Tax Type
Recordation Tax
Description
Grantors tax; Sale of real estate for delinquent taxes under §6335 I.R.C.
Topic
Persons Subject to Tax
Date Issued
12-21-1984
December 21, 1984
Re: § 58-1118 Application; Recordation Taxes
§58-54.1 Grantor's Tax
Sale of Real Estate for Delinquent Taxes under § 6335 I.R.C.
Dear **********************
This is in response to your letter dated April 23, 1984 to the Honorable Gerald L. Baliles, Attorney General of Virginia. It was forwarded to me on August 3, 1984 for handling as an application under Virginia Code §58-1118 (Application to Commissioner for Correction).
Facts
This application concerns the additional tax under Virginia Code §58-54.1 (commonly referred to as the Grantor's Tax) imposed on the recordation of a deed conveying real estate of a delinquent taxpayer to the United States of America. The deed named the Acting District Director of Internal Revenue for the district of Richmond, Virginia as the grantor. The clerk of the circuit court refused to record the deed unless the grantor's tax was paid. The tax was paid; the deed was recorded and this application followed.
Determination
The applicant claims that because the deed names as grantor an officer of the United States acting in his official capacity the deed is exempt from recordation taxes. Since the taxpayer was not named as the grantor, the grantor's tax cannot be imposed.
The fourth paragraph of Virginia Code §58-54.1 states:
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- "The tax imposed by this §shall be paid by the grantor of or any person who makes or signs on his behalf any of the deeds, instruments or writings subject to the tax imposed by this section."
The sections of the Internal Revenue Code under which this sale was authorized make it clear that the I.R.S. does not act as owner of the property but sells the property on behalf of the taxpayer/owner. The legal effect of a deed of sale is to "...be considered and operate as a conveyance of all the right, title, and interest the party delinquent had in and to the real property thus sold at the time the lien of the United States attached thereto." I.R.C. §6339.
The deed is to be executed in accordance with Virginia laws pertaining to sales of real property under execution. I.R.C. §6338.
The Taxpayer/owner is entitled to any surplus proceeds remaining after the expenses of levy and sale and taxes have been paid. I.R.C. §6342.
This is similar to the procedure required by Virginia laws for the sale of real property under execution. Virginia Code §§8.01-207, 8.01-462, 8.01-96 et. seq. In particular, Virginia Code §8.01-110 provides that a special commissioner is appointed to execute a deed on behalf of any party in interest. Both Virginia law and federal law require such deeds to set forth the name of the party whose interest is being conveyed. Virginia Code §8.01-111, I.R.C. §6638. This party is the true grantor on whom the grantor's tax is imposed.
Accordingly, I find that the deed in question conveyed the interest of the taxpayer to the United States pursuant to a sale; that the Acting District Director executed the deed on behalf of the taxpayer and that the grantor's tax on recordation of the deed was properly imposed and collected by the clerk of the circuit court.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner