Current through Register Vol. 24-06, March 15, 2024
(1)
Trading/exchanging property.
The real estate excise tax applies when real property is conveyed in exchange
for other real property or any other valuable property. The real estate excise
tax is due on the true and fair value for each individual property.
(2)
Boundary line adjustments.
(a)
Introduction. A boundary
line adjustment is a legal method to make minor changes to existing property
lines between two or more contiguous parcels. Real estate excise tax may apply
depending upon the specific circumstances of the transaction. Boundary line
adjustments include, but are not limited to, the following:
(i) Moving a property line to follow an
existing fence line;
(ii) Moving a
property line around a structure to meet required setbacks;
(iii) Moving a property line to remedy a
boundary line dispute;
(iv) Moving
a property line to adjust property size and/or shape for owner convenience;
and
(v) Selling a small section of
property to an adjacent property owner.
(b)
Boundary line adjustments in
settlement of dispute. Boundary line adjustments made solely to settle a
boundary line dispute are not subject to real estate excise tax if no other
consideration is present.
(c)
Taxable boundary line adjustments. In all cases, real estate
excise tax applies to boundary line adjustments if there is consideration
(other than resolution of the dispute), such as in the case of a sale or trade
of property.
(3)
Examples. The following examples identify a number of facts and
then state a conclusion. These examples are provided as a general guide. The
status of each situation must be determined after a review of all of the facts
and circumstances.
(a) Mr. Jehnsen and Mr.
Smith own adjoining parcels of land separated by a fence. During a survey to
confirm the property boundary of Mr. Smith's parcel, the parties discover that
the true property line actually extends five feet over on Mr. Jehnsen's side of
the fence. Mr. Jehnsen does not want to move the fence. He has paved,
landscaped and maintained this section of land and if he gave it up he would
lose his parking area. After numerous discussions regarding the property line,
Mr. Smith agrees to quitclaim the five-foot section of land to Mr. Jehnsen.
Real estate excise tax does not apply since there is no consideration other
than resolution of the dispute.
(b)
Mr. Smith will only agree to transfer the five-foot section of land to Mr.
Jehnsen if he is paid $1,000. Mr. Smith owes real estate excise tax on
$1,000.
(c) Mr. Smith will cede the
five-foot parcel only if Mr. Jehnsen gives him a narrow strip of land in
exchange. Mr. Jehnsen agrees to exchange a ten-foot section of his parcel for
the five-foot section of Mr. Smith's parcel solely to resolve the boundary line
dispute. Real estate excise tax does not apply. It is irrelevant that the
property involved in the transfer is not equal since the sole purpose of the
transfer is to settle a boundary line dispute.
(d) Mr. Smith and Mr. Jehnsen are unable to
resolve their dispute over the five-foot parcel. Mr. Jehnsen agrees to trade
his lake front cabin for Mr. Smith's entire parcel. Mr. Jehnsen will owe real
estate excise tax on the fair market value of the lake front cabin. Mr. Smith
owes real estate excise tax on the fair market value of his parcel.
(e) Mr. Smith wants something in exchange for
giving the five-foot parcel to Mr. Jehnsen. Mr. Jehnsen agrees to give Mr.
Smith his tractor in exchange for the five-foot section of land. Mr. Smith will
owe real estate excise tax on the fair market value of the five-foot section of
his parcel and use tax on the value of the tractor (see WAC
458-20-178 ).
(f) Mr. Robbins owns 18 acres of land
adjacent to Ms. Pemberton's 22-acre parcel. Mr. Robbins would like to develop
his 18 acres, but he needs two more acres to develop the land. Ms. Pemberton
agrees to give Mr. Robbins two acres of land. In exchange Mr. Robbins agrees to
pave Ms. Pemberton's driveway as part of the land development. The real estate
excise tax is due on the true and fair value of the two acres conveyed to Mr.
Robbins. In addition, sales or use tax may be due on the value of the
paving.
(4)
Documentation. In all cases, an affidavit is required to record
the new property line.
Statutory Authority:
RCW
82.32.300,
82.01.060(2), and
82.45.150. 05-23-093, §
458-61A-109, filed 11/16/05, effective
12/17/05.