State Bar of Wisconsin Return to wisbar.org Wisconsin Tax Appeals Commission


[WP]

STATE OF WISCONSIN

TAX APPEALS COMMISSION


LYLE G. HUNTINGTON REVOCABLE

LIVING TRUST

c/o Lyle Huntington

21329 Hwy F

Darlington, WI 53530

Petitioner,

vs.

WISCONSIN DEPARTMENT OF REVENUE

P.O. Box 8933

Madison, WI 53708

Respondent.

DOCKET NO. 98-T-179

DECISION AND ORDER


THOMAS M. BOYKOFF, COMMISSIONER:

This matter was submitted to the Commission on stipulated facts and briefs of the parties. By order dated March 1, 1999 the Commission determined, pursuant to Wis. Stat. § 73.01(1)(b), that this case would be decided pursuant to § 73.01(4)(b) rather than as a small claims case.

Petitioner is represented by Attorney Michelle M. Umberger of Foley & Lardner, Madison, Wisconsin. Respondent is represented by Attorney Neal E. Schmidt of the Wisconsin Department of Revenue, Madison, Wisconsin.

Based on the stipulated facts, related exhibits, and briefs of the parties, the Commission finds, concludes, and orders as follows:

STIPULATED FINDINGS OF FACT

As and for its Findings of Fact, the Commission adopts the following facts as stipulated by the parties, omitting references to exhibits:

1. On January 8, 1991, Lyle G. Huntington created the Lyle G. Huntington Revocable Living Trust ("Trust").

2. Mr. Huntington is the sole donor and sole trustee of the Trust.

3. On September 3, 1996, Mr. Huntington and his sister, Marguerite Reed, formed the Lyle G. Huntington Limited Partnership ("the Partnership").

4. Mr. Huntington and his sister are the only partners of the Partnership.

5. By deed recorded on October 7, 1996, the Trust transferred real property to the Partnership. The deed's grantor was "Lyle G. Huntington, Trustee."

6. The "Wisconsin Real Estate Transfer Return," filed pursuant to the transfer, claimed an exemption from the imposition of the real estate transfer fee ("fee") under Wis. Stat. § 77.25(15m).

7. In a "Notice of Additional Assessment of Real Estate Transfer Fee," dated January 14, 1998, respondent stated that the claimed exemption was inapplicable and imposed the fee, interest and penalty pursuant to Wis. Stat. § 77.22(1) on the conveyance from the Trust to the Partnership.

8. Petitioner filed a petition for redetermination with respondent on March 12, 1998.

9. On May 19, 1998, respondent issued an "Amended Notice of Action" denying the petition for redetermination.

10. On May 21, 1998, petitioner deposited with respondent the total assessed amount of $1,671.37 to stop the accumulation of interest pending this appeal.

11. On July 17, 1998, petitioner filed a petition for review with this commission appealing the denial of its petition for redetermination.

APPLICABLE WISCONSIN STATUTES

77.22 Imposition of real estate transfer fee.

(1) There is imposed on the grantor of real estate a real estate transfer fee at the rate of 30 cents for each $100 of value or fraction thereof on every conveyance not exempted or excluded under this subchapter....

77.25 Exemptions from fee. The fees imposed by this subchapter do not apply to a conveyance:

* * *

(15m) Between a partnership and one or more of its partners if all of the partners are related to each other as spouses, lineal ascendants, lineal descendants, siblings, or spouses of siblings and if the transfer is for no consideration other than the assumption of debt or an interest in the partnership.

CONCLUSION OF LAW

The conveyance of real estate by Lyle G. Huntington, as the sole trustee of a revocable living trust, to a limited partnership in which Lyle G. Huntington, in his trustee capacity, and his sister are the sole members is exempt from the real estate transfer fee under Wis. Stat. § 77.25(15m).

OPINION

The real estate transfer fee ("fee") is imposed on the grantor of a real estate conveyance. (Wis. Stat. § 77.22(1)). Twenty-four types of conveyances are exempted from the fee under Wis Stat. § 77.25. Among the exemptions are transfers between a partnership and one or more of its partners if all of the partners are related to each other as siblings or in other ways and if the transfer is for no consideration other than the assumption of debt on an interest in the partnership.

Claimed exemptions from the fee for entity-to-entity transfers -- between partnerships, corporations, and LLCs, all of which are comprised solely of family members -- have not succeeded, in the absence of specific exemption language.

The rationale has been that exemptions from tax statutes are narrowly construed against the person claiming the exemption. Ramrod, Inc. v. Wisconsin Department of Revenue, 64 Wis. 2d 499 (1974). While the "fee" is not a "tax", it has similar characteristics, such as having no value or "measure", a statutorily imposed rate, and the moneys are used to fund state (and county) operations or programs. Exemptions from this fee are, similarly, narrowly construed against the claimant.

Several claimed exemptions from the fee for entity-to-entity transfers have been denied in recent cases. See WDOR v. Virchow, Krause & Co., Wis. Tax Rptr. (CCH) ¶ 203-100 (Dane County Cir. Ct., Oct. 30, 1989) (partnership-to-partnership transfer); Heritage Place Limited Partnership v. WDOR, ¶ 400-162 Wis. Tax Rptr. (CCH) (WTAC 1995) (limited partnership-to-general partnership); J & R Hotel Partnership v. WDOR, ¶ 400-286 Wis. Tax Rptr. (CCH) (WTAC 1997) (partnership-to-LLC); and Sunset Meadows, Partnership v. WDOR, Docket No. 98-T-129 (WTAC 1999) (partnership-to-LLC).

This case involves a transfer by the trustee of a revocable living trust to a partnership in which the trustee and his sister are partners and sole members. Under Wis. Stat. § 701.05(1), "the trustee takes all title of the settlor or other transferor and holds such title subject to the trustee's fiduciary duties as trustee." Therefore, the trustee -- who was an individual and not an entity as respondent claims -- owned the property.

The trustee conveyed the subject real estate to a partnership in which he and his sister were the only partners. There was no consideration. This fits within the exemption of § 77.25(15m) exempting transfers "Between a partnership and one or more of its partners if all of the partners are related to each other as ... siblings ... and if the transfer is for no consideration...." A brother and sister are "siblings" regardless of whether or not the brother is also a trustee.

Respondent cites and relies upon Ronald L. Sherman et al. v. WDOR, Wis. Tax Rptr. (CCH) ¶ 202-897 (Fond du Lac County Cir. Ct. 1987). In that case, Ronald L. Sherman and Ardis C. Sherman were trustors, trustees, and beneficiaries of their respective revocable trusts. They conveyed real estate to a separate living trust for each. The Circuit Court held that these transfers were not exempt from the fee under Wis. Stat. § 77.25(9), which exempts transfers between agent and principal or from a trustee to a beneficiary. The transfers in that case were, rather, from a trustor (settlor) to a trustee.

This case, however, is distinguishable from the Sherman case. This case does not rely upon § 77.25(9). Rather, it relies upon § 77.25(15m), exempting transfers between a partnership and one or more of its partners who are related to each other in specified ways, without consideration.

This case is similar to both Lois A. Selle and the Estate of Howard H. Selle v. WDOR, Docket No. 98-T-175 (WTAC Mar. 15, 1999) and Ewald A. Blado and Marie L. Blado, Trustees, Ewald A. Blado and Marie L. Blado 1996 Revocable Trust v. WDOR, Docket No. 98-T-166 (WTAC Mar. 19, 1999).

In both Selle and Blado, the two spouses/trustees held title to real estate, and each conveyed it to an LLC in which they were the sole members. The Commission similarly held that those two conveyances were exempt from the fee under § 77.25(15s). The Commission now concludes that the transfer under review falls within the parallel language of the exemption in § 77.25(15m) and is exempt as well.

IT IS ORDERED

That respondent's action on petitioner's petition for redetermination is reversed.

Dated at Madison, Wisconsin, this 8th day of April, 1999.

WISCONSIN TAX APPEALS COMMISSION

___________________________________________

Mark E. Musolf, Chairperson

Don M. Millis, Commissioner

___________________________________________

Thomas M. Boykoff, Commissioner

ATTACHMENT: "NOTICE OF APPEAL INFORMATION"