REAL ESTATE EXCISE TAX ‑- MEASURE OF TAX

REAL ESTATE EXCISE TAX ‑- MEASURE OF TAX

The selling price of real property for excise tax purposes includes the amount of any unpaid balance on any outstanding mortgage

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                                                                 February 1, 1957

Honorable John C. Merkel
Prosecuting Attorney
Kitsap County
307 Dietz Building
Bremerton, Washington                                                                                                                Cite as:  AGO 57-59 No. 11

Dear Sir:

            This is on response to your letter of January 16, 1957, previously acknowledged, wherein you requested an opinion as to the measure of the real estate excise tax on the transaction described below.

            The facts giving rise to the inquiry as set forth in your letter and the enclosure are as follows:

            Both the grantor and the grantee are wholly owned family corporations, the grantor family owning both corporations.  The grantor executed a warranty deed to the grantee who issued stock in the amount of $199,240.00, which was given to the grantor as consideration for the grantee's equity in the property.  The property deeded to the grantee is subject to a mortgage, the unpaid balance of which is in the amount of $221,260.00 under the terms of the transaction, the grantor has the obligation to pay off the mortgage and there is no responsibility on the part of the grantee to assume this obligation.

             [[Orig. Op. Page 2]]

            The grantor has tendered the county treasurer a check for $1,192.40 as the amount due for the one percent real estate tax.  The question is whether the unpaid balance on the mortgage should have been included in the selling price for the purpose of determining the grantee's tax liability.

            In our view, the tax liability of the grantor in the above situation should be determined by including in the selling price the amount of the unpaid balance of the mortgage.

                                                                     ANALYSIS

            To arrive at the measure of the real estate excise tax on a particular transaction requires a determination of the selling price of the property for tax purposes.  RCW 28.45.030 defines selling price in part as follows:

            "As used in this chapter, the term 'selling price' means 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, and shall include the amount of any lien, mortgage, contract indebtedness, or other incumbrance, either given to secure the purchase price, or any part thereof, or remaining unpaid on such property at the time of sale."  (Emphasis supplied.)

            In our view, the above definition is plain and unambiguous in providing that the "selling price" means anything of value delivered or contracted to be paid for the transfer and that it shall include the amount of any lien or mortgage either given to secure the purchase price or remaining unpaid on such property at the time of the sale.

             [[Orig. Op. Page 3]]

            The fact that the grantee has not obligated himself to pay the mortgage is, in our view, of no consequence.  By the above definition, the legislature has simply and clearly provided that the selling price includes the amount of any mortgage remaining unpaid at the time of the sale.

            We have enclosed for your consideration a copy of an opinion from this office dated March 5, 1952, to the prosecuting attorney of Benton County [[Opinion No. 51-53-251]], wherein the conclusion reached is consistent with the view expressed herein.

Very truly yours,

JOHN J. O'CONNELL
Attorney General

ROBERT L. SIMPSON
Assistant Attorney General