Taxes on Family Transferred Property
State and local taxes can be assessed on real property when ownership of the property is transferred from one party to another. The tax on the sale, granting and transfer of real property or an interest in real property is referred to as a real property transfer tax.
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Taxable Transactions
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The contractual transfers of real property that are taxable unless exempted include: sale of land and buildings, transfers between a business entity and its owners or between related business entities, transfers from the state or U.S. government, transfers through foreclosure, leases of real estate for a minimum of 99 years and transfers of interests in time-share properties or real estate holding companies.
Tax Basis
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The tax for an arm's length transaction is based on the actual price of the property or the consideration agreed to by the parties to the transaction. Minimum taxes can be assessed or determined by the fair market value of the property. The fair market value of a property is the price that a willing buyer and willing seller would agree to in an arm's length transaction.
In turn, related parties are those individuals who are related by law or blood.
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RPTT Exceptions
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Exceptions to the Real Property Transfer Tax include non-contractual transfers, transfers between spouses according to a divorce decree, a filing of an instrument that corrects a deed, a transfer to the state or other political subdivision of a state, a transfer of a cemetery plot and a transfer that occurs by devise, intestate succession and descent or the death of a joint tenant.
RPTT Return
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As noted above, some transactions are exempt from the real property transfer tax. However, all transactions must be reported on a real property transfer tax return form.
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References
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