Pennsylvania Code › Title 61 - REVENUE › Part I - Department of Revenue › Subpart B - General Fund Revenues › Article IV - County Collections › Chapter 91 - REALTY TRANSFER TAX › Subchapter G - VALUATION › Section 91.137 - Construction contracts

Current through Register Vol. 54, No. 28, July 13, 2024
The value of realty also includes the value of
						  contracted-for improvements to the realty, such as a building to be made as a
						  permanent addition if under the construction agreement the grantor or grantor's
						  affiliate is contractually obligated to the grantee to make the contracted-for
						  improvements to the realty granted upon payment of the agreed consideration or
						  a contractor is contractually obligated to the grantor and to the grantor's
						  successors in interest to make contracted-for improvements to the realty
						  granted upon payment of the agreed consideration and the contractual obligation
						  is effective with the transfer or was effective prior to the transfer and not
						  removed thereby.
Example 1
:
O'Brien Land Company sells a lot to B for $10,000.
						  Prior to the transfer of the lot, B enters into a contract with O'Brien
						  Construction Company for the construction of a home on the lot for the contract
						  price of $50,000. O'Brien Construction Company and O'Brien Land Company are
						  subsidiaries of O'Brien Development Company. Tax is based on $60,000.
Example 2
:
After entering into an agreement with Acme Construction
						  Company to have a home constructed on his lot for the contract price of
						  $50,000, D sells the lot and assigns his interest in the construction contract
						  to B for $25,000. The balance due on the construction contract is $35,000. As
						  $15,000-$50,000 less $35,000-of the sales price is attributable to the
						  contracted-for improvements, tax is based on $10,000 for the lot and $50,000
						  for contracted-for improvements for a total of $60,000.
Example 3
:
D, a developer who routinely sells options to purchase
						  unimproved lots in his development to Acme Construction Company, agrees to sell
						  one of the option lots to B for $10,000. Acme Construction Company requires B
						  to enter into a construction agreement with it to build a home for $50,000 as
						  consideration for the release of its option to purchase the lot. Tax is based
						  on $60,000.
Example 4
:
D, a developer, having agreed with Acme Construction
						  Company that Acme Construction Company will be the exclusive builder for D's
						  development, requires as a condition of sale that all buyers use Acme
						  Construction Company as their builder. B buys a lot from D for $10,000 and
						  enters into a contract with Acme Construction Company for the construction of a
						  home for the contract price of $50,000. The tax is based on $60,000.
Example 5
:
D agrees to sell a lot to B for $10,000. Prior to the
						  transfer of the lot, B enters into a contract with Acme Construction Company
						  for the construction of a home on the lot. There is no relationship between D
						  and Acme Construction Company. Tax is based on the $10,000 consideration for
						  the lot.
The provisions of this §
														91.137 issued under section 1107-C
							 of the Tax Reform Code of 1971 (72 P. S. §
															8107-C).