State Bar of Wisconsin Return to Wisconsin Tax Appeals Commission





P. O. Box 628003

Middleton, WI 53562




P.O. Box 8933

Madison, WI 53708


DOCKET NO. 97-T-212



This matter is before us on stipulated facts with exhibits. On briefs are Attorneys Donald Leo Bach and Douglas L. Flygt for the petitioner and Attorney Neal E. Schmidt for the respondent.

Having considered the entire record, the Commission finds, concludes, and orders as follows, reversing the respondent's action:


We adopt the following facts, applicable at the time of the transaction at issue, as stipulated by the parties, omitting references to exhibits:

1. R&R Development Group, LLC ("R&R" or "petitioner"), whose address is Post Office Box 682003, Middleton, Wisconsin 53562, is a limited liability company organized under the laws of the State of Wisconsin.

2. R&R is now and was at all relevant times qualified to do business in the state of Wisconsin.

3. The sole members of R&R are Richard Harper and Rich Eberle.

4. The Wisconsin Department of Revenue ("the Department" or "respondent") is an agency of the State of Wisconsin.

5. R&R owns certain property in Middleton, Dane County, Wisconsin, which it has developed and is developing as "The Villages Condominium" ("The Villages").

6. The Villages is an expandable condominium organized under Chapter 703 of the Wisconsin Statutes, and R&R is the declarant of such condominium.

7. As the declarant, R&R owns the right to expand The Villages and sell to any person wishing to own a condominium unit in The Villages.

8. Any person who wished to live in The Villages but did not purchase a pre-built residence, pursuant to a disclosure statement entitled "Sale of Right to Construct Condominium Unit", contracted with Country Club Condominiums, Inc. ("CCC"), to construct a residence at a certain location (the "footprint") as defined in the Condominium Declaration.

9. R&R conveyed 3809 Signature Drive, a/k/a Unit 3809 of The Villages, to Warren H. Stolper and Jane H. Stolper (the "Buyer") by a Condominium Deed dated June 14, 1996 (the "Deed"). Addenda to the Stolper Offer to Purchase contained language requiring the Buyer to enter into a building contract with CCC.

10. The Deed was recorded on June 20, 1996, and was accompanied by a Wisconsin Real Estate Transfer Return which stated that the total value of the real estate being transferred from R&R to the Buyer was $83,100. The real estate transfer fee paid upon recording was $249.30.

11. At the time the Deed was executed and delivered to Buyer, The Villages was still in its build-out phase and remains so.

12. The Buyer entered into a revised Building Contract dated June 19, 1996, with CCC to construct a building (residence) at 3809 Signature Drive for the sum of $237,840. At the time the Deed was executed and delivered to Buyer on June 20, 1996, the building (residence) now located at 3809 Signature Drive did not exist.

13. The Buyer arranged financing at Home Savings Bank of $325,300 referred to as a settlement statement.

14. CCC is a Wisconsin corporation in good standing in the State of Wisconsin.

15. CCC is a separate legal entity from R&R.

16. CCC is not a member of R&R, and CCC is not a party in this case.

17. The sole shareholders of CCC are Richard Harper and Rich Eberle.

18. On October 3, 1996, the Department issued a Notice of Additional Assessment of Real Estate Transfer Fee for the above-described transaction.

19. On November 29, 1996, R&R timely filed a Petition for Redetermination with the Department contesting such additional assessment.

20. On March 27, 1997, the Department issued a Notice of Action on Petition for Redetermination denying the relief sought by R&R.

Stipulated Statement of Dispute

21. Petitioner maintains that it filed a proper and appropriate Wisconsin Real Estate Transfer Return reflecting the full actual consideration ($83,100) received by it with respect to the sale of 3809 Signature Drive, and that the value of the Building Contract should not and cannot be added to or included in the value of this and similar conveyances for which a real estate transfer fee is imposed.

22. Respondent maintains that when a developer requires the grantees of a footprint as a condition of taking title to contract with CCC to build the improvements thereon, both the value of the real estate and of the construction contract as a total inseparable package must be included to determine the value subject to the real estate transfer fee. Respondent maintains that the real estate and the construction contract merge.


77.21 Definitions. In this subchapter:

(1) "Conveyance" includes deeds and other instruments for the passage of ownership interests in real estate, including contracts and assignments of a vendee's interest therein and including leases for at least 99 years but excluding leases for less than 99 years, easements and wills.

* * *

(1m) "Real estate" includes, but is not limited to, fixtures, roots, vines and trees of perennial crops; stock in a cooperative building; improvements on leased land; timber; and minerals.

* * *

(3) "Value" means:

(a) In the case of any conveyance not a gift, the amount of the full actual consideration paid therefor or to be paid, including the amount of any lien or liens thereon; ....

* * *

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....

(2) The secretary of revenue shall prescribe the form required under sub. (1). The form shall include an application for a credit under s. 79.10(5) and shall provide for the submission of the following:

(a) The value of the ownership interest transferred by the instrument of conveyance.

(b) The amount of the fee payable under this section.

(c) Whether the real estate transferred is subject to certification under s. 101.122(4)(a), waiver under s. 101.122(4)(b) or stipulation under s. 101.122(4)(c).

(d) If the real estate transferred is not subject to certification under s. 101.122(4)(a), waiver under s. 101.122(4)(b) or stipulation under s. 101.122(4)(c), the reason why it is not so subject or the form prescribed by the department of commerce under s. 101.122(6).

(e) The financing terms under which agricultural land is transferred that are relevant to determining only the value of the property.

(f) Any other information the secretary requires.


The respondent improperly determined that the contracted value of real estate improvements not in existence at the time of the conveyance at issue was subject to the transfer fee imposed by Wis. Stats. § 77.22(1).


Our starting point in resolving this dispute is the language of Wis. Stats. § 77.22(1) and the related definitions in § 77.21. We find no ambiguity in either the fee imposition language or the definitions.

Section 77.22(1) imposes a fee measured by the "value" on "every conveyance not exempted or excluded under this subchapter." The conveyance here was by deed, and no exemption or exclusion was claimed. The dispute here concerns what was actually "conveyed" and what "value" is subject to the fee.

The petitioner reported the conveyance of an unimproved "footprint" lot, for which the purchasers paid $83,100. The purchasers also agreed, as a condition to buying the lot, that they would pay CCC $237,840 to construct a residence on the vacant lot. The respondent maintains that this additional $237,840 is subject to the fee because the transaction was not the sale of a vacant lot but of improved property with a total value of $320,940, including the lot and residence, which the purchasers were obligated to pay.

We agree that the transaction included the purchase of both the vacant lot and a condominium residence to be constructed there. But the only real estate actually conveyed by the deed at issue was a vacant lot valued at $83,100. Wisconsin's real estate transfer fee is imposed only on the value of real estate conveyed, not on the value of a contract to improve that real estate in the future.

Section 77.21(1) defines "conveyance" as including "deeds and other instruments for the passage of ownership interests in real estate." [emphasis supplied]. An agreement to construct an improvement to real estate is not an ownership interest in real estate. The commonly understood meaning of "real estate" is found in Black's Law Dictionary, 5th Edition, at p. 1137:

Land and anything permanently affixed to the land, such as buildings which would be personal property if not attached.

This definition reflects the elemental axiom that anything not permanently affixed to the land is personal property, not real estate. This axiom is further reflected in the definition in § 77.21(1m), which clarifies that certain specified items, such as "fixtures," are real estate for purposes of the transfer fee. We agree with the petitioner that a contract to construct a real estate improvement is personal property or, more precisely, a "chose in action." See, Black's Law Dictionary, 5th Ed., p. 219. It is clearly not real estate within the meaning of § 77.21.

Further, we are aware of no definition or legal authority anywhere in the Wisconsin Statutes or case law which even implies that the value of "real estate" includes improvements not yet made. See, for example, Wis. Stats. § 70.03, defining real property for property tax assessment purposes as including "all buildings and improvements thereon."

In support of its position, the respondent cites two cases from Pennsylvania and a Florida case.(1) All three are inapposite. Pennsylvania Builders Association involved a statute which specifically provided for inclusion of a building contract in the value of the real estate. No such language exists in Wisconsin's law. East Norriton Medical Associates involved leasehold improvements already on the real estate at the time it was conveyed. Here, the improvements were nonexistent at the time of conveyance. Similarly, Cohen-Ager, Inc., also involved conveyance of property to which improvements had already been made, unlike the conveyance in dispute here.

But the respondent insists that here "the grantees acquired the full value of the improved real estate."(2) That may have been the case at some point, but it was not the case when the conveyance at issue occurred on June 19, 1996. At that time, the $237,840 building did not exist. Fact 12, supra. It certainly could not have been conveyed as real estate on June 19, 1996.

The respondent also asserts, without citing any authority, that the construction contract becomes "an appendant as a fixture and a real covenant that runs with the land."(3) We disagree. As discussed above, such a contract is personal property under Wisconsin law and commonly accepted legal principles.

The respondent finally posits that its action is in accord with its longstanding policy, articulated in departmental publications beginning in 1984, which should be given great weight. While the respondent's longstanding interpretation of a statute may be entitled to great weight under some circumstances,(4) such interpretation is a mere nullity if it is out of harmony with the statute. Village of Plain v. H. W. Harder, 268 Wis. 507, 511 (1955). The petitioner's policy of declaring contracted-for but nonexistent improvements to be real estate is wholly out of harmony with both the clear language of § 77.21 and common law, and we reject it. It is not the function of the respondent to establish, define and enforce an appropriate public policy. That is the law-making function of the state legislature. Department of Revenue v. Nagle-Hart, Inc., 70 Wis. 2d 224, 226 (1975).

Finally, we give short shrift to the respondent's assertions that we should apply the doctrine of equitable conversion and/or the legal concept of merger to affirm its action. Where statutory definitions are unambiguous, as "conveyance" and "real estate" are here when applied to the stipulated facts, the only arbiter of equity is the legislature, not the respondent or this commission. As to the doctrine of merger, the respondent asserts the concept but provides no legal basis or authority for its application to the facts here.

In summary, we find no legal justification for the respondent's action here or its longstanding policy which holds that improvements contracted for but not existing at the time of a "conveyance" are included in the definition of "real estate" or "value" under § 77.21. The only real estate petitioner conveyed was a vacant lot, and its value was properly reported to respondent on the transfer fee return under review.


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

Dated at Madison, Wisconsin, this 11th day of February, 1999.



Mark E. Musolf, Chairperson

(Not participating)________________________

Don M. Millis, Commissioner


Thomas M. Boykoff, Commissioner


March 10, 1999 Appealed to Dane County Circuit Court (Case No. 99CV0566)

1 Pennsylvania Builders Association, et. al. v. Commonwealth of Pennsylvania, 552 A.2d 730 (1989);

East Norriton Medical Associates, Ltd. V. Commonwealth of Pennsylvania, 650 A.2d 1169 (1994);

Cohen-Ager, Inc. v. State of Florida Department of Revenue, 504 So.2d 1332 (1987).

2 Respondent's initial brief, p. 6.

3 Ibid.

4 See, Benefit Trust Ins. Co. v. Comm'r of Insurance, 142 Wis. 2d 582, 586-7 (Ct. App. 1987).