Avoiding property transfer tax...

Quote
herbdavey
Put up the money for an investor to purchase a property. Contract and escrow were already in his company name so we closed with him on title. How do we deed or quit claim it to my company without triggering transfer tax. I'm pretty sure there is a certain description or classification you can use but forget. Thanks.

You haven't indicated the state you're working in—so I'll assume it's CA.

In most of the counties in CA the transfer tax is relatively modest ($1.10 per $1,000 of sales price). The few extortionate exceptions ($16.10 per $1,000 of sales price) are the cities of San Francisco, Oakland, Berkeley (SOB).

So, let's say the retail value of the property is $300K and you're not in the clutches of SOB. Then the worst potential transfer tax would be $1.10 x 300 = $330 dollars...hardly anything to cry about. But if you were in SOB territory then it would be $16.10 x 300 = $4, 830 dollars (OUCH).

A transfer tax is only due if there's a major change in the ownership (or control & dominion) over the property. It appears that that's the situation in your case because your investor now owns the property in his name and you want him to deed his sole ownership of the property over to your corporation.

Now, the next deal you do, you should take title to it in a new, disposable CA General Partnership (GP) where the two partners are made up of your corporation and your investor's LLC or Trust, etc. The GP entity makes the deal exempt from the Franchise Tax Board's (FTB) requirement for the pre-payment of a property flipper's state income tax thru their resale escrow.

--------------------------Ward

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