At Berdon, we promote a culture within the Firm and with clients to be up-to-date regarding what our clients are planning for themselves and their businesses. This ensures that we assist in maximizing the efficiency of a given transaction, and safeguards against some common mistakes that can be prevented if addressed upfront, can be prevented.
These common foot faults span the gamut of all types of taxes. What might be a mistake in one state could be the optimum result in another.
Let’s consider real property transfer taxes. Many states make this a simple exercise; if you record a deed, you pay a tax. However, a majority of states and municipalities now have a controlling interest concept. This typically means if you own or acquire a 50% or more interest in an entity that owns real property, a transfer tax may apply.
Some jurisdictions look on a transaction by transaction basis to determine if the fifty percent threshold has been met; others will look over a certain time frame, often referred to as the aggregation period.
Things get a little worse: Some jurisdictions have a per se rule (any transfers within this time frame will be aggregated); some have a presumption (any transfers within a time frame will be aggregated unless you can prove otherwise); and others incorporate the presumption approach in which the jurisdiction can rebut the presumption (transfers outside the time frame can be show to be part of a plan, no matter how long the time period).
Just to make matters a little more perilous, many jurisdictions hold both the transferor and transferee liable for the transfer tax.
Questions? If you need help determining how real property transfer taxes are handled and if they apply to you, contact me at firstname.lastname@example.org or your Berdon advisor.
Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, advises on the unique requirements of governments and municipalities across the nation.