Tax Type
Recordation Tax
Description
Supplemental writing: Deeds in lieu of foreclosure
Topic
Documents Subject to Tax
Date Issued
12-13-1985
- December 13, 1985
Re: Request for Ruling: Recordation Tax §58.1-809 Supplemental Writing: Deed in Lieu of Foreclosure
Dear ****
This letter is in response to your correspondence of July 9, 1985, requesting a ruling on the taxability of three deeds in lieu of foreclosure presented to you for recordation. The person tendering the deeds (the grantee under the deeds and note holder) claims that they are exempt from tax under § 58.1-809 as writings supplemental to previously recorded deeds in trust.
An examination of the instruments presented makes it clear that they are deeds conveying real property. Such instruments presented for recordation are subject to recordation taxes under § 58.1-801 (grantee's tax) and § 58.1-802 (grantor's tax), unless an exemption applies. The deeds are not deeds of trust subject to a recordation tax under § 58.1-803; they are not contracts with respect to real estate taxable under § 58.1-807; nor are they contracts relating to the sale of rolling stock or equipment taxable under § 58.1-808.
The exemption from recordation tax for supplemental writings under § 58.1-809 reads in pertinent part:-
- " §§ 58.1-803, 58.1-807, and 58.1-808 are not to be construed as requiring payment of any tax for the recordation of any deed of trust, deed of subordination, mortgage, contract . . . or other writing supplemental to any such deed, mortgage, contract . . . or other writing theretofore admitted to record . . . upon which the [recordation] tax . . . has been paid . . . when the sole purpose and effect of the supplemental instrument or writing is . . . [one listed in the statute]."
It is clear from the opening language to § 58.1-809 that the exemption applies only to the recordation taxes imposed by §§ 58.1-803, 58.1-807, and 58.1-808. Because the deeds presented are not instruments taxable under any of these sections, the exemption provided in § 58.1-809 does not apply. See the enclosed Opinion to the Honorable D. Bruce Patterson, Clerk for the Circuit Court of Rockbridge County, Note 1, stating that the deed under consideration is not the type of supplemental writing exempted by §58-60, the predecessor to § 58.1-809. See, also, 1976-1977 Report of the Attorney General at 298 which provides that 58-60 (recodified as 58.1-809) provides an exemption from the tax imposed by § 58-58 (recodified as § 58.1-807).
The fact that the note holder claims the debts are not extinguished by the deeds in lieu of foreclosure, and that his intent is to better secure the payment of the notes, does not affect the applicability of § 58.1-809. This conclusion follows because the deeds are not the type of supplemental writing exempted by § 58.1-809. However, the amount of the debts canceled in consideration of the deeds may affect the amount of taxes due under §§ 58.1-801 and 58.1-802.
§ 58.1-802 imposes a tax on each deed by which realty sold is granted when the consideration or value of the interest exceeds $100. It is conceivable that the debts of the purchaser to the note holder and other secured parties exceeded the value of the property. If so, and if no portion of the purchaser's debt is satisfied by the conveyance, then the purchaser would not have received consideration in excess of $100 and no tax would be due under § 58.1-802. However, the tax under § 58.1-801 would be based on the consideration or actual value of the property, whichever is greater.
From the information you have provided me, it is not clear whether the debts have been extinguished or not. If the deeds of trust are marked released in your records, this would be an indication that the debts have been extinguished. An affidavit of the grantor-debtor, affirming that the debt was not extinguished by this conveyance would also be evidence of that fact. There is, however, a presumption in Virginia, in the absence of evidence to the contrary, that deeds in lieu of foreclosure extinguish the debt. See Joyner v. Graybeal, 204 Va. 543 (1963). Accordingly, you must be satisfied, based on evidence available to you, that the debts either are or are not extinguished by the deeds in order to make the determination as to the consideration for the conveyances.
In conclusion, therefore, I find that the deeds in lieu of foreclosure are not exempt under § 58.1-809, may be subject to the grantor's tax imposed under § 58.1-802 provided the consideration is in excess of $100 and are subject to the grantee's tax imposed by § 58.1-801.
Sincerely,
W. H. Forst
Tax Commissioner -
Rulings of the Tax Commissioner