Document Number
92-174
Tax Type
Recordation Tax
Description
Realty Transfer Tax; Transfer Pursuant to Bankruptcy Plan
Topic
Documents Subject to Tax
Date Issued
09-10-1992
September 10, 1992



Re: Request for Ruling; Recordation Tax


Dear**********************

This will reply to your letter of July 6, 1992, which I have treated as a request for ruling, regarding the applicability of §1146(c) of the Federal Bankruptcy Code to various factual situations. The three factual situations you present will be addressed separately.

1. If a debtor in bankruptcy sells real property pursuant to a plan of reorganization confirmed under §1129 of the Bankruptcy Code, the transfer will not be subject to state or local recordation taxes. Under 11 U.S.C.A. §1146(c), transfers of property pursuant to a plan confirmed under § 1129 of Title 11 may not be taxed under any law imposing a stamp or similar tax, which includes a recordation tax. The department has ruled that the recordation tax bears a sufficient resemblance to a stamp tax to be covered by the federal exemption. It should be noted that Va. Code § 17-59 requires that the code section under which an exemption is claimed must be clearly stated on the face of the document to be recorded.
    • If the plan has not been confirmed but is pending confirmation at the time it is recorded, the transfer is subject to the state and local recordation taxes, as no specific exemptions would be applicable.
2. If a debtor grants a mortgage or modifies a mortgage to restructure or obtain an additional advance of funds pursuant to a plan of reorganization confirmed under §1129, the mortgage or mortgage modification will not be subject to state and local recordation taxes. However, if a deed of trust is executed by the purchaser of the debtor's real property, the deed of trust is subject to state and local recordation taxes. See Case of Eastmet Corp., 907 F.2d 1487 (4th Cir. 1990) (copy enclosed).

    • If the plan has not been confirmed but is pending confirmation at the time it is recorded, the transaction is subject to the state and local recordation taxes.
3. If a debtor pays any taxes associated with the transfer of real property or creation of liens on real property made under a plan pending confirmation under §1129, the amounts paid would be refundable upon confirmation. To obtain a refund of state recordation taxes, an application for correction should be filed with the Tax Commissioner, in accordance with Va. Code §58.1-1821 and the regulations thereunder (copy enclosed). The application should include a copy of the confirmed plan, along with evidence that the recordation taxes were paid. The application for refund must be filed within three from the date the taxes were assessed.
    • The local recordation tax is one-third of the state tax. To obtain a refund of local recordation taxes, the claimant must apply to the clerk of the circuit court in which the documents were recorded.
The responses above are limited to the specific transactions herein considered under the facts as you have presented them. If you have any other questions regarding this matter, please contact the department.

Sincerely,



W. H. Forst
Tax Commissioner


OTP/6323F

Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46