pa transfer tax on assignment of contract

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• Apr 28, 2019

Are Assignments of Contracts In PA Subject to Additional Transfer Tax

The simple answer is YES. The Pennsylvania Department of Revenue issued a Realty Transfer Tax Bulletin titled 2008-01 which was in accord with the Rule in BAEHR BROS , (61 PA.Code 91.170). The bulletin sets out several real estate transfer scenarios and describes the tax implications of each one. It can be found at www.revenue.pa.gov.

The pertinent information for Wholesellers is Assignment of Agreements of Sale are subject to double taxation. When a party assigns a Contract of Sale to a business entity prior to closing, the assignment and the Deed from the original owners are considered to be "two separate transactions" each subject to realty transfer tax. Prior to this amendment, only the actual Deed transfer was taxed. So currently, even though there be no consideration for the assignment, the double tax will be based on the property's actual monetary value

The example provided by the PA Department of Revenue follows:

S and B enter into a Contract for the sale of real estate for $1,000,000. B gets certain approvals and then assigns the Contract to C for $2,000,000 for a total purchase price to C of $3,000,000. C gets approvals and then assigns the Contract to D for $5,000,000. for a total purchase price of $6,000,000. In this scenario, S ultimately sells the property to D and only receives $1,000,000, and the Realty Transfer Tax was only assessed on that amount. Under the new amended rules, each assignment will be subject to Realty Transfer Tax, resulting in tax being imposed on (a) the $1,000,000 transfer from S to D, (b) the $3,000,000 transfer from B to C and (c ) the $6,000,000 assignment from C to D.

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January 1, 1900

PENNSYLVANIA REALTY TRANSFER TAX UPDATE: Amended Regulations Could Result in a Double Tax on Assignments of Purchase Agreements and Like-Kind Exchanges

by Jeffrey G. DiAmico

Assignments of agreements of sale and like-kind exchanges are now potentially subject to a double tax thanks to the Pennsylvania Department of Revenue’s (“Department”) December 15, 2007 amendments to the Realty Transfer Tax Regulations (“Amended Regulations”). The double tax has been confirmed as recently as April 18, 2008 when the Department revised its Realty Transfer Tax Bulletin 2008-01, which was originally issued on January 3, 2008 (“Bulletin”). The Bulletin was issued in an attempt to provide more detailed “guidance” on like-kind exchanges, assignments of agreements of sale, and other taxable events, through a series of hypothetical scenarios and the Department’s explanation of the tax results for each scenario.

Realty Transfer Tax

The Pennsylvania Realty Transfer Tax is imposed at the rate of one percent (1%) for the State and generally one percent (1%) for the local portion of the actual consideration paid, or to be paid, for the transfer of an interest in real estate. Some larger counties/ municipalities charge a higher local rate, such as Philadelphia County which charges three percent (3%). When no consideration or nominal consideration is paid, the tax is based on the property’s actual monetary worth computed through the use of assessed value for local real estate tax purposes and adjusted to the market value. The realty transfer tax is a joint and several tax in that all parties to the transaction (seller and buyer) are responsible for the payment of the tax. Traditionally, the payment is split between both parties.

Assignments of Agreements of Sale

The amended regulations provide that where a party assigns its agreement of sale to a business entity formed just before closing, the assignment and the deed from the original owner are two separate “transactions”, each subject to realty transfer tax. This type of routine assignment is standard practice throughout the real estate industry, and until the recent amendment, was only taxed once upon the transfer of the deed. Although there may be no consideration for the assignment, the double tax will be based on the property’s actual monetary worth computed through the use of assessed value for local real estate tax purposes and adjusted to the market value.

However, if the newly formed business entity was created prior to execution of the agreement of sale, the assignment from the buyer to the new entity may not be subject to an additional transfer tax, as long as the buyer was acting as an agent and executed the agreement on the new entity’s behalf. Consequently, if you are contemplating entering into an agreement of sale with the intent of assigning the agreement to a business entity to be named later, it will be necessary to form the new business entity prior to entering into the agreement of sale; otherwise, pursuant to the Department, you will be responsible for two (2) separate realty transfer taxes.

Additionally, in addressing the issue of assignments of contracts for additional consideration, the Department will be taxing each assignmentas if they were multiple transactions. For example, in the Bulletin the Department provides the following Scenario #4: S and B enter into a contract for the sale of real estate for $1,000,000, B gets certain approvals and then assigns the contract to C for $2,000,000 for a total purchase price to C of $3,000,000, and C gets additional approvals and then assigns the contract to D for $5,000,000 for a total purchase price of $6,000,000. Under this scenario, S ultimately sells the property to D and only receives $1,000,000, and the realty transfer tax was previously only assessed on this amount. Under the new amended regulations, each assignment will be subject to realty transfer tax, resulting in a realty transfer tax being imposed on the following “transactions”: (a) the $1,000,000 transfer from S to D, (b) the $3,000,000 assignment from B to C, and (c) the $6,000,000 assignment from C to D.

Obviously, such an interpretation by the Department will result in significant additional taxes to the parties involved, unless and until they are challenged.

1031 Like-Kind Exchanges

In a traditional forward 1031 Like Kind Exchange, the taxpayer assigns its agreement of sale to a qualified intermediary (“QI”), but direct deeds the property to the buyer. In a reverse 1031 Exchange, the replacement property is acquired prior to the disposition of the relinquished property and is “parked” with an exchange accommodation titleholder (“EAT”), who “parks” the property until the taxpayer sells the relinquished property. Previously, the general position was that the QI/EAT was as an agent for the taxpayer for realty transfer tax purposes, and therefore exempt from transfer tax.

However, the amended regulations include a provision specifically stating that neither a QI nor an EAT is the agent of the taxpayer (Regulation § 91.153(d)), which means that transfers to and from a QI and/or an EAT may be subject to the realty transfer tax. Ultimately the Department clarified in Scenario #5 of its Bulletin that in a forward 1031 Exchange, it is immaterial whether the QI is an agent of the taxpayer since the QI never takes title to the property. Accordingly, the QI is viewed as a mere facilitator to the conveyance, and the assignment does not result in an additional Realty Transfer Tax. In a reverse 1031 Exchange, the EAT acquires and transfers the replacement property to the taxpayer. Since the EAT actually takes title to the property, the deed is subject to an additional Realty Transfer Tax.

The updates to the Pennsylvania Realty Transfer Tax Regulations make only one thing clear . . . there will be numerous challenges to the Department’s “guidance” in their explanation of the double tax.

You may be able to appropriately plan in advance to address many of the concerns raised by the Pennsylvania Department of Revenue’s recent Amended Regulations. If you have any questions in connection with your real estate transaction, the members of the Real Estate Division stand ready to assist you.

Jeffrey G. DiAmico is an associate of Hill Wallack LLP in the Newtown offi ce where he is a member of the Business & Commercial Practice Group .

• Privacy Policy

Real Estate Advisory: Realty Transfer Taxes: What to Know and How to Minimize their Impact

Anyone who has ever bought or sold real estate is familiar with the raft of extra expenses and “closing costs” that come along with the transaction. Among the most significant closing costs is realty transfer tax.

Realty transfer tax is imposed by both the Commonwealth of Pennsylvania and the municipality in which the real estate is located, when real estate is transferred by deed, long-term lease (greater than 30 years) or other recorded document.  Read on for a primer on the tax — and what to expect when you transfer real estate in Pennsylvania.

How much is the tax?

In Pennsylvania , 1% of the value of the real estate (based upon the actual consideration paid, the computed value of the real estate or in certain instances an appraisal) is paid to the state and typically 1% is paid to the local government. Local municipalities, however, may impose additional realty transfer taxes above the traditional 1%. For example, Pittsburgh’s realty transfer tax is 4%. Thus, when real estate is transferred within the City of Pittsburgh, 5% of the value of the real estate is paid in realty transfer tax.

The computed value of the real estate is determined by taking the real estate’s assessed value as determined by the county in which it is located and multiplying that number by the common level ratio real estate valuation factor as determined by the State Tax Equalization Board in effect at the time the conveyance document is executed. The Department of Revenue updates the common level ratio every year on July 1 st .

Who pays it?

In Pennsylvania, it is customary for the buyer and the seller to split the payment realty transfer tax, sometimes equally, but the cost to each party may be negotiated. For example, in order to entice buyers to purchase real estate in high tax municipalities, the seller may offer to pay all or most of the transfer tax in the event the sale is consummated.

What does it benefit?

In Pennsylvania, most of the tax goes to the state’s General Fund, while 15% is dedicated to the Keystone Recreation, Park and Conservation Fund.

Who’s exempt?

Certain parties and transactions are exempt from the tax, such as transfers between husband and wife, lineal family members, transfers by testate or intestate succession, or corrective or confirmatory deeds. In most situations, however, parties should expect to pay transfer tax.

A county recorder will not accept an instrument for recording without collecting payment for realty transfer tax or the attachment of a Realty Transfer Tax Statement of Value to the recorded instrument which claims an exemption to the payment of realty transfer tax.

Minimizing Your Realty Transfer Tax Burden

The statutory provisions of Pennsylvania law relating to real estate transfers are complicated. In most situations, transfer tax is unavoidable, however, Pennsylvania law provides ways to structure certain real estate transactions to avoid or minimize the amount of realty transfer taxes that must be paid upon transfer.

As a best practice for businesses and other organizations considering the acquisition or disposition of real property in Pennsylvania, a knowledgeable attorney should be part of the process from the beginning. They will provide guidance during negotiation of transaction documents and ensure that the transaction is structured to minimize the amount of real estate transfer taxes and other closing costs for which their client is responsible.

For assistance with realty transfer taxes and all real estate transactions, reach out to Meyer, Unkovic & Scott’s Derek Markle at djm@muslaw. com or (412) 456-2878.

For a printable PDF of this article,  click here.

This material is for informational purposes only.  It is not and should not be solely relied on as legal advice in dealing with any specific situation.

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• from Mc Keesport, Pennsylvania
• Member since May 14, 2012
• Mc Keesport, PA

Transfer taxes on contract assignments?

I recently had someone tell me that you have to pay transfer taxes when you assign a contract. Is this true?

I've done contract assignments and have never paid any transfer tax. In my mind, there is no transfer of ownership only transfer of interest so there should be no transfer tax. Of course, upon closing the seller and the end buyer would have to pay the tax in accordance with how the payment of transfer tax is stipulated in the agreement - the agreement that was assigned.

I'm putting this out to my trusty BiggerPockets folks to set things straight. Thanks and advance... You guys (and the BP website) are wonderful!

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Assignment and Assumption Agreement and Optional Novation (PA) | Practical Law

Assignment and Assumption Agreement and Optional Novation (PA)

Practical law standard document w-005-0552  (approx. 23 pages).

61 Pa. Code § 91.170 - Rule in Baehr Bros. v. Commonwealth, 487 Pa. 233, 409 A.2d 326 (1979)

• State Regulations

Example 1 . X enters into an agreement of sale with Y for the conveyance of real estate for $100,000. Y subsequently assigns the sales agreement to Z for $1 million. X executes a deed for the conveyance of the real estate to Z and receives $100,000. Y receives $1 million from Z for the assignment. The taxable value of the deed from X to Z is $1,100,000. X and Y are jointly and severally liable for the tax on $100,000 (See § 91.132 (c) ). Y and Z are liable for the remaining tax on $1 million.

Example 2 . D dies leaving a will that devises real estate to D's two sons, X and Y. D is also survived by another son, Z. Z wants the real estate. X and Y do not want the real estate. X and Y agree to sell the real estate to Z. D's estate could execute a deed for the real estate to X and Y as tenants in common without the imposition of tax. See § 91.193 (b)(7) . X and Y could then sell and transfer their interests in the real estate to Z without the imposition of tax. See § 91.193 (b)(6)(i)(C) . Therefore, assuming the criteria in subsection (b)(2)(i)-(iv) are met, D's estate could sell and transfer the real estate to Z without the imposition of tax on the deed of transfer even though the deed from D's estate to Z would otherwise be taxable.

Example 3 . X and Y are siblings. X has a child, Z (Y's niece/nephew). Y conveys title to real estate to Z by a document. Documents that convey title to real estate from a person's sibling to the person's child are subject to tax. Therefore, the document from Y to Z is taxable. This rule does not prohibit the imposition of tax. Although Y could have transferred the real estate to X by a document without the imposition of tax, see § 91.193 (b)(6)(i)(C) , and X could then, by a separate document, have transferred the same real estate to Z without tax, see § 91.193 (b)(6)(i)(B) . The document from Y to Z is still subject to tax because the two-step transaction would violate the rule under § 91.193 (b)(6)(ii) regarding family transfers made within 1 year.

Example 4 . X conveys title to real estate to an industrial development authority (IDA) as security for a loan of $1 million in a financing transaction in which the IDA is the lender. In turn, the IDA enters into an installment land contract with X for the real estate. The total installment payments serve as the debt service on the loan. During the term of the installment land contract, X enters into an agreement of sale with Y for the real estate. The purchase price for the real estate is $5 million. At the end of the installment sales contract, X directs the IDA to convey the real estate directly to Y. In this case, the deed from the IDA to Y will be viewed as two transfers and documents: a transfer from the IDA to X in satisfaction for the repayment of the $1 million loan and a subsequent deed for the sale of the real estate from X to Y for $5 million. The taxable value of the deed from the IDA to Y is $5 million. The taxable value is calculated by adding the taxable value of the transfer from the IDA to X and the transfer from X to Y as if each transfer had been effectuated by a document. The transfer from the IDA to X is excluded as the second leg in a financing transaction. See § 91.193 (b)(23) . Neither the IDA or X are liable for tax on this transaction. The transfer from X to Y is taxable on the sale value of $5 million. X and Y are jointly and severally liable for the tax on the $5 million sale value.

Example 5 . Same facts as in Example 4 except that there is no sale between X and Y. Rather, X is the sole owner of a subsidiary business entity. At the end of the installment sale term between the IDA and X, X directs the IDA to convey the real estate to the subsidiary business entity. The conveyance is for no or nominal consideration. Under this set of facts, the deed to the subsidiary will also be seen as a two step transaction. As in Example 4, the first step of the transaction will be the transfer of the real estate from the IDA to X. That transaction is excluded from tax. The IDA and X have no liability for that transaction. The second step of the transaction is the transfer from X to its subsidiary business entity. The second step is taxable; and because the transaction is for no or nominal consideration, the taxable value is the computed value of the real estate. X and the subsidiary business entity are jointly and severally liable for the tax on that transfer.

Example 1 . X agrees to sell and convey real estate to Z for $2 million. The conveyance can be accomplished by one, taxable document based upon the sale price of $2 million. To avoid paying tax on the full sale price of the transfer, X and Z agree to divide the conveyance into four separate transactions: D-G. Transaction D involves a deed of conveyance for a portion of the value of the real estate. Z pays $100,000 for the deed. Transactions E-G are effectuated by separate writings that each, by appearance, is nontaxable. Z pays $400,000 for transaction E and its respective writing and a total of $1.5 million for transactions F and G and their respective writings. The four transactions and writings effectuate the same outcome as would have been accomplished by the single transaction and document. Therefore, all four transactions are considered as accomplished by the single transaction and document, and each writing is taxable upon the portion of the value of the real estate that it represents. The deed of conveyance for transaction D represents the conveyance of a portion of the real estate. Z paid $100,000 for the deed. Therefore, its taxable value is $100,000. Transactions E, F and G and the associated writings effectuated the transfer of the remaining portion of the real estate. Because Z paid $400,000 for the writing under transaction E, the taxable value of the writing is $400,000. There was no allocation of the purchase price for transactions F and G and the associated writings. Therefore, the remaining portion of the real estate value that has not been allocated, that is $1.5 million, is divided equally, $750,000 each, between the writings for transactions F and G.

Example 2 . X is a land developer and is the sole owner of business entity 1 and 2.

X has business entity 1 purchase vacant real estate. Realty Transfer Tax is paid on the document of transfer for the real estate. X then has business entity 1 lease the real estate under a short term lease (less than 30 years) to business entity 2. Business entity 2 makes $10 million worth of improvements to the real estate. Business entity 1 remains the owner of the underlying real estate and business entity 2 remains the owner of the improvements.

X then enters into an agreement with Y for the sale of the real estate and improvements for $15 million. The agreement provides that X will have business entity 1 convey its ownership in the underlying real estate to Y for a sale price of $2 million. Business entity 1 and Y effectuate the transfer of the underlying real estate and pay realty transfer tax on the deed of conveyance based upon the $2 million sale value.

The agreement also provides that X will have business entity 2 assign its lessee interest in the short term lease to Y for the remaining $13 million sale price. No tax is paid on the assignment of the lessee interest. Y then terminates the lease resulting in a merger of the real estate and improvements in Y. Y has, in substance, purchased both the underlying real estate and improvements. By breaking the simple sale of the underlying real estate and improvements into multiple transactions, X and Y have attempted to avoid paying tax on the full sale price of $15 million. In this case, the multiple transactions will be viewed as a single transaction. Therefore, the total taxable value of the single transaction is the $15 million sale price.

The provisions of this § 91.170 adopted under section under section 1107-C of the Tax Reform Code of 1971 ( 72 P. S. § 8107 -C).

State regulations are updated quarterly; we currently have two versions available. Below is a comparison between our most recent version and the prior quarterly release. More comparison features will be added as we have more versions to compare.

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§ 91.170.  Rule in Baehr Bros. v. Commonwealth , 487 Pa. 233, 409 A.2d 326 (1979).  (a)   General rules .    (1)  A document will be excludible from tax if each of the following requirements is satisfied:      (i)   The document stands in the place of two or more other writings.      (ii)   Each of the writings for which the document stands would be excludible from tax under this article and effective notwithstanding the insolvency, bankruptcy or other legal disability of the signatories thereto.      (iii)   Title to the affected real estate would not revert or be in any way impaired or encumbered by reason of the recordation of the writings described in subparagraphs (i) and (ii).    (2)  Separate transfers of a greater estate and a lesser estate in real property will be taxed as a single transfer of both estates if the transactions are entered into in contemplation of a merger thereof.    (3)  Separate transfers of an interest in timber, coal, oil, gas or other appurtenance to real estate and the real estate to which the interest is appurtenant will be taxed as a single transfer of both interests if the transactions are entered into in contemplation of their coinciding and meeting in the same person.  (b)   Combining transactions . When a single document represents, in substance, two or more transfers of title to real estate, the document will be viewed as a series of separate transfers and documents.    (1)  The tax due on the single document will be the same as the sum of tax that would be due had each transfer been effectuated by a document. The tax liability for the single document will be allocated among the parties as if each transfer had been effectuated by a document.    (2)  If each separate transfer in the series is excluded from tax, the single document is excluded from tax. This rule only applies if the following apply:      (i)   Each transfer and document in the series could have been accomplished and executed individually under the laws of the Commonwealth or the United States.      (ii)   Completing the series of transfers and documents would result in the same transfer accomplished by the single document.      (iii)   The series of transfers and documents have not been reduced to one transfer and document in order to avoid a legal, contractual, economic or personal detriment associated with completing the series of transfers and documents.      (iv)   The series of transfers and documents would have been completed without the benefit of this rule.      (v)   The application of §  91.193(b)(6)(ii) (relating to excluded transactions) will not be avoided by the application of this rule.   Example 1 . X enters into an agreement of sale with Y for the conveyance of real estate for $100,000. Y subsequently assigns the sales agreement to Z for $1 million. X executes a deed for the conveyance of the real estate to Z and receives $100,000. Y receives $1 million from Z for the assignment. The taxable value of the deed from X to Z is $1,100,000. X and Y are jointly and severally liable for the tax on $100,000 (See §  91.132(c)). Y and Z are liable for the remaining tax on $1 million.   Example 2 . D dies leaving a will that devises real estate to D’s two sons, X and Y. D is also survived by another son, Z. Z wants the real estate. X and Y do not want the real estate. X and Y agree to sell the real estate to Z. D’s estate could execute a deed for the real estate to X and Y as tenants in common without the imposition of tax. See §  91.193(b)(7). X and Y could then sell and transfer their interests in the real estate to Z without the imposition of tax. See §  91.193(b)(6)(i)(C). Therefore, assuming the criteria in subsection (b)(2)(i)—(iv) are met, D’s estate could sell and transfer the real estate to Z without the imposition of tax on the deed of transfer even though the deed from D’s estate to Z would otherwise be taxable.   Example 3 . X and Y are siblings. X has a child, Z (Y’s niece/nephew). Y conveys title to real estate to Z by a document. Documents that convey title to real estate from a person’s sibling to the person’s child are subject to tax. Therefore, the document from Y to Z is taxable. This rule does not prohibit the imposition of tax. Although Y could have transferred the real estate to X by a document without the imposition of tax, see §  91.193(b)(6)(i)(C), and X could then, by a separate document, have transferred the same real estate to Z without tax, see §  91.193(b)(6)(i)(B). The document from Y to Z is still subject to tax because the two-step transaction would violate the rule under §  91.193(b)(6)(ii) regarding family transfers made within 1 year.   Example 4 . X conveys title to real estate to an industrial development authority (IDA) as security for a loan of $1 million in a financing transaction in which the IDA is the lender. In turn, the IDA enters into an installment land contract with X for the real estate. The total installment payments serve as the debt service on the loan. During the term of the installment land contract, X enters into an agreement of sale with Y for the real estate. The purchase price for the real estate is $5 million. At the end of the installment sales contract, X directs the IDA to convey the real estate directly to Y. In this case, the deed from the IDA to Y will be viewed as two transfers and documents: a transfer from the IDA to X in satisfaction for the repayment of the $1 million loan and a subsequent deed for the sale of the real estate from X to Y for $5 million. The taxable value of the deed from the IDA to Y is $5 million. The taxable value is calculated by adding the taxable value of the transfer from the IDA to X and the transfer from X to Y as if each transfer had been effectuated by a document. The transfer from the IDA to X is excluded as the second leg in a financing transaction. See §  91.193(b)(23). Neither the IDA or X are liable for tax on this transaction. The transfer from X to Y is taxable on the sale value of $5 million. X and Y are jointly and severally liable for the tax on the $5 million sale value.   Example 5 . Same facts as in Example 4 except that there is no sale between X and Y. Rather, X is the sole owner of a subsidiary business entity. At the end of the installment sale term between the IDA and X, X directs the IDA to convey the real estate to the subsidiary business entity. The conveyance is for no or nominal consideration. Under this set of facts, the deed to the subsidiary will also be seen as a two step transaction. As in Example 4, the first step of the transaction will be the transfer of the real estate from the IDA to X. That transaction is excluded from tax. The IDA and X have no liability for that transaction. The second step of the transaction is the transfer from X to its subsidiary business entity. The second step is taxable; and because the transaction is for no or nominal consideration, the taxable value is the computed value of the real estate. X and the subsidiary business entity are jointly and severally liable for the tax on that transfer.  (c)   Splitting transactions . If a series of two or more transactions and associated writings, one or more of which would not be subject to tax if considered separately, are completed instead of a single transaction and taxable document, the series of transactions and writings will be considered as if completed by the single transaction and document. Therefore, each individual writing in the series of transactions and writings will be subject to tax upon a portion of the value of the title to real estate conveyed in respect of the transactions and writings. If it is not possible to determine how to apportion all or part of the taxable value between two or more of the writings, the value for which apportionment cannot be determined shall be divided equally among all writings that do not have an apportioned value. This rule only applies if:    (1)  The parties to the single transaction and document are identical to the parties to the series of transactions and writings. For purposes of this section, parties are identical if they are the same person or the person’s affiliate. The term ‘‘affiliate’’ in this section has the same meaning as the term ‘‘grantor’s affiliate’’ in §  91.131 (relating to definitions).    (2)  Completing the series of transactions and writings results in the same outcome that would have resulted from completing the single transaction and document.    (3)  The primary purpose for completing the series of transactions and writings rather than completing the single transaction and document is the avoidance of tax.   Example 1 . X agrees to sell and convey real estate to Z for $2 million. The conveyance can be accomplished by one, taxable document based upon the sale price of $2 million. To avoid paying tax on the full sale price of the transfer, X and Z agree to divide the conveyance into four separate transactions: D—G. Transaction D involves a deed of conveyance for a portion of the value of the real estate. Z pays $100,000 for the deed. Transactions E—G are effectuated by separate writings that each, by appearance, is nontaxable. Z pays $400,000 for transaction E and its respective writing and a total of $1.5 million for transactions F and G and their respective writings. The four transactions and writings effectuate the same outcome as would have been accomplished by the single transaction and document. Therefore, all four transactions are considered as accomplished by the single transaction and document, and each writing is taxable upon the portion of the value of the real estate that it represents. The deed of conveyance for transaction D represents the conveyance of a portion of the real estate. Z paid $100,000 for the deed. Therefore, its taxable value is $100,000. Transactions E, F and G and the associated writings effectuated the transfer of the remaining portion of the real estate. Because Z paid $400,000 for the writing under transaction E, the taxable value of the writing is $400,000. There was no allocation of the purchase price for transactions F and G and the associated writings. Therefore, the remaining portion of the real estate value that has not been allocated, that is $1.5 million, is divided equally, $750,000 each, between the writings for transactions F and G.   Example 2 . X is a land developer and is the sole owner of business entity 1 and 2.  X has business entity 1 purchase vacant real estate. Realty Transfer Tax is paid on the document of transfer for the real estate. X then has business entity 1 lease the real estate under a short term lease (less than 30 years) to business entity 2. Business entity 2 makes $10 million worth of improvements to the real estate. Business entity 1 remains the owner of the underlying real estate and business entity 2 remains the owner of the improvements.  X then enters into an agreement with Y for the sale of the real estate and improvements for $15 million. The agreement provides that X will have business entity 1 convey its ownership in the underlying real estate to Y for a sale price of $2 million. Business entity 1 and Y effectuate the transfer of the underlying real estate and pay realty transfer tax on the deed of conveyance based upon the $2 million sale value.  The agreement also provides that X will have business entity 2 assign its lessee interest in the short term lease to Y for the remaining $13 million sale price. No tax is paid on the assignment of the lessee interest. Y then terminates the lease resulting in a merger of the real estate and improvements in Y. Y has, in substance, purchased both the underlying real estate and improvements. By breaking the simple sale of the underlying real estate and improvements into multiple transactions, X and Y have attempted to avoid paying tax on the full sale price of $15 million. In this case, the multiple transactions will be viewed as a single transaction. Therefore, the total taxable value of the single transaction is the $15 million sale price. Authority    The provisions of this §  91.170 adopted under section under section 1107-C of the Tax Reform Code of 1971 (72 P. S. §  8107-C). Source    The provisions of the §  91.170 adopted December 14, 2007, effective December 15, 2007, 37 Pa.B. 6516. No part of the information on this site may be reproduced for profit or sold for profit. This material has been drawn directly from the official Pennsylvania Code full text database. Due to the limitations of HTML or differences in display capabilities of different browsers, this version may differ slightly from the official printed version.