simultaneous/ double close tax implications????
In Philadelphia there is a 4% transfer tax, the highest in the nation. In which 3% goes to the city and 1% to the state.
So if I did a double close , I already know the retailer ( the end buyer that is buying off me)would get hit with the 4% transfer tax.
but , since the title would only be in my name for about 60 seconds, would I still get hit with that 4% transfer tax as well.
Hi Bparker,
Is this transfer tax applicable only to Philly or all counties in PA?
Sorry, I don't have an answer to your question, but curious since we are moving to Montgomery county & closing mid May.
I assume that the transfer tax could be shared with the buyer.
When we lived in Berkeley, CA we split this tax.
Lil ct future pa
That depends on how you set up the transaction, are you truly doinga double close or did you sale the assignment of your purchase agreement to the end borrower. 2 closes, then usually yes, there would be a tax on each transaction.
bparker,
What did the settlement attorney say when you asked him this question?
What did the settlement attorney say when you asked if he would leave the file open and directly deed the property from your seller to your buyer? If he can do this, will you still incur a transfer tax?
If the attorney can not directly deed the property from your seller to your buyer, can you have the property deeded from your seller to a living trust? Then you assign your beneficial interest in the trust to your buyer. Ask the attorney if this strategy will avoid the second hit on the transfer tax. If so, ask the attorney if you can avoid the first hit on the transfer tax if the seller deeds the property directly into his own living trust, then assigns the beneficial interest to you, and then you assign to your buyer?
In Pa, the buyer and seller normally split theransfer tax.
PLEASE NOTE, THIS IS NOT A LIVE CASE, BUT JUST AN EXAMPLE THAT I'M USING. I'M STILL WAITING ON MY TAX ID NUMBER FOR MY LLC BEFORE I CAN GET STARTED.
In Pa, the buyer and seller normally split the transfer tax.
Now regarding landtrusts , Pa also have special laws for that .
the reality transfer tax applies not only to direct tranfers of real esate, but also to tranfers of 90% or more of the intersts in a real estate company.
since I have an LLC , and I do decide to use a land trust, I have to figure out whether I should make a person the trustee and my LLC the beneficiary . Or the other way around,
my LLC the trustee, which however would appear to break the 90% rule and therfore, get hit with the trasfer tax anyway.
So I guess my question is if I do make a person the trustee, and the seller the benefeciary, in which they assign beneficial interest over to me, and I in turn assign benecial interest over to the end buyer in a double close, HOW EXACLY WOULD THAT AFFECT THE TRANSFER TAX, IF ANY AT ALL.
[ Edited by bparker on Date 04/15/2003 ][ Edited by bparker on Date 04/15/2003 ]
Will the settlement attorney leave the file open and directly deed the property from your seller to your buyer in a simultaneous close? If he can do this, your seller and your buyer split the transfer tax.
well, a double close would mean I have 2 seperate contracts. One with the seller at the lower price, and the other with the buyer at the higher price.
since there are 2 seperare escrows, and each contract has to be followed through by the title company, I really don't see how the title company can transfer the deed from the seller to the end buyer.
From my understanding, there isn't much of a chance to avoid my LLC showing up on title for a few minutes during the chain of title in a double close.
My only other option would be an assignment, but assigment fees aren't as high as what you can make in a double close.
Did you ask the attorney if he would direct deed from the seller to your buyer during a simultaneous close, or, just assume that it could not be done?
bparker:
Try this. Have the seller transfer the deed to a single member LLC. In most states such a transfer that is not subject to the state deed transfer tax. Now, when you buy the property, just have the seller transfer all of the LLC interests to you. A sale of LLC interests is not subject to the deed transfer tax since the deed has not changed (this is true in most states, but more states are catching onto this creative technique to avoid transfer taxes and having the property tax on the property revalued ... check with your RE attorney if that strategy is permissible in your state).
With regard to getting the new loan, the lender will only check to see if the LLC owns the property. Depending on the lender, you may be able to convince a lender to give you a refi loan rather than a purchase money loan, thereby reducing or eliminating your down payment. This is a classic way I have down short sales to say on transfer taxes and the property tax from being increased on a new higher sale price (again, most property tax statutes trigger the new valuation when the real estate has changed hands. In this situation, it is the LLC intrerests, not the LLC that has changed hands).
I have found the same scenario I describe above using a landtrust will not work in most states.
Taxjunkie
[ Edited by taxjunkie on Date 06/04/2003 ]
Why does the transfer to an LLC work yet not to a land trust? Thanks.
Quote:
On 2003-06-04 15:33, Elf wrote:
Why does the transfer to an LLC work yet not to a land trust? Thanks. <IMG SRC="images/forum/smilies/icon_confused.gif">
Because the state transfer tax laws in most states disregard a revocable trust (this is what most landtrusts are) as disregarded for state deed tax purposes. Check your own state's law to see if that is true in your state.
hi all,
Just browsing thru old topics. I wanted to know if this issue was ever resolved. DaveT seems to be hinting in the right direction. But I am not sure if directly deeding from the seller to the buyer is allowed in PA.
Assuming that it could be done, this would be used with the double close? (versus the assignment)
And can someone please outline for me the pros and cons of assignment and a double close.
Finally do you have to show proof of funds for either of the two tranactions to work? And what is the monetary limitation on assignment (specific to your state)?
Thanks,
E. Dickens
[addsig]