Tax Type
Recordation Tax
Description
Bulk purchase of noncontiguous parcels
Topic
Rate of Tax
Date Issued
02-23-1989
February 23, 1989
Re: §58.1-1821 Application; Recordation Tax
§58.1-801 Tax on Deeds; Consideration or actual value
Dear**************
This is in response to our conference on January 5, 1989, in which you requested that I reconsider my ruling dated November 10, 1988, P.D. No. 88-317 (copy enclosed). The previous ruling adequately explains the facts and issues involved.
The determination of the actual value of property for purposes of assessing the recordation tax is the responsibility of the clerk of the circuit court of the locality in which a deed is offered f or recordation. In the absence of clear and cogent evidence that the clerk has erred in valuing property conveyed, for example, by using an improper method of valuation, the clerk's determination of actual value will not be disturbed.
A negotiated price is only one of the relevant factors to be considered in determining the actual value and is not necessarily controlling. Another factor that the clerk may consider is the nature of the property. For example, when noncontiguous tracts are conveyed by a single deed the clerk may properly value such tracts as separate tracts if that represents the fair market value they would bring after reasonable efforts to find one or more purchasers who will give the best price for all of the tracts.
On the other hand, contiguous parcels located in the same magisterial district may be consolidated into a single tract on the landbook for subsequent general reassessments. See Report of the Attorney General 1982-1983 at page 541 (copy enclosed). Thus, when determining the actual value of property for purposes of the recordation tax, the clerk may properly consider the value of contiguous parcels as if they were a single tract, but is not required to do so. The clerk's valuation may be affected by other factors such as whether the contiguous parcels are similar and used for the same purpose, or whether all parties to the deed intended to treat the parcels as a single tract. The fact that contiguous parcels are conveyed by separate deeds would be clear evidence that the seller does not consider the parcels to be a single tract.
One point in my November 10, 1988, letter should be clarified. For purposes of the recordation tax the assessed value on the landbooks creates a presumption as to the actual value. When, as in this transaction, the assessed value greatly exceeds the reported consideration the clerk is justified in questioning whether the consideration is at least equal to the actual value. In most cases the assessed value will be a good indicator or starting point for the clerk's investigation into the actual value of property conveyed by a deed. The clerk may not, however, automatically base the recordation tax on the assessed value unless it is determined that the assessed value does, in fact, equal the actual value of the property conveyed.
Therefore, I reaffirm my determination in the letter of November 10, 1988. I note, however, that the determination of actual value has not been finalized in each of the localities involved. If you still disagree with the valuation method used by any clerk you may submit evidence showing how it is erroneous.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner