88-271 | Virginia Tax

Tax Type

Recordation Tax

Description

Transfer pursuant to a bankruptcy court order

Topic

Exemptions

Date Issued

10-14-1988

October 14, 1988

Re: §58.1-1821 Application; Recordation Tax
§58.1-801 Tax on Deeds
§58.1-802 Grantor's Tax

Dear***************

This is in response to your letter of June 1, 1988, in which you applied for correction of an assessment of state and local recordation taxes, including the grantor's tax, assessed by the clerk of court.

Facts

You request a refund of state and local recordation taxes and the grantor's tax paid upon recording a deed which was pursuant to a disposition order confirmed by the U. S. Bankruptcy Court. You claim that the recordation of the deed is exempt from all state and local recordation taxes under 11 U.S.C.A. §1146(c).

Discussion

Section 11 U.S.C.A. §1146(c) provides:

- (c) The issuance, transfer, or exchange of a security, or the making or delivery of an instrument of transfer under a plan confirmed under section 1129 of this title, may not be taxed under any law imposing a stamp tax or similar tax.

A review of the copy of the deed shows that the deed stated that it was pursuant to a plan of reorganization which had been confirmed by the U. S. Bankruptcy Court and cited the Bankruptcy case number and other relevant information. The deed also cited the code section under which it claimed an exemption as required by §17-59.

Therefore, the deed qualifies for the exemption provided in the quoted section of federal law. The Virginia grantor's tax under §58.1-802 is clearly a "stamp tax or similar tax" since it was enacted after Congress repealed the federal stamp tax on deeds and is similar to the provisions of the repealed federal law. The state recordation tax under §58.1-801 (and therefore the local recordation tax authorized by §58.1-3800) bears a sufficient resemblance to a stamp tax to be covered by the federal exemption as well.

The federal exemption clearly applies to the transfer and all documents to implement the transfer, not merely to the bankrupt party. Therefore, the deed in question may be recorded free of the state and local recordation tax as well as the state grantor's tax.

Determination

Accordingly, the assessment was incorrect and the tax paid will be refunded. The department will refund the state recordation tax collected under §58.1-801 and one-half of the grantor's tax collected under §58.1-802 which has been transferred to the state treasury by the clerk of the circuit court. You should contact the clerk for a refund of the local recordation tax and the portion of the grantor's tax retained by the locality.

Sincerely,

W. H. Forst
Tax Commissioner

Rulings of the Tax Commissioner