August 22, 1977
Subject:
Taxation; Real Estate Excise Stamp Tax; Consideration; Encumbrances; G.S. 105-228.30
Requested By:
Mr. Fred H. Israel Register of Deeds Transylvania County
Question:
Where a deed of trust executed by a seller of real property is recorded simultaneously with the deed conveying the property from seller to purchaser, is the amount of the deed of trust deducted from the total consideration for purposes of computing the amount of the stamp excise tax?
Conclusion:
No.
The controlling statute, G.S. 105-228.30, provides that the excise stamp tax on conveyances is computed on "the consideration or value of the interest or property conveyed (exclusive of the value of any lien or encumbrance remaining thereon at the time of sale)." The deed in question recites that "as a portion of the consideration of the purchase price," the purchasers agree "to assume and pay off the balance due on that certain deed of trust" executed by the sellers and recorded on the same date on which the deed was made and recorded. Since the deed and deed of trust became effective simultaneously, the deed of trust could not qualify as an encumbrance remaining at the time of sale. Only a pre-existing deed of trust could constitute a "lien or encumbrance remaining thereon at the time of sale."
This conclusion is supported by I.R.C. Reg. § 47.4361-1, which construed the federal documentary stamp tax statute, I.R.C. 1954 § 4361, now repealed. The language of the federal statute with respect to encumbrances was identifical to that now found in G.S. 105-228.30. The regulation provided as follows:
"In determining the amount of the net consideration for, or net value of, the realty conveyed, only the amount of the liens and encumbrances on the property existing before the sale and not removed thereby may be deducted. Thus, for example, taxes or assessments which are liens on the property before the sale and are not paid at the time of sale are deductible. No deduction shall be made on account of any lien or encumbrance placed upon the property in connection with the sale, or by reason of deferred payments of the purchase price whether represented by notes or otherwise."
It is apparent from the reference to the deed of trust in the deed and from the fact that both instruments were made and recorded simultaneously that the deed of trust is an encumbrance "placed upon the property in connection with the sale." Therefore, the amount of the deed of trust may not be deducted from the consideration of value of the property in computing the amount of the excise stamp tax.
Rufus L. Edmisten Attorney General
Marilyn R. Rich Associate Attorney General