Tax Type
Recordation Tax
Description
Basis for Determining the Grantor's Tax
Topic
Basis of Tax
Documents Subject to Tax
Date Issued
02-14-1985
[Opinion - Virginia Attorney General: 1985 at 393]
REQUEST BY: Honorable Warren E. Barry Clerk, Circuit Court of Fairfax County
OPINION BY: Gerald L. Baliles, Attorney General
OPINION:
You have asked what value serves as the base for determining the grantor's tax imposed by § 58.1-802 of the Code of Virginia when the bid price on real estate in a foreclosure sale is $ 85,000, but the actual value1 of the property is $ 95,000.
Section 58.1-802 imposes the grantor's tax
"on each deed . . . by which lands, tenements or other realty sold is granted . . . . The rate of the tax, when the Consideration or value of the interest exceeds $ 100, shall be 50c. for each $ 500 or fraction thereof, exclusive of the value of any lien or encumbrance remaining thereon at the time of the sale . . . ." (Emphasis added.)
The language quoted above has remained essentially unchanged since 1970 when the grantor's tax was originally imposed.2 See Ch. 772, Acts of Assembly of 1970. Prior Opinions of the Attorney General have consistently held that the grantor's tax applies only when a real property interest is "sold." In order for a "sale" to occur, consideration or value3 must be given for the transfer. (For example, in conveyances between husband and wife, no money is exchanged, as a general rule.) The amount of consideration is the value upon which the tax is computed (the price, less the value of liens or encumbrances). See Reports of the Attorney General: 1982-1983 at 590; 1974-1975 at 517; 1973-1974 at 406, 407; 1971-1972 at 433; and Virginia Recordation Tax Regulations § 630-14-802(D)(4) (1985). Obviously, a sale occurs at a foreclosure on a real estate loan. If the sales price exceeds the amount necessary to satisfy the lien, that excess goes to the owner.
Based on the foregoing, it is my opinion that the grantor's tax under § 58.1-802 should be based upon the $ 85,000 bid price, which is the consideration given in the foreclosure sale, less the amount of the encumbrance.
1 I assume you use the term "actual value" in the same sense that it is used in the § 58.1-801 grantee's tax statute to mean "fair market value." See Opinion dated September 6, 1984, to the Honorable Paul C. Garrett, Clerk, Circuit Court of the City of Charlottesville.
2 The former federal stamp tax on conveyances was discontinued effective January 1, 1968, by Act of Congress. See Pub. L. No. 89-44. The Commonwealth then imposed an additional recordation tax modeled, in part, on the federal tax formerly appearing at Secs. 4361 and 4362 of the Internal Revenue Code of 1954, as amended. Thus, interpretations of § 58.1-802 (and its antecedent sections) by this Office and by the Department of Taxation have relied upon the federal tax regulations formerly appearing at Secs. 47.4361-1 and 47.4361-2. Those federal regulations were adopted by former State Tax Commissioner C. H. Morrissett in his letter to the clerks of courts dated May 23, 1968. The Department of Taxation has recently incorporated the provisions of Commissioner Morrissett's letter into the Virginia Recordation Tax Regulations, § 630-14-800 et seq. (January 1985).
3 "Consideration" and "value" are synonymous in the context of the grantor's tax. Note that the term used is "value," not "actual value," as is used in § 58.1-801 (grantee's tax).
Attorney General's Opinion