Did Washington's real estate excise tax apply when a parent corporation transferred land to its wholly owned subsidiary for no new stock?

Plain-English summary

In 1963, Washington's Attorney General concluded that a county's one-percent real estate excise tax did not apply when a corporation transferred land to a wholly owned subsidiary without receiving any new stock or other thing of value. The two corporations were separate legal entities, so there was a transfer of land. But the opinion found no valuable consideration and therefore no “selling price” on which to measure the tax.

The opinion distinguished an earlier AG opinion involving a sole stockholder who transferred land to a corporation in exchange for common stock. In that situation, the shares carried rights to control, operation and profits and supplied consideration. The transaction asked about here involved no such exchange.

Currency note

This opinion was issued in 1963. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: Did a transfer between a parent corporation and its subsidiary automatically trigger the tax?
A: No. The opinion treated the corporations as separate entities but held that the described transfer lacked the consideration needed for the tax.

Q: Why did the earlier stock-for-land opinion reach a different answer?
A: The earlier transaction gave the transferor common stock and associated rights in exchange for the land. The 1963 transfer gave the parent no additional stock or other value.

Background and statutory framework

The question came from the Stevens County prosecuting attorney. The opinion said a county real estate excise tax required both a transfer of an interest in land and valuable consideration. It quoted RCW 28.45.030's definition of “selling price” as consideration given in return for the property transfer and applied that definition to the specified parent-subsidiary transaction.

Citations and references

Statute: RCW 28.45.030.

Source

• Landing page: https://www.atg.wa.gov/ago-opinions/taxation-real-estate-excise-tax-transfer-real-property-transferor-corporation-owns-all

Original opinion text

Attorney General John J. O'Connell

TAXATION ‑- REAL ESTATE EXCISE TAX ‑- TRANSFER OF REAL PROPERTY ‑- TRANSFEROR CORPORATION OWNS ALL STOCK OF TRANSFEREE CORPORATION.

The one percent real estate excise tax does not apply to the transfer of real property by one corporation to another corporation where the transferor owns all of the authorized issued and outstanding capital stock of the transferee and no additional stock is to be issued in exchange for the real property.

July 31, 1963

Honorable Sid Buckley
Prosecuting Attorney
Stevens County
Colville, Washington

Cite as: AGO 63-64 No. 44

Dear Sir:

By a previously acknowledged letter you have requested our opinion on a question which we paraphrase as follows:

Does the one percent real estate excise tax apply to the transfer of real property by one corporation to another corporation where the transferor owns all of the authorized, issued and outstanding capital stock of the transferee and no additional stock is to be issued in exchange for the real property?

We answer your question in the negative.

ANALYSIS

As we stated in AGO 59-60 No. 100 [[to Prosecuting Attorney, Pacific County on February 10, 1960]], the real estate excise tax, when levied by a county, is imposed when there is (1) a transfer of an interest in land and (2) a valuable consideration for the transfer.

In this instance there has been a transfer of real property, the two corporations being separate legal entities. See, AGO 59-60 No. 100. However, we do not find valuable consideration for the transfer.

The tax is measured by the "selling price" which is defined in RCW 28.45.030 reading in material part:

[[Orig. Op. Page 2]]

"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. . . ."

We concluded in AGO 59-60 No. 100 [[to Prosecuting Attorney, Pacific County on February 10, 1960]]that the transfer of real estate to a corporation by the sole stockholder in exchange for common stock was a taxable transaction. The shareholder received certain rights relating to the control, operation and profits of the corporation from the receipt of the stock given in consideration of the transfer.

In the transaction here under consideration no stock or other thing or value was given in exchange for the real estate. There was no consideration or any "selling price" by which to measure the value. We would conclude that the transfer is not subject to the tax.

Very truly yours,

JOHN J. O'CONNELL
Attorney General

HENRY W. WAGER
Assistant Attorney General