REAL ESTATE EXCISE TAX ‑- APPLICATION TO CONVEYANCE BY HUSBAND AND WIFE TO A CORPORATION FORMED UNDER A PROPERTY SETTLEMENT AGREEMENT IN EXCHANGE FOR CAPITAL STOCK OF THE CORPORATION.

REAL ESTATE EXCISE TAX ‑- APPLICATION TO CONVEYANCE BY HUSBAND AND WIFE TO A CORPORATION FORMED UNDER A PROPERTY SETTLEMENT AGREEMENT IN EXCHANGE FOR CAPITAL STOCK OF THE CORPORATION.

The real estate excise tax applies to a conveyance to a corporation by a husband and wife under a property settlement agreement which provides that a corporation be set up under the laws of the State of Washington and all community property be exchanged for the capital stock, divided as their interest appeared in the property.

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                                                                February 17, 1955

Honorable D. L. McMannis
Prosecuting Attorney
Whitman County
204 First National Bank Building
Pullman, Washington                                                                                                                Cite as:  AGO 55-57 No. 25

 Dear Sir:

             You request our opinion as to whether or not the excise tax on real estate sales applies to a transfer under a property settlement agreement between a husband and wife, approved by a decree of divorce in Idaho, which provided that a Washington corporation should be created and all community property be conveyed to the corporation for which capital stock would be issued and divided between the husband and wife as their interest appeared in the community property.

             We conclude that the excise tax on real estate sales applies to the conveyance.

                                                                     ANALYSIS

             In opinions of this office to the Spokane Prosecuting Attorney of April 4, 1952 [[Opinion No. 51-53-280]], and to the Yakima Prosecuting Attorney of May 22, 1952 [[Opinion No. 51-53-313]], it was concluded and to the Yakima Prosecuting Attorney of May 22, 1952, it was concluded that transfers of real property by partners or partnerships to corporations  [[Orig. Op. Page 2]] in consideration for stock issued to the partners, according to their interest in the property, constituted conveyances subject to the real estate sales tax.  The transactions described in those opinions are closely analogous to the transfer to which you refer; the only substantial difference being that in this case the transfer was made pursuant to a divorce settlement.

             In your request reference is made to our opinion to the Yakima County Prosecuting Attorney of October 29, 1953 [[AGO 53-55 No. 158]], which concluded that transfers of real property made pursuant to property settlements incident to the adjustment of marital relationships by divorce or separation were not taxable.

             Transfers are within the contemplation of that opinion, however, only where such transfers are between husband and wife, not transfers from husband and wife to another entity, as in this case.  Here the transaction assumes more the color of a business transaction than a mere division of the spouses' interest in community property.  While the transfer to the corporation may have been precipitated by marital difficulties, the principal reason for the transfer is business expediency.

             We conclude that this transaction falls within the meaning of "sale" as used within the act and is not within the scope of our opinion to the Yakima County Prosecuting Attorney, dated October 29, 1953 [[AGO 53-55 No. 158]].

 Very truly yours,
 DON EASTVOLD
Attorney General

W. DELMORE MCDOWELL
Assistant Attorney General