Rev. Rul. 58-511

Advice has been requested concerning the applicability of the documentary stamp tax imposed by section 4361 of the Internal Revenue Code of 1954 with respect to `Declarations of Taking' filed by agencies of the United States Government when real property is taken for public use.

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 encumbrances 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 is not 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.

Where real property is acquired by the United States or any agency or instrumentality thereof in condemnation proceedings, the instrument whereby title is vested in the condemnor is subject to the documentary stamp tax imposed by section 4361 of the Code. A `Declaration of Taking' which is sometimes filed in a condemnation proceeding, is an instrument or writing whereby title to realty sold is vested in the condemnor and the documentary stamp tax is payable with respect thereto by the condemnee, the non-exempt party to the condemnation proceeding. See Revenue Ruling 57-72, C.B. 1957-1, 415. Specific questions relating to `Declarations of Taking' filed pursuant to the provisions of the Act of February 26, 1931, Public Law 736, 71st Cong., 46 Stat. 1421, 40 U.S.C. 258(a), and the answers thereto, are as follows:

Question 1 . When does the tax attach?

Answer: Section 258(a) of Title 40 of the United States Code provides, in part, that upon the filing of a `Declaration of Taking' and of the deposit in the court, to the use of the persons entitled thereto, of the estimated compensation stated in such declaration, title to lands in fee simple absolute shall vest in the United States of America, and such lands shall be deemed to be condemned and taken for the use of the United States, and the right to just compensation for the same shall vest in the persons entitled thereto; and the compensation shall be ascertained and awarded in the proceeding and established by judgment therein.

Section 258(b) of Title 40 of the United States Code provides that no appeal in any cause under section 258 of that title nor any bond or undertaking given therein shall operate to prevent or delay the vesting of title to such lands in the United States.

In the case of United States v. Sunset Cemetery Co. , 132 Fed.(2d) 163, the Court of Appeals for the Seventh Circuit held that, under the above-mentioned sections, condemnation of land for public use is effected and title completely vested in the government by the mere filing of the `Declaration of Taking', and judgment adjudging title in the government is unnecessary. The court said, `Thereafter the court had only jurisdiction to determine what was just compensation for the tract, . . ..'

In United States v. 243.22 Acres of Land Situate in Village of Farmingdale, Town of Babylon, Suffolk County, State of New York et al. , 41 Fed.Supp. 469, it was stated that in a condemnation proceeding by the United States title to the property vested in the United States on the date of filing of the `Declaration of Taking', pursuant to section 258(a) of Title 40 of the United States Code, and depositing with the clerk of the court the estimated just compensation.

In view of the foregoing, it is held that the tax attaches on the date the `Declaration of Taking' is filed, since that is the date that title to the property vests in the United States. The filing of an appeal by a taxpayer to a higher court would not affect the government's title to such property.

Question 2 . What is the basis for the tax?

Answer: Section 113.82(c) of Regulations 71, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 77, provides that the tax is based upon net value where the amount of the consideration is indefinite, or is left open to be fixed by future contingencies. Therefore, the amount finally awarded by the court as the value of the property is the basis for the tax.

Question 3 . Where should the stamps be affixed?

Answer: Section 113.85 of the regulations provides that the stamps must be affixed to the deed, instrument, or other writing by which realty is conveyed. Accordingly, the stamps must be affixed to the `Declaration of Taking' since that is the instrument by which title is vested in the United States.