Iowa Administrative Code › Agency 701 - Revenue Department › Title II - Property Tax › Chapter 109 - Real Estate Transfer Tax and Declarations of Value › Rule 701-109.2 - Taxable Status of Real Estate Transfers

Current through Register Vol. 47, No. 3, July 24, 2024
(1)
Federal rules and
				regulations.
In factual situations not covered by these rules and
				involving those portions of Iowa law which are consistent with the former
				federal statutes (26
				U.S.C.A. 4361) that imposed a real estate
				transfer tax, the department of revenue and county recorders shall follow the
				federal rules and regulations in administering the provisions of Iowa Code
				chapter 428A. (1968 O.A.G. 643)
(2)
Transfer of realty to a corporation or partnership.
Capital
				stock, partnership shares and debt securities received in exchange for real
				property constitutes consideration which is subject to the real estate transfer
				tax. Where the value of the capital stock is definite or may be definitely
				determined in a dollar amount, the specific dollar amount is subject to the
				tax. Where the value of the capital stock is not definitely measurable in a
				dollar amount, the tax imposed is to be calculated on the fair market value of
				the realty transferred. For purposes of this rule, fair market value shall be
				as defined in Iowa Code section
				441.21. (1976 O.A.G. 776)
Real estate transfer tax is not due when real property is
				  conveyed to a family corporation, partnership, limited partnership, limited
				  liability partnership, or limited liability company as defined in Iowa Code
				  section 428A.2 in an incorporation or
				  organization action where the only consideration is the issuance of capital
				  stock, partnership shares, or debt securities of the corporation, partnership,
				  limited partnership, limited liability partnership, or limited liability
				  company. Actual consideration other than these shares or debt securities is
				  subject to real estate transfer tax.
(3)
Trades of real estate.
Real estate transfers involving the exchange of one piece of real property for
				another are transfers subject to the real estate transfer tax. Each grantor of
				the real estate is liable for the tax based on the fair market value of the
				property received in the trade as well as other consideration including but not
				limited to cash and assumption of debt. (1972 O.A.G. 654)
For purposes of this rule, fair market value shall be as
				  defined in Iowa Code section
				  441.21.
(4)
Conveyance to the United States
				government or the state of Iowa.
Any conveyance of real estate to the
				United States or any agency or instrumentality thereof or to the state of Iowa
				or any agency, instrumentality, or political subdivision thereof not exempt
				from the real estate transfer tax pursuant to Iowa Code section
				428A.2, is subject to the real
				estate transfer tax. (1968 O.A.G. 579) An exception to this rule is any
				conveyance to the United States Department of Agriculture, Farmers Home
				Administration, which is specifically exempted by federal law (7 U.S.C.S.
				§ 1984).
(5)
Conveyance of property on leased land.
The transfer of
				buildings or other structures located on leased land is subject to the real
				estate transfer tax. The fact that the person who owns a building or other
				structure does not own the land upon which the property is located does not
				exempt this type of conveyance from the real estate transfer tax. (1972 O.A.G.
				318)
(6)
Mortgage
				default.
In the factual situation where a defaulting mortgagor issues
				a deed or other conveyance instrument to the mortgagee as satisfaction of the
				mortgage debt, the transaction is subject to the real estate transfer tax. The
				consideration upon which the tax is calculated is the outstanding unsatisfied
				mortgage debt.
However, as an exception to this rule, a conveyance of real
				  property to lienholders in lieu of forfeiture or foreclosure action is exempt
				  from real estate transfer tax.
(7)
Completion of contract.
A deed or other conveyance instrument given at the time of completion of a
				single real estate contract is subject to the real estate transfer tax. The tax
				is to be computed on the full amount of the purchase price as stated in the
				contract and not solely on the last installment payment made prior to the
				issuance of the deed or other conveyance instrument. If the original contract
				is assigned to a third party or parties prior to fulfillment of such contract,
				the tax is to be computed only on the original contract price upon completion
				of the contract.
When a single deed or other conveyance instrument is given at
				  the time of completion of multiple successive real estate contracts, separate
				  taxes are to be computed and paid based upon the full purchase price stated in
				  each contract. For example, if A sells real estate to B on an installment
				  contract, and then B sells the same property to C on another installment
				  contract, and subsequently both A and B transfer their respective interests in
				  the property to C via one deed, A is liable for a tax computed on the full
				  purchase price stated in the original contract to which A was a party and B is
				  liable for a tax computed on the full purchase price stated in the subsequent
				  contract to which B was a party.
(8)
Assignments of contract.
Assignments of real estate contracts by contract sellers and contract buyers
				are not subject to the real estate transfer tax. (1970 O.A.G. 605)
(9)
Corporate and partnership
				dissolution.
A conveyance of realty by a corporation or partnership in
				liquidation or in dissolution to its shareholders or partners subject to the
				debts of the corporation or partnership is a conveyance subject to the real
				estate transfer tax. However, if there are no debts and the conveyance is made
				solely for the cancellation and retirement of the capital stock or dissolution,
				the tax does not apply.
Real estate transfer tax is not due when real property is
				  conveyed from a family corporation, partnership, limited partnership, limited
				  liability partnership, or limited liability company as defined in Iowa Code
				  section 428A.2 to its shareholders,
				  partners, or members in a dissolution action where the only consideration is
				  capital stock, partnership shares, or debt securities of the corporation,
				  partnership, limited partnership, limited liability partnership, or limited
				  liability company, including the assumption of debts by the shareholders,
				  partners, or members. Actual consideration other than these shares or debt
				  securities is subject to the real estate transfer tax.
(10)
Security instruments.
Any deed or instrument given exclusively to secure a loan or debt is not
				subject to the real estate transfer tax.
(11)
Marriage dissolution
				exemption.
Marriage dissolution exemption from the real estate
				transfer tax provided in Iowa Code section
				428A.2(16) 
				applies only to real property conveyances between former spouses specifically
				mandated by a dissolution decree.
(12)
Family debt cancellation
				exemption.
The family debt cancellation exemption from the real estate
				transfer tax provided in Iowa Code section
				428A.2(11) 
				applies only to real estate conveyances between husband and wife, or parent and
				child and indebtedness between these parties.
The amount of indebtedness subject to exemption shall not
				  exceed the fair market value of the property being transferred.
EXAMPLE 1. A son is indebted to his father for $10,000. The
				  son transfers real property with a fair market value of $12,000 to his father
				  as satisfaction of the indebtedness. No real estate transfer tax is due in this
				  situation.
EXAMPLE 2. A son is indebted to his father for $10,000. The
				  son transfers real property with a fair market value of $4,000 to his father as
				  satisfaction of the indebtedness. Real estate transfer tax is due on $6,000 in
				  this situation.
(13)
Assumption of debt.
Any outstanding debt on the property
				conveyed that is not assumed by the grantee is not to be included as
				consideration in computing the amount of real estate transfer tax due.
EXAMPLE. Property with a mortgage of $40,000 is transferred
				  from A to B. B pays A $60,000 but does not assume the $40,000 mortgage. The
				  real estate transfer tax is to be computed on the $60,000 cash payment only. If
				  B had assumed the mortgage in addition to making the cash payment, the real
				  estate transfer tax would be computed on $100,000 (the sum of the payment and
				  mortgage).
(14)
Mergers, consolidations, and reorganizations.
Conveyances of
				real estate resulting from corporate or limited liability company mergers,
				consolidations, or reorganizations are exempt from the real estate transfer
				tax. The following definitions are intended to be general guidelines in
				determining eligibility for exemption under this subsection.
"Merger"
means the uniting of two or more
				  corporations or companies into one corporation or company in such manner that
				  the corporation or company resulting from the merger retains its existence and
				  absorbs the other constituent corporation(s) or company(ies) which thereby lose
				  its or their existence.
"Consolidation"
means the uniting of two or
				  more corporations or companies into a single new corporation or company, all of
				  the constituent corporations or companies thereby ceasing to exist as separate
				  entities.
"Reorganization"
means the transfer of
				  substantially all of the assets of one corporation or company to another
				  corporation or company where the persons having an interest in the old
				  corporation or company maintain substantially the same interest in the new
				  corporation or company.
This rule is intended to implement Iowa Code section
				  428A.1 as amended by 1996 Iowa
				  Acts, chapter 1167, and section
				  428A.2 as amended by 1996 Iowa
				  Acts, chapter 1170.