Interest Exchange

1. Is a deed filed to give notice of an interest exchange under state law (sec. 178.1131, Wis. Stats.), exempt from transfer fee?


2. Is a conveyance of real estate to a partnership in exchange for a partnership interest exempt from transfer fee under Exemption 6q?

Joint Tenancy

1. I'm preparing a transfer tax return to accompany a deed where the owner of a single-family residence is a single male. He requested that I prepare a deed from him (as sole owner) to himself and his cohabitant (as joint tenants). The couple does not plan to marry. I have the following questions:

   1. When figuring the transfer fee, should I figure it on half the value of the real estate or should I figure it on the entire value?
   
   
   2. Grantor/Grantee relationship: Is it none? Or is it "Other" with the explanation of "cohabitants"?
   
   
   3. Type of Transfer: Should I select "Other" and explain it as a "Conveyance" with no explanation?
   
   
   4. Ownership interest transferred: Should I select "Full" or "Other"? Should I explain it as "Grantor is conveying a half interest to Grantee?"
   
   
   5. Does Grantor retain any of the following rights: Should I select "None" (since he is giving up his rights as an individual owner and conveying them to himself and his cohabitant as joint tenants)? Or should it be "Other" and explained with "Grantor retains a half interest"?


2. In filing a quit claim deed from a surviving spouse disclaiming joint tenancy in the real estate of the decedent under state law (sec. 854.13(2) (b), Wis. Stats.), the effect is as though the surviving joint tenant predeceased the decedent. (a) Is a transfer return required? (b) Is a return required when the decedent's children disclaim any interest in the estate and have no prior interest or title in the real estate?

Interest Exchange

1. Is a deed filed to give notice of an interest exchange under state law (sec. 178.1131, Wis. Stats.), exempt from transfer fee?

   Yes. A deed filed to give notice of an interest exchange under state law (sec. 178.1131, Wis. Stats.) is exempt from transfer fee per state law (sec. 77.25(6q), Wis. Stats.).

2. 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.

Joint Tenancy

1. I'm preparing a transfer tax return to accompany a deed where the owner of a single-family residence is a single male. He requested that I prepare a deed from him (as sole owner) to himself and his cohabitant (as joint tenants). The couple does not plan to marry. I have the following questions:

   1. When figuring the transfer ​fee, should I figure it on half the value of the real estate or should I figure it on the entire value?

      Transfer fee is due on one-half of the fair market value since one-half of the value is being conveyed.

   2. Grantor/Grantee relationship: Is it none? Or is it "Other" with the explanation of "cohabitants"?

      Since either one applies, you may check either one or both. If you select "Other," you must provide an explanation.

   3. Type of Transfer: Should I select "Other" and explain it as a "Conveyance" with no explanation?

      You can check "Other" and explain it as "cohabitants."

   4. Ownership interest transferred: Should I select "Full" or "Other"? Should I explain it as "Grantor is conveying a half interest to Grantee?"

      Select "Other" and explain it as "Grantor is conveying a half interest to Grantee."

   5. Does Grantor retain any of the following rights: Should I select "None" (since he is giving up his rights as an individual owner and conveying them to himself and his cohabitant as joint tenants)? Or should it be "Other" and explained with "Grantor retains a half interest"?

      Select "Other" and explain it as "Grantor retains a half interest."

2. In filing a quit claim deed from a surviving spouse disclaiming joint tenancy in the real estate of the decedent under state law (sec. 854.13(2) (b), Wis. Stats.), the effect is as though the surviving joint tenant predeceased the decedent. (a) Is a transfer return required? (b) Is a return required when the decedent's children disclaim any interest in the estate and have no prior interest or title in the real estate?

   (a) Yes. A transfer return is required; however, the spousal deed is exempt from fee per state law (sec. 77.25(11), Wis. Stats.), as being "By will, descent or survivorship." It is assumed that spouses may also have an interest in the property under marital property law.

   (b) No. For the children, since they had no prior interest or title in the property, this is exempt from return and fee, according to sec. 77.21 (1), Wis. Stats.

   Note: You should make a statement on the document similar to, "This is a disclaimer only and not a conveyance as defined by sec. 77.21(1), Wis. Stats, and therefore is exempt from fee imposed under sec. 77.22(1), Wis. Stats." If they had an interest in the property, then the use of the exemption per sec. 77.25(11), Wis. Stats., would apply. We instructed the Register of Deeds that they should not accept exempt recordings verbally and the person recording the document should place the exemption on the document when no return is furnished.