Do you own a company that owns real estate? Are you thinking about selling real estate? Are you considering selling the property’s property or selling the company that owns the property?
Generally, a real estate transfer tax is levied on documents that transfer an interest in real estate from one person to another. Transfer tax is generally levied on the recording of a deed and is based on the consideration paid or the fair value of the property (the “property transfer tax”).
Taxpayers took advantage of loopholes to avoid paying land transfer tax by selling the company that owns the property rather than selling the property itself. Around 17 states have filled such gaps.
The 17 states are: Connecticut, Maine, Washington, the District of Columbia, Maryland, Michigan, New Hampshire, Delaware, California, New Jersey, New York, Florida, Minnesota, Illinois, Pennsylvania, Rhode Island, and Vermont
Generally, the laws provide that a tax should be levied on the transfer of control interest on a direct or indirect transfer or acquisition of a controlling interest in a company that owns real estate in the state. The tax rate is applied to the value of the property transferred, divided by the percentage of the ownership interest transferred.
Taxpayers considering stock acquisitions or other mergers or restructurings of companies that own real estate should be particularly aware of the risk of not paying tax on the transfer of control interest. Even if a merger qualifies as a deferred tax restructuring under federal tax law, a control interest transfer tax may be levied if the transfer represents a change of ownership in a company that owns real estate and there is no applicable exemption.
The scope of the control interest transfer tax varies from state to state, e.g. B. Tax rates, applicable exemptions and the meaning of “transfer of control”. If you are considering selling or buying a company that owns real estate, or reorganizing your corporate structure, it is important to analyze whether the transaction will be subject to a control interest transfer tax.
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