Rev. Rul. 58-377

Advice has been requested concerning the applicability of the documentary stamp tax imposed by section 4361 of the Internal Revenue Code of 1954 where a mortgagee, who bid in the mortgaged property at a foreclosure sale, instructed the trustee to convey it direct to the Federal Housing Commissioner.

In the instant case, default had been made in the payment of an indebtedness which was secured by a deed of trust and which had been accepted for insurance by the Federal Housing Administration, an agency of the United States Government. The mortragee requested the trustee to foreclose under the terms of the deed of trust, and at the foreclosure sale the mortgagee bid in the property for $300,000. Pursuant to authorization and instructions of the Federal Housing Administration, the mortgagee directed the trustee to convey the property by one deed direct to the Federal Housing Commissioner. The mortgagee joined in the trustee's deed making the conveyance and received from the Commissioner debenture bonds in the amount of $500,000, which was the approximate amount of the mortgage on the date of the foreclosure. The specific question presented is whether liability for two documentary stamp taxes is incurred, one based on the amount bid for the property at the foreclosure sale and the second on the consideration represented by the amount of the debentures issued by the Federal Housing Administration to the mortgagee.

Section 4361 of the Code imposes a tax on each deed, instrument, or writing, whereby any lands, tenements, or other realty sold shall be granted, assigned, transferred, or otherwise conveyed to, or vested in, the purchaser or purchasers when the consideration or value of the interest or property conveyed, exclusive of the value of any liens or encumbrance remaining thereon at the time of sale, exceeds $100.

Section 4383 of the Code provides that the documentary stamp tax shall be paid by any person who makes, signs, issues, or sells any of the documents or instruments subject to tax, or for whose use or benefit the same are made, signed, issued, or sold. The United States or any agency or instrumentality thereof shall not be liable for the tax with respect to an instrument to which it is a party, and affixing of stamps thereby shall not be deemed payment for the tax, which may be collected by assessment from any other party liable therefor.

In the instant case, it is held that, since there is only one conveyance and one deed, that being from the trustee to the Federal Housing Administration, only one conveyance tax is imposed and that is based on the amount of the consideration supporting such conveyance, namely, $500,000, the amount of the bonds issued by the Federal Housing Administration for the property. Since the Federal Housing Administration is an agency of the United States, it is not liable for the documentary stamp tax with respect to a conveyance of real property acquired by it in a foreclosure proceeding. However, this does not relieve the other party to the transaction from his liability for such tax in view of the dual liability provisions of section 4383 of the Code, under which the tax is payable by and collectible from the grantor or the grantee, unless otherwise specifically exempt. See Rev. Rul. 57-373, C.B. 1957-2, 775; and Rev. Rul. 57-72, C.B. 1957-1, 415.