was acquired."  (p. 857.)

            The reasoning of that case applies to the transfer from the trustee to the beneficiary.  This conveyance is merely the performance of a duty previously imposed upon the trustee.  To the beneficiary, it is simply the fruition of a right it already had by virtue of the transfer in trust.  No liabilities are to be assumed by the beneficiary.  Accordingly, we need not be concerned with the effect of an agreement by the beneficiary to pay debts incurred by the trust.  See, also, AGO 61-62 No. 86; The Doric Co. v. King County, 57 Wn. (2d) 640, 358 P. (2d) 972 (1961).

            The conveyance tax is imposed by chapter 82.20 RCW upon all conveyances of real property when the consideration or value of the property conveyed exceeds one hundred dollars.

            The state tax commission, under its rule‑making power conferred by RCW 82.32.300, has promulgated Tax Commission Rule 184 which provides that transfers without a valuable consideration in property or money are not subject to the tax.

            Rule 184 also provides that in situations not specifically covered, the tax commission will be guided by any covering regulation of the United States Bureau of Internal Revenue relating to federal documentary  [[Orig. Op. Page 3]] stamps.  Federal documentary stamp tax regulations, § 47.4361-2 (b) (2), exempt from the tax, deeds by trustees not pursuant to a sale. C.C.H. Federal Excise Tax Reporter, § 3320.

            We trust the foregoing will be of assistance to you.

Very truly yours,

Attorney General

Assistant Attorney General