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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 9-519. CONSIDERATION ALLOCABLE TO REAL PROPERTY
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519.1The deed recordation tax is imposed upon the portion of the consideration from a transfer of an economic interest that is allocable to the value of the real property held by the entity subject to the Transfer of Economic Interests Act.
519.2The allocation between the real property and the other assets of the entity shall be based upon the same allocation determined by the Deputy Chief Financial Officer to be reasonable under §§ 516.5 and 516.6 of this chapter.
519.3Consideration shall include the amount of any mortgage, lien or other encumbrance, whether or not the underlying indebtedness is assumed.
Example: X corporation owns real property located in the District valued one million dollars ($ 1,000,000) encumbered with a three hundred thousand dollars ($ 300,000) mortgage, and machinery valued at five hundred thousand dollars ($ 500,000). Ninety percent (90%) of X’s gross receipts during the relevant period was from the real property. One hundred percent (100%) of the stock of X corporation is sold for one million two hundred thousand dollars ($ 1,200,000) in cash. The value of the real property, one million dollars ($ 1,000,000), is two-thirds (2/3) of the value of all of X corporation’s assets, one million five hundred thousand dollars ($ 1,500,000). The consideration includes the three hundred thousand dollars ($ 300,000) mortgage that was assumed. Two-thirds (2/3) of the consideration, one million dollars ($ 1,000,000), will be subject to the tax.
519.3aA purchase money mortgage or deed of trust securing indebtedness incurred to acquire an economic interest is exempt from tax if it is:
(a) Recorded simultaneously with the filing of the economic interest deed; or
(b) Executed within 30 days from the date of execution of the economic interest deed and it is recorded within 30 days from the date of recordation of the economic interest deed.
519.4The Deputy Chief Financial Officer shall determine the consideration allocated to the real property for each separate transaction that is aggregated to determine the total consideration subject to the tax.
519.5For aggregated transfers, the Deputy Chief Financial Officer shall use the fair market value of the properties at the time of each transfer to determine the total consideration subject to the tax.
Example: X corporation is owned equally by A, B and C. X owns real property located in the District with a tax assessed value of nine hundred thousand dollars ($ 900,000), and assets other than real property valued at one hundred thousand dollars ($ 100,000). On January 15, 1990, A sells her stock to D for three hundred thousand dollars ($ 300,000). On June 20, 1990, X renovates the real property, which increases the estimated fair market value to one million nine hundred thousand dollars ($ 1,900,000). On August 4, 1990, B sells his stock to D for five hundred thousand dollars ($ 500,000). The transfer from B to D is a transfer of a controlling interest. The portion of the consideration of A's transfer to D that is subject to the recordation tax is two hundred seventy thousand dollars ($ 270,000). One-tenth (1/10) of the value of the assets at the time of the sale, thirty thousand dollars ($ 30,000), is attributable to non-real property assets, therefore, one-tenth (1/10) of the purchase price of the stock is excluded from the tax. The portion of the consideration of B's sale to D that is subject to the tax is four hundred seventy-five thousand dollars ($ 475,000). One-twentieth (1/20) of the purchase price of the stock at the time of sale, twenty-five thousand dollars ($ 25,000), is attributable to assets other than real property and is excluded from the tax.