Is a conveyance of real estate to a partnership in exchange for a partnership interest exempt from transfer fee under Exemption 6q?
No. A conveyance of real estate to a partnership in exchange for partnership interest does not meet any of the statutory requirements of an interest exchange under state law (sec. 178.1131, Wis. Stats.), and is not exempt from transfer fee under sec. 77.25(6q), Wis. Stats.
Wisconsin Statute References
Sec. 77.25(6q) – is "Pursuant to an interest exchange under s. 178.1131."
Sec. 178.1131 – Interest exchange authorized
(1) A domestic partnership may acquire all of one or more classes or series of interests of another domestic or foreign entity pursuant to ss. 178.1131 to 178.1135 and a plan of interest exchange if the interest exchange is permitted under the governing law applicable to the partnership and the acquired entity.
(2) All of one or more classes or series of interests of a domestic partnership may be acquired by another domestic or foreign entity pursuant to ss. 178.1131 to 178.1135 and a plan of interest exchange if the interest exchange is permitted under the governing law applicable to the acquiring entity and the partnership.
An interest exchange under Sub (1) is where a partnership acquires all of one or more classes or series of interests of another domestic or foreign entity and under sub (2) is where all of one or more classes or series of interests of a domestic partnership may be acquired by another domestic or foreign entity.
Sec. 178.1101(16) – defines "interest" as:
(a) A share in a business corporation
(b) A membership in a nonprofit corporation
(c) A partnership interest in a general partnership
(d) A partnership interest in a limited partnership
(e) A membership interest in a limited liability company
(f) A membership interest or stock in a general cooperative association
(g) A membership interest in a limited cooperative association
(h) A membership in an unincorporated nonprofit association
(i) A beneficial interest in a statutory trust, business trust, or common-law business trust.
(j) A comparable interest in any other type of unincorporated entity.
Note: "Classes or series of interest" does not include real estate.
In addition, an interest exchange must meet the following statutory requirements:
- Sec. 178.1132(1), Wis. Stats. – defines what information the plan of interest exchange must contain
- Sec. 178.1133(1), Wis. Stats. – requires the plan of interest exchange must be approved by the partners of the acquiring entity
- Sec. 178.1134, Wis. Stats. – requires the plan of interest exchange must be delivered to the Wisconsin Department of Financial Institutions (WDFI) for approval
- A plan of interest exchange is submitted to WDFI on Form 52 Articles of Share or Interest Exchange
Note: The only possible exemption for a conveyance of real estate to or from a partnership is sec. 77.25(15m), Wis. Stats.:
Between a partnership and one or more of its partners if all of the partners are related to each other as spouses, as lineal ascendants, lineal descendants or siblings, whether by blood or by adoption, or as spouses of siblings and if the transfer is for no consideration other than the assumption of debt or an interest in the partnership.