Rev. Rul. 67-415
Rev. Rul. 67-415; 1967-2 C.B. 383
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- Tax Analysts Electronic Citationnot available
Obsoleted by Rev. Rul. 72-622
Advice has been requested concerning the computation of the documentary stamp tax on conveyances of real property in the circumstances described below.
X corporation acquired all of the outstanding capital stock of Y corporation and, thereafter, adopted a plan whereby Y corporation was to be completely liquidated. Pursuant to the plan of liquidation, all of Y corporation's assets, subject to the existing liabilities, were transferred to X corporation in exchange for Y corporation's capital stock which was then retired. Title to the real property was transferred by means of a general warranty deed. Immediately preceding the liquidation, the Y corporation balance sheet, reflecting current market values of the assets, appeared as follows:
ASSETS
Building................................................ $360,000
Land.................................................... 40,000
Other assets............................................ 180,000
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Total assets...................................... 580,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage payable on land and building................... $220,000
Other liabilities....................................... 60,000
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Total liabilities.................................. 280,000
Stockholders' equity.................................... 300,000
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Total liabilities and stockholders' equity......... 580,000
Section 4361 of the Internal Revenue Code of 1954 imposes a tax on any instrument evidencing a transfer of interest in realty for a valuable consideration, that is, money or anything of value. Section 47.4361-2(a)(8) of the Documentary Stamp Tax Regulations gives as an example of a taxable conveyance a conveyance of realty by a corporation in liquidation or in dissolution to its shareholders subject to the debts of the corporation. Therefore, the conveyance in the instant case is subject to the tax imposed by section 4361 of the code.
Section 47.4361-1(b) of the Documentary Stamp Tax Regulations provides with respect to conveyances that the rate of tax is 55 cents on each $500 or fractional part thereof of the net consideration paid for, or the net value of, the realty conveyed. The net consideration or net value is the gross consideration or gross value less, in either case, the amount of all liens or encumbrances on the realty existing before the sale and not removed thereby.
In the instant case the gross consideration paid for the realty is the sum of (1) the liabilities assumed by X corporation that are directly attributable to the realty and (2) the pro rata portion, based on certain adjusted asset values described below, of the liabilities assumed by X corporation that are not directly attributable to the realty. By reference to the Y corporation balance sheet presented earlier, it is found that the first figure is the mortgage payable of $220,000. The second figure is $30,000 computed as follows:
Current value of realty................................. $400,000
Less mortgage payable thereon........................... 220,000
Adjusted value of realty................................ 180,000
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Current value of all assets............................. 580,000
Less real property mortgage payable..................... 220,000
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Adjusted value of all assets............................ 360,000
Ratio of adjusted value of realty ($180,000) to adjusted value
of all assets ($360,000) -- 1:2.
Total liabilities....................................... $280,000
Less liabilities directly attributed to the realty...... 220,000
Liabilities not directly attributable to the realty..... 60,000
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Pro rata portion (50%) of liabilities not directly
attributable to the realty to be included in the gross
consideration paid for the realty..................... 30,000
The net consideration paid for the realty on which the
documentary stamp tax is based in computed as follows:
Gross consideration paid ($220,000 + $30,000)........... $250,000
Less mortgage payable on land and building.............. 220,000
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Net consideration paid.................................. 30,000
The documentary stamp tax in this case is $33.00.
- LanguageEnglish
- Tax Analysts Electronic Citationnot available
