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D.C. Municipal Regulations (Last Updated: September 13, 2017) |
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Title 9. TAXATION AND ASSESSMENTS |
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Chapter 9-5. TAX ON RECORDATION OF DEEDS |
Section 9-518. AGGREGATION OF TRANSFERS
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518.1For transfers executed on or after October 1, 1989, the Deputy Chief Financial Officer shall aggregate all transfers of interests in an entity subject to the Recordation of Economic Interests Act that are made within the twelve (12) month period prior to the most recent transfer in order to determine whether a controlling interest has been transferred.
518.2If a transfer of an interest in an entity that is subject to the Recordation of Economic Interests Act occurs, the entity shall submit information concerning any transfers occurring during the previous twelve (12) months.
518.3A controlling interest is transferred if the total aggregate percentage of interests transferred is more than fifty percent (50%) of the total percentage of the entity during any period of twelve (12) consecutive months, starting with the most recent transfer and counting back twelve (12) months.
Example: X corporation owns real property in the District, the value of which comprises more than eighty percent (80%) of its entire tangible asset holdings. A, B, C, D and E each own a one-fifth (1/5) interest in X corporation’s outstanding stock. A sells his entire one-fifth (1/5) interest on November 20, 1989. B sells his entire interest on May 18, 1990, and C cells his entire interest on November 10, 1990. All the transfers made within the twelve (12) month period that concluded on November 10, 1990, shall be aggregated to determine whether a controlling interest has been transferred. Accordingly, since more than fifty percent (50%) of X corporation’s stock was transferred within a twelve (12) month period, X corporation must record a deed evidencing the transfer, and pay the tax.
518.4The Deputy Chief Financial Officer shall examine separately each transfer of an interest in an entity subject to the Recordation of Economic Interests Act to determine what percentage of the entity has been transferred.
Example: X corporation is owned equally by A, B, and C, and holds real property located in the District. On May 15, 1990, A sells her stock to D. On August 30, 1990, C sells her stock to D. C’s transfer when combined with the transfer of A’s interest constitutes a transfer of a controlling interest. During the period from August 31, 1989, through May 15, 1990, X corporation’s only asset was real property located in the District. In July, 1990, X corporation acquired non-real property assets, the value of which comprised fifty percent (50%) of X corporation’s total asset value. During the period from August 31, 1989, through August 30, 1990, X corporation derived more than fifty percent (50%) of its gross receipts from income generated by real property located in the District. The transfer of C’s stock to D on August 30, 1990, will subject X corporation to the recordation tax, because at the time of the transfer, X was an entity subject to the recordation tax based on the income test. If during the period from August 1, 1989, through August 30, 1990, X corporation did not derive more than fifty percent (50%) of its gross receipts from income generated by real property located in the District, then the transfer of C’s stock to D on August 30, 1990, would not be subject to the tax because X corporation did not derive more than fifty percent (50%) of its gross income from property located in the District nor did it meet the eighty percent (80%) asset test on the date of the transfer of the controlling interest.
518.5If the same interest in an entity is sold more than once during the twelve (12) month period, the transactions involving the sale of that interest shall not be aggregated with each other.
518.6Transfers of interests in entities subject to the Recordation of Economic Interests Act that occur more than twelve (12) months apart shall be aggregated if the transactions resulting in the transfer of interests are bargained for during any one twelve (12) month period.
Example: X corporation owns real property in the District. A, B and C each own one-third (1/3) of X corporation's outstanding stock. A and B bargain with D to sell their entire interest in X to D. B's sale occurs two (2) years after A's sale. A and B bargained to sell a controlling interest which must be recorded even though the actual sale was not consummated within twelve (12) months.
518.7The Deputy Chief Financial Officer may request information for a period of up to three (3) years from the transfer in question to determine whether transactions occurring over more than a twelve (12) month period were bargained for during a twelve (12) month period.
518.8A bargain, within the meaning of this chapter, includes an agreement to transfer an interest in an entity subject to the Recordation of Economic Interests Act, if the bargain is consummated.