TAXATION ‑- REAL ESTATE SALES TAX ‑- EXCHANGE OF DEEDS BY TENANTS IN COMMON

TAXATION ‑- REAL ESTATE SALES TAX ‑- EXCHANGE OF DEEDS BY TENANTS IN COMMON

1. Deeds by which tenants in common partition the land in accordance with their respective undivided interests are transactions subject to the Real Estate Sales Tax.

2. Deeds by which heirs to an undivided interest in real property partition the same in accordance with such undivided interest for the purpose of having such division embodied in a decree of distribution constitute transactions subject to the Real Estate Sales Tax.

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                                                                    July 30, 1951

Honorable Lawrence Hickman
Prosecuting Attorney, Whitman County
Seattle First-National Bank Building
Colfax, Washington                                                                                                                Cite as:  AGO 51-53 No. 98

Dear Sir:

            In your letter of June 28, 1951, you requested our opinion on the following two questions:

            1. Where tenants in common of a certain piece of real property exchange deeds with each other for the purpose of partitioning the land between them according to their respective interests, is such transaction subject to the Real Estate Sales Tax imposed by county ordinance?

            2. If the Real Estate Sales Tax is payable under the foregoing situation, would the tax be due where, pending probate, heirs exchange deeds "for the purpose of a partition in probate, which division is subsequently embodied in the decree of distribution" by distributing the property in accordance with the deeds?

            Our conclusions may be summarized as follows:

             [[Orig. Op. Page 2]]

            1. Deeds by which tenants in common partition the land in accordance with their respective undivided interests are transactions subject to the Real Estate Sales Tax.

            2. Deeds by which heirs to an undivided interest in real property partition the same in accordance with such undivided interest for the purpose of having such division embodied in a decree of distribution constitute transactions subject to the Real Estate Sales Tax.

                                                                     ANALYSIS

            The Real Estate Sales Tax, levied by ordinance of the various counties pursuant to authority of chapter 11, Laws of 1951, Ex. Sess., imposes a tax "on each sale of any real property" situated in the county.  The term "sale" is defined in part as follows:

            "'Sale' shall have its ordinary meaning and shall in addition include any conveyance, grant, assignment, quit-claim [[quitclaim], or transfer of ownership of or title to real property or any estate or interest in real property for a valuable consideration, * * * but shall not include transfers by gift, devise or inheritance, * * *"

            Treating the first question, tenants in common each have an interest in real property.  Plebuck v. Barnes, 149 Wash. 221, 225, 270 Pac. 823.  The deeds exchanged between them transfer such interests in the land.  It follows that such a transaction amounts to a "sale" of real property, and the transferor, the "seller" as defined in the ordinance, is obligated to pay the Real Estate Sales Tax at the rate of 1% of the selling price.  Since "selling price" is defined to include money or anything of value delivered in return for the transfer, the measure of the tax is the value of the tenancy in common which was conveyed, which would be the proportionate part of the fee interest owned by such tenant applied to the market value of the property transferred.

            Treating the second question, the problem is identical if it is found that the transferors have an interest in real property at the time of the conveyances.  It is settled that upon the death of the owner of land his interest therein immediately vests in his heirs or devises, subject only to the powers of the probate court relative to the use thereof for the payment of outstanding claims against the estate of the decedent.  Section 1, chapter 105, Laws of 1895 (Rem. Rev. Stat. 1366).  (There are numerous cases dealing with the many situations  [[Orig. Op. Page 3]] which may arise, but the language of the statute answers your rather general inquiry; for particular situations we refer you to those cases.)  The executor or administrator cannot transfer that interest.  Plebuck v. Barnes,supra.  The heirs having an interest in real property which they have transferred, a "sale" has occurred which is subject to the Real Estate Sales Tax.  The only problem remaining is the determination of the selling price.  Again, it would be the market value of the land apportioned to the respective interest of the transferor, but if the land were held for any claims against the estate the value would be reduced accordingly.

Very truly yours,

SMITH TROY
Attorney General

C. JOHN NEWLANDS
Assistant Attorney General