Opinion ID: 1539570
Heading Depth: 1
Heading Rank: 4

Heading: the dismissed charges

Text: The ODC and Davis stipulated to the dismissal of the two counts that were potentially the most serious. Davis purchased two investment properties from the same owner in February 2007. The Form HUD-1 (settlement statement) for the first purchase listed the sale price as $162,500, resulting in a combined transfer tax of $4,875. With the seller's consent, Davis revised the Affidavits of Gain and Value to reflect the amount of consideration received as being $40,000, resulting in a reduced tax liability of $600 (which was the amount paid). Similar revisions were made in the second transaction, where the purchase price was listed as $212,500, but the Affidavits of Gain and Value were revised to reflect consideration in the amount of $60,000. That modification caused the transfer tax to be reduced from $3,187.50 to $900. [3] After a staff person at Ward and Taylor, LLC told the firm's partners about the altered tax forms, the firm placed Davis on administrative leave and instructed him to report the matter to ODC. Davis convinced the ODC and the Board to dismiss the charges relating to those transactions by obtaining a letter from a tax attorney. The letter outlined how Davis arrived at the values he included in the revised affidavits. For the purchase where Davis reduced the sales price from $212,500 to $60,000, the tax letter explains: The seller provided 100% purchase money financing. The purchase money note provided for monthly payments with interest at 6% per annum with a maturity date of one year following settlement.    You told me that the property was not subject to lease at the time of settlement and that your intention was to lease it for one year then sell the property. You projected gross rental income of $16,500 for the year.... You believe that the market value of the property, based on sales of comparable properties, was $256,000 and that the value of the transaction involving the purchase, lease then resale of the property was $60,000 ($256,000 minus $212,500 plus $16,500). Realty transfer taxes were paid based on this $60,000 transaction value. The tax letter describes a similar calculation for the other transaction, as well as a third transaction (involving an adjustment from $590,000 to $150,000) that the ODC never included in its petition. The tax letter then discusses different definitions of value, none of which relate to Davis's valuation, and notes that the values you used are based on factors with real economic substance. The tax letter concludes that the manner in which you determined value is not without support, and that Davis could have avoided all transfer taxes if he had structured his deals as conditional sales agreements. The tax letter fails to note that the seller was not interested in a conditional sale agreement. As with the $48,000 in transfer taxes for the Red Oak Road property, Davis paid the full transfer taxes on the two transactions that were the subject of ODC's original petition at the time that his former firm required him to self-report to ODC. Davis never paid the additional transfer tax on the third such transaction, apparently because it was not included in ODC's petition.