Tax Type
Recordation Tax
Description
Original Beneficiary of Trust
Topic
Documents Subject to Tax
Date Issued
03-31-1987
March 31, 1987
Re: Request for Ruling; Recordation Tax
§58.1-811 Exemption: Original Beneficiaries of Trust
Dear ******************
This is in response to your letter of November 26, 1986, in which you request a ruling on the application of the recordation tax to a transaction.
Facts
A trust agreement was executed by unrelated parties and the trustees under the agreement subsequently entered into a contract to acquire a parcel of real estate. Prior to closing on the purchase, your client entered into negotiations with the unrelated parties and the trustees to acquire the parcel. For a combination of legal and business reasons, it was determined that the contract could not be assigned, and it was agreed that the beneficial interest in the trust would be transferred to your client.
As originally executed, the trust agreement provided for the trustees to exercise discretion in the administration of the trust. At the time the beneficial interest of the trust was transferred to your client the agreement was amended to provide that the trustee would exercise no authority except upon specific written instruction from your client. This converted the trust into a Virginia Land Trust as authorized by Va. Code §55-17.1.
The parcel of real estate was subsequently conveyed to the trust and a recordation tax was paid. No other property is, or ever has been, subject to this trust. You now request a ruling that no tax will be due upon the conveyance of the parcel to your client on the grounds that he is the "original beneficiary" of the trust as that term is used in §58.1-811.
Discussion
Section 58.1-811 A. 12. provides for an exemption from the recordation tax for a conveyance:
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- To trustees of a trust, when the grantors in the deed and the beneficiaries of the trust are the same persons; and to the original beneficiaries of a trust from the trustees holding title under a deed in trust.
Your client was not the original beneficiary of the trust agreement when it was first executed. However, the trust agreement was significantly amended prior to the first acquisition of property by the trustees. The amendments changed both the nature of the trust and the beneficiaries.
Determination
After considering the facts of the transaction described, I am of the opinion that your client was the original beneficiary at the time that the trust acquired its first, and only, property. Therefore the conveyance of the property from the taxpayer to your client will be exempt from recordation tax.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner