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Transfer Fee Case Analysis

Notwithstanding the court’s decision, there are two ways in which the conveyance in this case could be done that would effect substantially the same result, and still avoid the transfer fee.

First, the companies could utilize 77.25(9) — exempting conveyances “Between agent and principal … without actual consideration” — instead of subsec. (15s).
The Tax Appeals Commission approved an exemption in such a transfer in Sunburst IV Limited Partnership v. DOR, 97-T-373.

In that case, Sunburst was a limited partnership, and transferred property to Westgrove, another limited partnership. The agreement provided, “(A) Sunburst III shall convey its interest … to Sunburst IV; and (B) Sunburst IV shall immediately thereafter transfer record title to the Property to Westgrove LLP to act as its nominee and agent.”

The agreement also provided, “The parties acknowledge that Sunburst IV is, and during the entire existence of this Agreement shall remain, the true and actual owner of the Property and shall account for and file its tax returns accordingly, even though Westgrove LLP shall hold record title thereof by the recording of a Quit Claim Deed transferring record title to the Property from Sunburst IV to Westgrove LLP.”

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Case Analysis

Utilizing a similar arrangement, a company could accomplish substantially the same transfer without paying the transfer fee.

The second way the transaction could be accomplished without paying the transfer fee is to convert the limited partnership to a limited liability company, bringing the transaction within the ambit of 77.25(6m).

That subsection exempts conveyances “Pursuant to the conversion of a business entity to another form of business entity under … sec. 183.1207, if, after the conversion, the ownership interests in the new entity are identical with the ownership interests in the original entity immediately preceding the conversion.”

Using one of these two methods, a company likely could accomplish the conveyance, and still avoid paying the transfer fee.

The company cannot be faulted for not pursuing the second option, however. Subsection (6m) was not enacted until 2001, and the transactions here occurred in 1998.

– David Ziemer

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David Ziemer can be reached by email.

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