When a land contract was taken out, the property was all vacant land. Now the property has improvements. What value goes on the transfer return, the original land contract value or the current property value with the improvements?
Use the original land contract value. The real estate was conveyed on the land contract, not the satisfaction.
How are the satisfaction of land contracts, dated prior to September 1, 1981 ($1/thousand, 1 mill), reported on the electronic Real Estate Transfer Return (RETR)? The RETR automatically calculates at $3/thousand, 3 mills. Is a waiver (PE-500w) required?
No waiver is required since the RETR allows for the .001 mil rate land contract. The following describes how to complete the RETR.
On the "Transfer" page of the RETR:
On the "Fee Computation" page of the RETR:
Total value of real estate transferred = value of original land contract
Value subject to fee = 1/3 the value of the original land contract. The fee calculates to the amount based on the rate of .001
Since the "Value subject to fee" is less than the "Total value of real estate transferred," select transfer fee Exemption 17 - Sat. Land Contract"
Provide the document number and date of the original land contact in the appropriate boxes for claiming Exemption 17
Does a vendee's assignment of land contract for collateral only require a transfer return?
Yes. Exemption 10 applies.
Why is another transfer fee due on an assignment of a vendee's interest in a land contract when the fee was paid on the original land contract?
These transactions are two separate and distinct conveyances:
There is a fee on the original land contract (or any instrument evidencing the existence of a land contract)
Sale and obligation of payment on the assignment of a vendee's interest in a land contract is subject to transfer fee per state law (sec. 77.21(1), Wis. Stats.), and administrative rule (Tax 15.04, Wis. Adm. Code)
What is the measure of the fee when a vendee sells his/her interest in an original land contract for $100,000 and there is a $100,000 balance owed on the land contract assumed by the buyer?
The fee is based on the total consideration of $200,000 (sum of the cash paid of $100,000 and the balance of $100,000 owed) on the land contract that is assumed by the buyer.
A city sells property to an individual on a land contract and the transfer return is filed using Exemption 2. Later the city sells its vendor's interest in the land contract to another individual and records the assignment without a return since the vendor's interest is a personal interest in a debt. Now the deed in satisfaction is being recorded. Does Exemption 17 apply since the land contract was exempt and the current vendor is not a governmental agency?
Yes. Exemption 17 does apply. Since the original vendor was a governmental agency and exemption sec. 77.25(2), Wis. Stats., was properly used, the satisfaction is exempt per state law (sec. 77.25(17), Wis. Stats.), regardless of the current vendor.
Is there a transfer fee due on a deferred land contract when there is an assignment of a vendor's interest in a land contract?
No. An assignment of a vendor's interest does not provide for the passage of ownership interest in real property and does not require a transfer return under state law (sec. 77.21(1), Wis. Stats.). Since a return is not required for a conveyance of a vendor's interest and typically does not involve the vendee, the deferred original land contract can remain deferred until satisfied or upon an assignment of the vendee's interest in the land contract.
Note: An assignment of a vendee's interest is not only subject to fee but also requires a transfer fee on the original deferred land contract; this is because equitable conversion gives the vendee an ownership interest in the real estate.
Is the recording of a deed in partial satisfaction of a land contract that releases one parcel of the two parcels conveyed on the land contract, exempt from return and fee?
A transfer return is required, but the exemption under state law (sec. 77.25(17), Wis. Stats.), applies to a deed executed in fulfillment of a land contract if the proper fee was paid when the land contract or instrument evidencing the land contract was recorded. On the "Fee Computation" page:
Enter the value of the portion satisfied in the box "Total value of real estate transferred"
Do not enter the total of the original land contract. See administrative rule (Tax 15.04(5), Wis. Adm. Code).
Example:
A 40-acre parcel is sold under an original land contract for $80,000; deed is issued in partial satisfaction of this land contract covering five acres; fee is based on 5/40 of $80,000 or $10,000
Enter zero (0) in the "Value subject to fee" box
You may then select Exemption 17 and enter the document number of the recorded land contract
Note: If the land contract was recorded before August 1, 1992 and the fee was deferred, then a transfer fee is due and you should enter the same value as shown in the "Total value subject to fee" box
When was the deferral of transfer fees changed on land contracts?
The 1991 Wisconsin Act 269, repealed the deferral of transfer fees on land contracts per state law (sec. 77.22(2), Wis. Stats.). Effective August 1, 1992, for ALL original land contracts submitted, a transfer fee is imposed at the time the land contract is submitted for recording.
When is a deed in satisfaction of a land contract exempt from fee?
- Exemption 17 – applies when recording a deed in satisfaction and the fee was previously paid either on an amendment or on the original land contract
- Exemption 14 – applies when recording a deed from the vendee back to the vendor under foreclosure or in lieu of foreclosure
- Exemption 1 applies – when recording a deed in satisfaction of a land contract dated before December 17, 1971
Can Exemption 8 be used on a land contract between parent and child?
No. Exemption 8 requires the conveyance to be for no or nominal consideration. A transfer fee would be due on the full sale price of a land contract.
Is a deed in satisfaction of a land contract caused by will, descent or survivorship, exempt from fee?
No. Exemption 11 may not be used since the original land contract conveyed the real property and the deed in satisfaction is only conveying a personal interest in the debt or obligation per the Doctrine of Equitable Conversion. A deed in satisfaction of a land contract must meet the requirements of Exemption 17 or a transfer fee is due if the original land contract was fee deferred.
Is a transfer return needed when there is an amendment of a land contract reflecting an increased interest rate or longer term?
Yes. Any amendment to a land contract requires the submission of a transfer return. The amendment is exempt from transfer fee under state law (sec. 77.25(3), Wis. Stats.).
Note: An increase in value requires the submission of an additional transfer fee.
According to a divorce decree, a person must give their vendee's interest in the land contract to their spouse. Is a transfer fee due on an originally fee-deferred land contract even if the divorce conveyance is exempt?
Yes. The conveyance of the vendee's interest between spouses who are getting divorced is exempt under state law (sec. 77.25 (8m) Wis. Stats.). However, the originally deferred fee is now payable with this assignment of the vendee's interest.
If a vendor and vendee of an original land contract sign their respective interest over to a third party, is there a fee due?
Yes. The effect of this conveyance merges all interests of the land contract with the third party. A fee is due on this sale. Also, if a transfer fee was deferred on the original land contract (contract consummated prior to August 1, 1992), that fee is also due.
There are two vendees in a land contract and one vendee is assigning his interest in the property to the other vendee. Does the vendor's name go on the transfer return as grantor and is there a fee due?
An assignment of a vendee's interest in a land contract is subject to both transfer fee and transfer return because it is a conveyance of an interest in real property per state law (sec. 77.21(1), Wis. Stats.). The transfer fee is due on the value of the original purchase price of the land contract if it was a recent purchase; otherwise, a fee is due on the fair market value of the real estate.
Vendors are not listed on the transfer return when doing an assignment of the vendee's interest. The grantor is the vendee conveying his/her interest. The grantee is the remaining vendee.
Can a Register of Deeds accept a lease (or an assignment of lease) regarding a telephone cell tower with no explanation as to the length of the lease being recorded or assigned without a transfer return?
It depends on the type of lease, whether a return is needed.
Examples:
Farmer Brown gives a 50-year lease to Big Phone Co. - no return is needed if the wording on the recorded lease states, "This is a lease less than 99 years and not a conveyance per state law (sec. 77.21(1), Wis. Stats.)
Note: If the lease is for 99 years or more, then a return and fee are due.) After the lease is recorded Big Phone Co. builds a tower on leased land.
Big Phone Co. assigns ground lease to Little Phone Co. - transfer return and transfer fee are required since the assignment conveys "improvements" on leased land as defined under state law (sec. 77.21(1m), Wis. Stats.). The remaining length of the ground lease term does not matter. If the original lease was for less than 99 years then a transfer fee is due only on the tower; and if the original lease is greater than or equal to 99 years, then the fee is due on the ground lease and tower.
Little Phone Co. now leases tower space to Tell All Phone Co. for an antenna - this is not a conveyance of real property. No return is needed. Provided, however, that wording is included on the document submitted for recording to clarify that this is a "lease of tower space only, not a conveyance per state law (sec. 77.21(1), Wis. Stats.)."
A hospital built a daycare center on property it owns. Now, it is selling just the building, and the new owners are going to lease the land. Is the sale of the building subject to transfer return and fee?
Yes. The sale of the building requires a transfer return and fee. The building on leased land is defined as real estate under state law (sec. 77.21(1m), Wis. Stats.). "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."
Note: If the lease is for 99 years or more, the lease is also subject to a transfer return and fee. "Leases for at least 99 years but excluding leases for less than 99 years" are defined as a conveyance of real estate per sec. 77.21(1), Wis. Stats.
For transfer fee purposes, a fee is due for a lease of 99 years or more per state law (sec. 77.21(1), Wis. Stats.). How would you measure the number of years for a lease with an initial term of less than 99 years but renewable so it becomes 99 years or more?
Leases less than 99 years are not conveyances of real property per state law (sec. 77.21(1), Wis. Stats.). If an original lease of 50 years expires and is then renewed for another 50 years, it is considered to be less than 99 years and is exempt from transfer return and the transfer fee. You must include a statement on the recorded document such as, "This is a lease less than 99 years and not a conveyance per sec. 77.21(1), Wis. Stats."
However, if the original lease is for 50 years with an option to renew for years totaling 99 years or more, it would be a lease for 99 years and subject to return and transfer fee. This situation is similar to a land contract, which is subject to fee.
When recording a deed that conveys a lease of 30 years remaining on an original 99-year lease, is this conveyance subject to transfer return and fee?
Yes. A lease for at least 99 years and a conveyance of any remaining portion is defined as a passage of ownership interest in real property per state law (sec. 77.21(1), Wis. Stats.), and requires a transfer return and fee. A transfer fee is due per sec. 77.22(1), Wis. Stats., unless expressly exempted under sec. 77.25, Wis. Stats.
If you file a "Termination of Lease" for a lease that is less than 99 years, do you need a transfer return?
No. The termination of a lease does not convey an interest in real estate. If the document does not clearly state that this is a termination of a lease, you must include a statement, such as, "This is a termination of a lease less than 99 years and not a conveyance per sec. 77.21(1), Wis. Stats."
If a condominium is selling its units as a 75-year lease for $100,000, is a transfer return and fee due?
No. A lease less than 99 years is not a conveyance of real property per state law (sec. 77.21(1), Wis. Stats.). The document recorded should have a statement included, such as, "This is a lease less than 99 years and is not a conveyance per sec. 77.21(1), Wis. Stats." The filer, not the Register of Deeds must exempt the document.
Renter A entered into a ground lease with Owner B for 50 years. Owner B constructed a building on this land. Owner B then assigned this lease and sold the building to Buyer C. Would the sale of the building on leased land be subject to the fee and return?
Yes. The definition of real estate specifically includes improvements on leased lands.
Can a partnership convert to a limited liability company with an effective date of July 1, 2016 or after and be exempt per state law (sec. 77.25(6m), Wis. Stats.)?
Yes. Effective July 1, 2016 or after, the exemption applies when converting a business entity to another form of business entity under state law (sec. 178.1141, 179.76, 180.1161, 181.1161, or 183.1207, Wis. Stats).
Sec. 178.1141(1) - a domestic partnership may convert to another type of domestic entity, other than a domestic partnership, or to any type of foreign entity (under secs. 178.1141 to 178.1145, Wis. Stats.) and a plan of conversion if the conversion is permitted under the governing law of the converting entity and the governing law to be applied to the converted entity
Sec. 178.1141(2) - a foreign or domestic entity, other than a domestic partnership, may convert to a domestic partnership under secs. 178.1141 to 178.1145, Wis. Stats. and a plan of conversion if the conversion is permitted under the governing law of the converting entity and the converted entity satisfies the definition of a partnership under this chapter immediately after the conversion
Sec. 179.76(1) - a domestic limited partnership may convert to another form of business entity if it satisfies the requirements under this section and if the conversion is permitted under the applicable law of the jurisdiction governing the organization of the business entity into which the domestic limited partnership is converting
Sec. 179.76(2) - a business entity, other than a domestic limited partnership, may convert to a domestic limited partnership if it satisfies the requirements under this section and if the conversion is permitted under the applicable law of the jurisdiction that governs the business entity
Sec. 180.1161(1)(a) - a domestic (business) corporation may convert to another form of business entity if it satisfies the requirements under this section and if the conversion is permitted under the applicable law of the jurisdiction governing the organization of the business entity into which the domestic corporation is converting
Sec. 180.1161(2)(a) - a business entity, other than a domestic corporation, may convert to a domestic corporation if it satisfies the requirements under this section and if the conversion is permitted under the applicable law of the jurisdiction that governs the business entity
Sec. 181.1161(1)(a) - a domestic (non-stock) corporation may register to be another form of business entity if it satisfies the requirements under this section and if the conversion is permitted under the applicable law of the jurisdiction governing the organization of the business entity into which the domestic corporation is converting
Sec. 181.1161(2)(a) - a business entity, other than a domestic (non-stock) corporation, may convert to a domestic corporation if it satisfies the requirements under this section and if the conversion is permitted under the applicable law of the jurisdiction that governs the business entity
Sec. 183.1207(1)(a) - a domestic limited liability company may convert to another form of business entity if it satisfies the requirements under this section and if the conversion is permitted under the applicable law of the jurisdiction governing the organization of the business entity into which the domestic limited liability company is converting
Sec. 183.1207(2)(a) - a business entity, other than a domestic limited liability company, may convert to a domestic limited liability company if it satisfies the requirements under this section and if the conversion is permitted under the applicable law of the jurisdiction that governs the business entity
Can a general partnership convert to a limited liability company with an effective date prior to July 1, 2016 and be exempt per state law (sec. 77.25(6m), Wis. Stats.)?
No. Prior to July 1, 2016 the exemption only applies when converting a business entity to another form of business entity under state law (sec. 179.76, 180.1161, 181.1161, or 183.1207, Wis. Stats).
Note: Prior to July 1, 2016 a general partnership can only register to be a limited liability partnership under state law (sec. 77.25(6d), Wis. Stats.), which provides, "Pursuant to partnerships registering as limited liability partnerships under sec. 178.40, Wis. Stats." and cannot be combined with sec. 77.25(6m), Wis. Stats.
What are some examples of required relationships for Exemption 15 corporations, Exemption 15m partnerships and Exemption 15s limited liability companies?
All Exemption 15 series require relationships to each other as spouses, lineal ascendants, lineal descendants, siblings or spouses of siblings.
Examples that meet the relationship requirements:
Sole: Sole individual (Corporation or LLC only)
Spouses: Spouse and spouse
Lineal: Parent(s) and child(ren); parent(s) and son-in-law/daughter-in-law; or grandparent(s), parent(s) and grandchild(ren). Children includes adopted children but not foster children.
Siblings: Brother(s) and sister(s)
Spouses of Siblings: Brother(s) and sister(s)-in-law; sister(s) and brother(s)-in-law; brother(s) and brother(s)-in law; and sister(s) and sister(s)-in-law
Examples that do not meet the relationship requirements:
- Aunt/uncle and nieces/nephews
Note:
Can another entity be a member of an LLC and be exempt from transfer fee per state law (sec. 77.25(15s), Wis. Stats.)?
No. Transfer fees are due on conveyances to or from entities when another entity is the member, partner, or shareholder of that entity. The use of Exemptions 15, 15m, and 15s requires the entity ownership to be a human(s). This was decided by F.M. Management Company Limited Partnership and F.M. Real Estate Company, LLC, v. Wisconsin Department of Revenue, 2007 WI App 125, Appeal No. 03-1536.
Is a quit claim deed from a general partnership to a limited liability company subject to a transfer fee?
Yes. A conveyance between a limited liability company and a general partnership is subject to transfer fee.
If a corporation (or partnership) transfers its real estate to its LLC and the ownership in the corporation (or partnership) and LLC are identical, is this exempt from fee under state law (sec. 77.25(6m), Wis. Stats.)?
No. A transfer fee is due on conveyance between separate entities with identical ownership. The "conversion" exemption is "pursuant to the conversion of a business entity to another form of business entity under state law (sec. 178.1141, 179.76, 180.1161, 181.1161, or 183.1207, Wis. Stats.), if, after the conversion, the ownership interests in the new entity are identical with the ownership interests in the original entity immediately preceding the conversion."
Also, Exemptions 15, 15m, or 15s under sec. 77.25, Wis. Stats., do not apply since this is a conveyance between entities and not between individuals who are related as family members. For additional information, refer to the Turner, d/b/a Epco, Limited Partnership of Wisconsin, v. Wisconsin Department of Revenue, 2004 WI App 82, Appeal No. 03-1517.
I am conveying property from my revocable trust (which I am the trustee) to my limited liability company (LLC), is this exempt from transfer fee?
The conveyance is exempt from transfer fee under state law (sec. 77.25(15s), Wis. Stats.), provided the conveyance was from the trustee, the trustee is a member of the LLC and all of the members are related as required by the exemption.
The successful bidder at the sheriff's sale was an LLC. The only members of the LLC are the defendants, who are related as spouses. In essence, they purchased their own house, but in the name of the LLC. The LLC was in existence prior to the commencement of the foreclosure and the sheriff's sale. Is this transfer exempt under state law (sec. 77.25(15s), Wis. Stats.), since the spouses are the only members of the Grantee (LLC)?
No. The conveyance is not exempt per state law (sec. 77.25(15s), Wis. Stats.), since the exemption requires the conveyance be for no consideration. A purchase at a Sheriff sale does not meet that requirement. Sec. 77.25(14), Wis. Stats., does not apply either because the LLC is considered a "third party" since it was not the mortgage holder. However, the transfer would be exempt under the "two step" method if the individuals are the successful bidders, take title using Exemption 14 and then convey into their LLC using (15s).
An LLC will be dissolved. The LLC owns some condo units and plans to deed a unit to each member of the LLC. The members are unrelated to each other, so they cannot use Exemption 15s. There is a mortgage on all the units held by the LLC and the individual members will take a loan out on their individual units to have the LLC's outstanding mortgage released. Is there a transfer fee due for each unit or can they use either Exemption 5 for partition or Exemption 10 to release a security or debt?
There is a transfer fee due for the conveyance of each unit. No transfer fee exemption applies to these conveyances. A transfer fee is due for each deed from the members based on each unit's fair market value.
Exemption 5 does not apply - since the definition of partition is not met. Partition is defined under state law (sec. 77.21(1k), Wis. Stats.), as "the division among several persons of real property, including noncontiguous real property, that belongs to them as co-owners." The facts do not fit within the definition of partition since the individuals do not own the real estate; the LLC owns the real estate. The individuals own the membership in the LLC which is personal property.
Exemption 10 does not apply - since there is a conveyance of real estate and not "solely to provide or release security for a debt or obligation." Exemption 10 only applies when a deed is used or serves as or release of a mortgage or lien.
Property is in a revocable living trust. The trust uses the same Social Security Number as the settlor/trustee (father). The trustee's children are the beneficiaries. The trustee now wants to convey the real estate to a limited liability company (LLC) whose only members are his children. Is there a fee due if we deed the real estate directly to the LLC?
Yes. A fee is due since the only members of the LLC are the children and not the father/trustee. Exemption 77.25(15s), Wis. Stats., requires the grantor (the trustee in this case) to be a member along with the other family members. Since the LLC is not a beneficiary under the trust, the requirements of sec. 77.25(9), Wis. Stats. are not met.
This conveyance could be exempt if the following steps are taken:
Conveys from the trust to the father who is a beneficiary under sec. 77.25(9), Wis. Stats.
Father conveys by gift to children under sec. 77.25(8), Wis. Stats.
Children convey to LLC under sec. 77.25(15s), Wis. Stats.
Note: To be exempt, the multi-step procedure must be taken as determined in other court decisions such as Turner, d/b/a Epco, Limited Partnership of Wisconsin, v. Wisconsin Department of Revenue, 2004 WI App 82, Appeal No. 03-1517.
I am selling a membership interest in my LLC where the LLC name will remain the same. The only change will be the members who own the LLC. Do I need to file a deed and pay a transfer fee since the members are not related?
Since a change in the membership interest only is considered personal property, it is not subject to a transfer return if a deed is recorded showing the members of the LLC. This is similar to selling stock in a corporation. There is no conveyance of real property and a deed does not need to be recorded.
Example:
XYZ, LLC is owned by 1, 2 and 3 and title to the property is in the name of XYZ, LLC. The members sell their membership interest to 4, 5 and 6. XYZ, LLC still has title to the property and does not have to record a deed since the real property was not conveyed. If a deed or other document is recorded to show who the current members are, you must include a statement on the document saying, "This is being recorded to indicate the current members of XYZ, LLC and is not a conveyance of real property per sec. 77.21(1), Wis. Stats."
Note: If the name of the LLC is changing then a transfer return is required and Exemption 3 applies.
AB, LLC holds title to real estate and consists of two unrelated individuals, X and Y. Y sells his membership to X. AB, LLC continues as always, but X wants to record a deed indicating AB, LLC is now a solely owned LLC. Is this transaction exempt from transfer return and fee?
Yes. Since selling membership in an LLC is personal property, nothing needs to be recorded since there is not a real property conveyance. When a deed is recorded ONLY indicating a change in membership interest (AB, LLC; consisting of X and Y, as grantor quit claims to AB, LLC; consisting of X, as grantee), it is exempt from the transfer return and fee. To exempt the recording from a transfer return, add a description stating, "This is a conveyance of a membership interest only and not a conveyance of real property, and no return or fee are due per sec. 77.21(1), Wis. Stats."
Note: If the name of the LLC is changing then a transfer return is required and Exemption 3 applies.
A married couple own real property together. They want to convey it directly into an LLC where only one of the spouses is a member. Would this be exempt from transfer fee?
No. There is a fee on one half the value of the real estate conveyed. Since one of the spouses is not a member of the LLC, they do not meet the relationship requirement and the conveyance is treated the same as with any unrelated party. However, two steps could be done: (1) The non-member spouse could convey his/her half interest to the member-spouse under Exemption 8m, and then (2) the member-spouse could convey the entire interest to the LLC under Exemption 15s.
Note: The same would apply to a conveyance from an LLC to spouses where only one is a member. Again, two steps could be done: (1) LLC to member-spouse under Exemption 15s, and then (2) spouse to spouse and spouse under Exemption 8m.
If the sole members of an LLC are "A" and "B," and are also sole partners in a partnership, would the following relationship between "A" and "B" qualify for the Exemptions 15m and 15s? The partnership wants to convey real property to the LLC. "A" has a sister "C" who is married to "D" who is the brother of "B." Since a direct conveyance from the partnership to the LLC would result in a transfer fee being imposed, regardless of the relationship of the partners and members, we are proposing a conveyance from the partnership to the individuals using Exemption 15m and then from the individuals to the LLC using Exemption 15s. Are "A" and "B" related as required for the exemptions?
As to the relationship of "A" and "B", they would not qualify under the exemptions. Since "C's" spouse "D" is the brother of "B," "A" and "B" are not considered in-laws per state law (sec. 77.25 (15s), Wis. Stats.). A brother-in-law is the brother of one's spouse. Therefore, while "A" and "D" would be in-laws, "A" and "B" would not.
"A" was the brother-in-law of "B" and both are the sole members of A B, LLC that owns real estate. "A" is now divorced from "B's" sister. Can they liquidate the LLC and exempt the conveyance from fee per state law (sec. 77.25(15s), Wis. Stats.)?
No. The divorce terminated the relationship as in-laws; therefore, Exemption 15s does not apply and a transfer fee is imposed on the property's fair market value.
Would a conveyance of real estate from an LLC with multiple members to just one member in the LLC upon liquidation, be subject to transfer fee?
If all of the members are not related as required by Exemption 15s, a transfer fee is due on the property's full value.
Contact us at eretr@wisconsin.gov.