Tax Type
Recordation Tax
Description
Deed of Conveyance
Topic
Documents Subject to Tax
Date Issued
03-21-1986
March 21, 1986
Re: §58-54 Recordation Tax
Dear *****************
You have requested a ruling on the taxable consideration for a deed of assumption recently recorded in your office. The deed in question is the third in a series of instruments recorded.
First: A deed conveying unimproved land from the taxpayer to an industrial development authority.
Second: A deed of trust conveying the land to trustees to secure payment of a bond. A portion of the borrowed funds are to be used to construct a building on the land.
Third: A deed of assumption conveying the land from the I.D.A. to the taxpayer. The instrument provides that the taxpayer assumes the obligation to pay the bond.
A deed of assumption is a document which conveys property and contains an agreement to assume an obligation. The agreement to assume an obligation is a separate transaction from the conveyance of property although both transactions are contained in a single document.
Questions Presented
Based on the foregoing, it is my opinion that the questions presented are twofold:
1. The recordation tax, if any, to be imposed on that part of Document by which taxpayer assumes an existing deed of trust (the deed of assumption).
2. The recordation tax to be imposed, if any, on the Document insofar as it conveys property to the taxpayer (the deed of conveyance).
Deed of Assumption
Section 58-60 (recodified as §58.1-809) at the time the Document was executed and recorded (December, 1984) provided as to the assumption of a deed of trust:
-
- "The assumption of a deed of trust shall not be separately taxable under §§58-54, 58-55, or §58-58, whether such assumption is by a separate instrument or included in the deed of a conveyance."
- "The assumption of a deed of trust shall not be separately taxable under §§58-54, 58-55, or §58-58, whether such assumption is by a separate instrument or included in the deed of a conveyance."
Deed of Conveyance
Section 58-54 (recodified as §58.1-801) applies to the deed of conveyance. The tax of §58-54 is imposed on the grantee-taxpayer and is to be calculated on the greater of the consideration of the deed or the actual value of the property conveyed. You must determine the actual value of the property conveyed as well as the consideration of the deed and assess tax on the greater amount. See, also §58-65 (recodified as §58.1-812.)
In the facts at hand, you have already assessed the recordation tax imposed by §58-54 based on the value of the unimproved land. This value was used to calculate the recordation tax based on telephone advice from the Department of Taxation. Your letter requests written confirmation of that advice.
Such a confirmation must include a consideration of the greater of the actual value of the land conveyed versus the consideration. In this regard, the information provided indicates that the actual value of the land conveyed is known. The consideration for the deed of conveyance, however, is not clear. One element of consideration may be the amount of the obligation being assumed on an existing deed of trust. See 1982-1983 Report of the Attorney General at 596. In this instance, the amount of obligation being assumed under the existing deed of trust includes the actual value of the unimproved land, and the value of a building, improvements and equipment to be purchased or constructed in the future. Because at the time of conveyance and recordation of the document, only the unimproved land existed without any building, improvements or equipment thereon, I conclude that the consideration for the conveyance was no greater than the value of the unimproved land. Accordingly, the proper basis for calculation of a recordation tax under §58-54 would be the value of the unimproved land.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner