Subject 2 and Transfer Tax - Posted by Jesse

Posted by Ed Copp (OH) on September 11, 2003 at 15:34:57:

A transfer to a trust is exempt from the conveyance fee (tax). A change in the ownership of the beneficial interests, all or part is a private matter and would not be known.

Subject 2 and Transfer Tax - Posted by Jesse

Posted by Jesse on September 10, 2003 at 14:43:19:

Hi everyone,
Does anyone have experience in paying transfer tax on subject 2 deals? Specifically, some states (i.e. Maryland, Delaware, etc) have a tax associated with the transfer of title to real estate as a percentage of the sale value. There are exceptions such as putting a property into a trust. This assumes however that the beneficial interest of the trust is the same person(s) that title was initially held in.
For a subject 2 deal, the trust is setup with the motivated seller initially having beneficial interest. Once this interest is assigned to you as the investor, I THINK this technically is a taxable event subject to transfer tax.
Are investors in these states paying this transfer tax? I like to know since I live in a transfer tax state. How would the state know there was transfer tax due?
Interested in some of the comments from the experts,
thanks, jesse

Re: My state - Posted by Ed Copp (OH)

Posted by Ed Copp (OH) on September 10, 2003 at 20:25:47:

taxes a sub-2 sale just as if it were all cash. No mercy at all. In Ohio the minimum rate is $1 per thousand of value, the maximum is $4 per thousand. This means that the rate used to be $1, but has now increased by 400%. The cost of recording was increased Aug. 1 of this year by 100% (doubled). This is just another form of taxation, without representation I might add. I doubt that other states will hesitate to follow.

In Ohio the conveyance fee (tax) also applies to land contracts, which must be recorded. I think Maryland is also a “must record” state for land contracts.

Re: My state - Posted by Jesse

Posted by Jesse on September 11, 2003 at 12:38:08:

Thanks Ed,
I’m not quite sure I understand your comments. My guess would be in Ohio, transferring title from the seller to a trust with the seller as beneficiary would not incur a conveyance fee, since there hasn’t been a transfer of principal interest. What I’m trying to understand is if the beneficial interest gets assigned to you as the investor, how would anyone know? The assignment of beneficial interest isn’t recorded, and thus there would be no automated trigger to pay the conveyance fee. Or would there be? Any additional insight you may have would be appreciated.
thanks, jesse