Real Estate Transfer Fee Common Questions

Land Contracts

  1. 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?
  2. How will the satisfaction of land contracts that are dated prior to September 1, 1981 ($1/thousand, 1 mill) be reported on the eRETR? The eRETR automatically calculates at $3/thousand, 3 mills). Will a waiver (PE-500w) be required?
  3. Does a vendee's assignment of land contract for collateral only require a transfer return?
  4. 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?
  5. What is the measure of the fee when a vendee sells their interest in an original land contract for $100,000 and there is a balance owing on the land contract in the amount of $100,000?
  6. A city sells property to an individual on a land contract and the transfer return (required since the transferor is the lender) was 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 as 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?
  7. 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?
  8. 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?
  9. When was the deferral of transfer fees changed on land contracts?
  10. When is a land contract exempt from fee?
  11. Can Exemption (8) be used on a land contract between parent and child?
  12. Is a deed in satisfaction of a land contract caused by will, descent or survivorship exempt from fee?
  13. Is a return needed when there is an amendment of a land contract reflecting an increased interest rate or longer term where the fee was paid when the land contract was recorded?
  14. Pursuant to a divorce decree, the husband is to give his vendee's interest in the land contract to his wife. Is a transfer fee due on the original land contract even if the divorce conveyance is exempt?
  15. If a vendor and vendee of an original land contract sign their respective interest over to a third party, is there a fee due?
  16. There are 2 vendees in a land contract and 1 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?

Lease

  1. Can a Register of Deeds accept a lease (assignment of lease) regarding a telephone cell tower and no explanation as to the length of the lease being assigned without a transfer return?
  2. A hospital built a day care center on property it owns. Now, they are selling just the building, and the new owners are going to lease the land. Is the sale of the building going to be subject to transfer return and fee?
  3. For transfer fee purposes, a fee is due for a lease of 99 years or more, pursuant to 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?
  4. 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?
  5. If you file a "Termination of Lease" for a lease that is less than 99 years, do you need a transfer return?
  6. If a condominium is selling its units as a 75 year lease for $100,000, is a transfer return and fee due?
  7. Renter A entered into a ground lease with Owner B for 50 years. B constructed a building on this land. 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?

Legal Description

  1. Is there any way to get the symbols to appear correctly into the eRETR Legal description box?

Life Estates(LLC)

  1. When gifting property to your children and grandchildren while keeping a life estate, is there a formula to calculate the value of the property being conveyed?
  2. If a grandmother is gifting her home to her granddaughter and reserving a life estate, is this exempt from fee per sec. 77.25(8) or (13), Wis. Stats.?
  3. Is there a fee due on the purchase of a life estate?
  4. Is a fee due on the repurchase of a life estate by a condominium association?

Limited Liability Company (LLC)

  1. Is conveying property from my revocable trust of which I am the trustee to my limited liability company (LLC) exempt from transfer fee?
  2. The successful bidder at the sheriff's sale was an LLC. The only members of the LLC are the defendants related as husband and wife. 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. Can you tell me if this transfer is exempt pursuant to § 77.25(15s) because the Grantors are the only members of the Grantee?
  3. An LLC is going to be dissolved. The LLC owns some condo units and plans to deed each member of the LLC a unit. 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 in order 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?
  4. Property is in a revocable living trust. The trust uses the same Social Security Number as the settlor/trustee. His children are the beneficiaries. The trustee, (father), 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?
  5. Can another entity be a member of a LLC and be exempt from transfer fee per sec. 77.25(15s), Stats?
  6. Can a general partnership convert to a limited liability company and be exempt per sec. 77.25(6m), Stats?
  7. When selling a membership interest in your LLC where the LLC name will remain the same and the only change will be the members who own the LLC, do you need to file a deed and pay a transfer fee since the members are not related?
  8. If a corporation transfers its real estate to its LLC and the ownership in the corporation and LLC are identical, is this exempt from fee under sec. 77.25(6m), Wis. Stats.?
  9. There is a limited liability company (LLC) with two unrelated members, with the real estate titled in the LLC's name. One member is having his interest redeemed by the LLC, and we want to record a deed from him to the LLC to avoid a possible cloud on the title. The LLC will continue as a one member LLC. Is this deed exempt from transfer return and fee?
  10. Would a married couple (H & W) owning real property together which they want to convey directly INTO an LLC, whose sole member is W, be exempt from transfer fee when the real property comes OUT of that same LLC to both of them?
  11. AB, LLC holds title to real estate and consists of 2 unrelated individuals, X and Y. Y sells his membership to X. AB, LLC will continue as always, but X wants to record a deed indicating AB, LLC is now a solely owned LLC. Is this transaction subject to transfer fee?
  12. If the sole members of an LLC are "A" and "B", who are unrelated 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 (15m) and then from the individuals to the LLC using (15s). Are "A" and "B" related as required for the exemptions?
  13. "A" was the brother-in-law of "B" and both of them 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 sec. 77.25(15s), Wis. Stats.?
  14. What are some examples of required relationships for Exemption (15) for corporations, (15m) for partnerships and (15s) for limited liability companies?
  15. Two single-member LLC's hold title as tenants in common to 6 condos and are interested in splitting up these properties.  Is a transfer fee due on the value of each condo, or does Exemption (5), "on partition", apply?  LLC A will convey to LLC B units 3, 4 & 9 and LLC B will convey to LLC A units 10, 11 & 12, plus $11,000 cash.
  16. Can a conveyance from a corporation or partnership to an LLC whose members are the same as the shareholders in the corporation or the partners in the partnership be exempt from transfer fees?
  17. 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 fees?

Land Contracts

  1. 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?

    The value that needs to be on the return is the original land contract value. The real estate was conveyed on the land contract, not the satisfaction.

  2. How will the satisfaction of land contracts that are dated prior to September 1, 1981 ($1/thousand, 1 mill) be reported on the eRETR? The eRETR automatically calculates at $3/thousand, 3 mills). Will a waiver (PE-500w) be required?

    The eRETR allows for the .001 mil rate land contract so no waiver will be needed. The following describes how to complete the eRETR.

    On the "Transfer"page of the eRETR:

    • Select "Deed in satisfaction of land contract" and also "Other." Explain in the "Other" field that the land contract is dated mm/dd/yyyy and requires a one mill payment.

    On the "Fee Computation" page of the eRETR:

    The total value of real estate transferred = value of original land contract

    The value subject to fee = 1/3 the value of the original land contract. The fee will calculate to the amount based upon 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).

  3. Does a vendee's assignment of land contract for collateral only require a transfer return?

    Yes. Exemption 10 applies.

  4. 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. First there is a fee on the original land contract (or any instrument evidencing the existence of a land contract) and secondly the sale and obligation of payment on the assignment of a vendee's interest in a land contract is subject to transfer fee per sec. 77.21(1), Wis. Stats., and Tax 15.04, Wis. Adm. Code.

  5. What is the measure of the fee when a vendee sells their interest in an original land contract for $100,000 and there is a balance owing on the land contract in the amount of $100,000?

    The fee is based upon $200,000 as the amount of the full actual consideration paid there for or to be paid, including the amount of any lien or liens thereon per sec. 77.21(3), Wis. Stats.

  6. A city sells property to an individual on a land contract and the transfer return (required since the transferor is the lender) was 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 as 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. Since the original vendor was a governmental agency and exemption sec. 77.25(2), Wis. Stats., was properly used, the satisfaction is exempt per sec. 77.25(17), Wis. Stats., regardless of the current vendor.

  7. 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 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.

  8. 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 sec. 77.25(17), Wis. Stats., would apply. Exemption 17 would apply 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, you should 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, sec. Tax 15.04(5), Wis. Adm. Code. Example: A 40-acre parcel was sold under an original land contract for $80,000. A deed was issued in partial satisfaction of this land contract covering 5 acres. The fee is based upon 5/40 of $80,000 or $10,000. Enter zero (0) in the box "Value subject to fee." You may then select Exemption (17) and enter the document number of the recorded land contract. Note: If the land contract was recorded prior to August 1, 1992 and the fee was deferred, then a transfer fee would be due and you should enter the same value as shown in the box "Total value subject to fee".

  9. When was the deferral of transfer fees changed on land contracts?

    Budget Bill 991 Wisconsin Act 269, repealed the deferral of transfer fees on land contracts per 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.

  10. When is a land contract exempt from fee?
    • When recording a deed in satisfaction when the fee has been previously paid either on an amendment or on the original land contract.  Exemption (17) is used.
    • A deed from the vendee back to the vendor under foreclosure or in lieu of foreclosure, exempt per Exemption (14).
    • Exemption (1) is used when recording a deed in satisfaction of a land contract dated prior to December 17, 1971.
  11. 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.

  12. 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.

  13. Is a return needed when there is an amendment of a land contract reflecting an increased interest rate or longer term where the fee was paid when the land contract was recorded?

    No. However, the amendment should include the recording data of the original land contract for verification that a fee was paid.  NOTE: If the value changes, a transfer return is required.

  14. Pursuant to a divorce decree, the husband is to give his vendee's interest in the land contract to his wife. Is a transfer fee due on the original land contract even if the divorce conveyance is exempt?

    No. Any conveyance between husband and wife pursuant to divorce is exempt under sec. 77.25 (8m) Wis. Stats.

  15. If a vendor and vendee of an original land contract sign their respective interest over to a third party, is there a fee due?

    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.

  16. There are 2 vendees in a land contract and 1 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 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, 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 their interest. The grantee is the new vendee.

Lease

  1. Can a Register of Deeds accept a lease (assignment of lease) regarding a telephone cell tower and no explanation as to the length of the lease being assigned without a transfer return?

    Depends on the type of lease if a return is needed or not:

    • Farmer Brown gives a 50 year lease to Big Phone Co.: No return is required since the lease is for less than 99 years. If the wording on the recorded lease states "lease less than 99 years", no return or fee is due per ss. 77.21(1), Wis. Stats. If the lease is for 99 years or more, then a return and fee are due. Big Phone Co. now 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 per 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 equal to or greater than 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 sec. 77.21(1), Wis. Stats.
  2. A hospital built a day care center on property it owns. Now, they are selling just the building, and the new owners are going to lease the land. Is the sale of the building going to be subject to transfer return and fee?

    Yes. The sale of the building will require a transfer return and fee. The building on leased land is defined as real estate per 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 will also be 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.

  3. For transfer fee purposes, a fee is due for a lease of 99 years or more, pursuant to 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 sec. 77.21(1), Wis. Stats. If the original lease is 50 years, that lease expires and they decide to renew for another 50 years this would be considered to be less than 99 years and be exempt from transfer return and the transfer fee. Language on the recorded document such as the following must be stated that "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.

  4. 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 thereof is defined as a passage of ownership interest in real property per sec. 77.21(1), Wis. Stats., and requires a transfer return and fee. A transfer fee would be due per sec. 77.21(3), Wis. Stats., unless expressly exempted under sec. 77.25, Wis. Stats.

  5. 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 the 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."

  6. 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 sec. 77.21(1), Wis. Stats. The document recorded should have a statement included on its face such as: "This is a lease less than 99 years and is not subject to return per sec. 77.21(1), Wis. Stats." The filer, not the Register of Deeds must exempt the document.

  7. Renter A entered into a ground lease with Owner B for 50 years. B constructed a building on this land. 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

Legal Descriptions

  1. Is there any way to get the symbols to appear correctly into the eRETR Legal description box?

    The Microsoft symbols (from Microsoft Word) that you can insert into a document will NOT carryover properly in the eRETR legal description. Symbols should be typed using "Alt-Key Codes". Symbols can be created by holding the Alt key while typing "34" or "39" on the number key pad and a ' or a " will appear. To type the 'degree' symbol for legal descriptions, press and hold the Alt key while typing "0176" on the number keypad and a ° will appear. These "Alt-Key Codes" should work with any software application.

Life Estates

  1. When gifting property to your children and grandchildren while keeping a life estate, is there a formula to calculate the value of the property being conveyed?

    The value that needs to be on the return is the fair market value of the property actually being transferred. This is calculated by taking the fair market value of the property and multiplying it by a factor as determined in the table is the Wisconsin Department of Health and Family Services Medicaid Eligibility Handbook found at,http://www.emhandbooks.wi.gov/meh-ebd/.  The value gifted to the children would be exempt from the transfer fee per sec. 77.25(8), Wis. Stats., while the value gifted to the grandchildren would be subject to the transfer fee. On the eRETR "Fee computation" page, enter the total value in "Total value of real estate transferred" as calculated using the tables referred to above, and in the "Value subject to fee" enter the calculated value to the grandchildren.  Select "(8)" in the exemption selection box.

  2. If a grandmother is gifting her home to her granddaughter and reserving a life estate, is this exempt from fee per sec. 77.25(8) or (13), Wis. Stats.?

    No. Exemption (8) is between parent and child, not grandparent and grandchild. A transfer fee is due on the fair market value of the property less the value of the life estate. Unless the actual value of the real estate conveyed is less than $100.00, Exemption (13) does not apply.

  3. Is there a fee due on the purchase of a life estate?

    Yes. The initial sale of the life estate is subject to a transfer fee based upon the sales price.

  4. Is a fee due on the repurchase of a life estate by a condominium association?

    Yes. The fee is based upon the consideration paid or to be paid on the date of the repurchase. The fee is paid at the time the instrument is recorded terminating the life estate.

Limited Liability Company (LLC)

  1. Is conveying property from my revocable trust of which I am the trustee to my limited liability company (LLC) exempt from transfer fee?

    The conveyance would be exempt from fee under sec. 77.25(15s), Wis. Stats., provided the conveyance was from the trustee and that the trustee was a member of the LLC as an individual representing himself/herself and not a member as the trustee indicating the trust was a member. Another entity, including a trust, cannot be a member of an LLC under the exemption as it requires only humans can be members. The use of exemptions under sections 77.25(15), (15m) and (15s), Wis. Stats., require the entity ownership to be owned by humans.

  2. The successful bidder at the sheriff's sale was an LLC. The only members of the LLC are the defendants related as husband and wife. 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. Can you tell me if this transfer is exempt pursuant to § 77.25(15s) because the Grantors are the only members of the Grantee?

    The conveyance is not exempt per sec. 77.25(15s), Wis. Stats., since the exemption requires the conveyance to be for no consideration. A purchase at a Sheriff sale does not meet that requirement. Nor does sec. 77.25(14), Wis. Stats., apply since the LLC would be considered a "third party." since the LLC was not the mortgage holder. However, it would be exempt under the "2 step" method if the individuals were to be the successful bidders and take title using Exemption (14) and then convey into their LLC using (15s).

  3. An LLC is going to be dissolved. The LLC owns some condo units and plans to deed each member of the LLC a unit. 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 in order 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?

    No transfer fee exemption applies to these conveyances. A transfer fee is due on each of the deeds to the members based upon the fair market value of each unit. Exemption (5) does not apply as the definition of partition is not met. Partition is defined under 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 property. 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." Exemption (10) only applies when a deed is used or serves as a mortgage or lien.

  4. Property is in a revocable living trust. The trust uses the same Social Security Number as the settlor/trustee. His children are the beneficiaries. The trustee, (father), 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, not the father/trustee. Exemption 77.25(15s), Wis. Stats., requires that the grantor (the trustee in this case) be a member along with the other family members. The primary beneficiaries, his children  are still living, so the LLC is not the beneficiary under sec. 77.25(9), Wis. Stats. This conveyance could be exempt if the following steps were taken:

    • Convey from the trust to the father who is the beneficiary under sec. 77.25(9), Wis. Stats.
    • Father conveys by gift to children under exemption sec. 77.25(8), Wis. Stats.
    • Children convey to LLC.

    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. The Wisconsin Tax Appeals Commission decision may be accessed at, http://www.wisbar.org/res/txap/2002/01t102.htm.

  5. Can another entity be a member of a LLC and be exempt from transfer fee per sec. 77.25(15s), 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 humans. 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. 03-153s. This decision can be found at: http://www.wisbar.org/res/capp/2003/03-1356.htm.

  6. Can a general partnership convert to a limited liability company and be exempt per sec. 77.25(6m), Stats?

    No. The exemption applies only to a conveyance pursuant to the conversion of a business entity to another form of business entity under sec. 179.76, 180.1161, 181.1161, or 183.1207.

    • Sec. 179.76(1), Wis. Stats. 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 that governs the organization of the business entity into which the domestic limited partnership is converting.
    • Sec. 180.1161(1)(a), Wis. Stats. A domestic 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 that governs the organization of the business entity into which the domestic corporation is converting.
    • Sec. 181.1161(1)(a), Wis. Stats. A domestic 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 that governs the organization of the business entity into which the domestic corporation is converting.
    • Sec.183.1207(1)(a), Wis. Stats. 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 that governs the organization of the business entity into which the domestic limited liability company is converting.

    A general partnership can only convert to a limited liability partnership under sec. 77.25(6d), Wis. Stats., with 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.

  7. When selling a membership interest in your LLC where the LLC name will remain the same and the only change will be the members who own the LLC, do you need to file a deed and pay a transfer fee since the members are not related?

    A change in the membership interest only is considered personal property and not subject to a transfer return if a deed is recorded showing the members of the LLC. This is similar to selling of stock in a corporation in that there is not a 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 a deed does not have to be recorded since the real property was not conveyed. Whether or not you file a deed to show who the members are is a business decision the members will have to decide upon.  If a deed or other document is recorded, language on the document stating something to the effect that "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."

  8. If a corporation transfers its real estate to its LLC and the ownership in the corporation and LLC are identical, is this exempt from fee under sec. 77.25(6m), Wis. Stats.?

    No. A transfer fee is due on conveyance between separate entities having the same identical ownership. The exemption is for a "conversion" in which, for instance, the only change is the form of the same entity from a corporation to an LLC. The "conversion" exemption is "pursuant to the conversion of a business entity to another form of business entity under sec. 179.76, 180.1161, 181.1161, or 183.1207, 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, the use of any of the three (15), (15m), or (15s) exemptions under sec. 77.25, Wis. Stats., would not apply since this is a conveyance between entities and not between individuals who are related as family members. 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, for additional information. The Wisconsin Tax Appeals Commission decision may be accessed at, http://www.wisbar.org/res/txap/2002/01t102.htm.

  9. There is a limited liability company (LLC) with two unrelated members, with the real estate titled in the LLC's name. One member is having his interest redeemed by the LLC, and we want to record a deed from him to the LLC to avoid a possible cloud on the title. The LLC will continue as a one member LLC. Is this deed exempt from transfer return and fee?

    Yes. There is no interest in real property conveyed, only the membership interest in the LLC, which is personal property. The deed should list the grantor as the LLC's name and as each member's name. The grantee should be shown as the LLC and the remaining member. To exempt the recording from a transfer return, a description should be added to the deed explaining "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." If you prefer to use a transfer return, Exemption (3) may be used on the "Fee Computation" page. The document number of the deed by which the LLC took title of the real estate originally will also need to be listed on the "Fee Computation" page.

  10. Would a married couple (H & W) owning real property together which they want to convey directly INTO an LLC, whose sole member is W, be exempt from transfer fee when the real property comes OUT of that same LLC to both of them?

    No, there is a fee on one half of the value. Since H is not a member of the LLC, he does not meet the relationship requirement and the conveyance is treated the same as from any unrelated entity. However, the LLC could convey to W and be exempt per sec. 77.25(15s), Wis. Stats. Then W could convey one half interest to H and be exempt per sec. 77.25(8m), Wis. Stats.

  11. AB, LLC holds title to real estate and consists of 2 unrelated individuals, X and Y. Y sells his membership to X. AB, LLC will continue as always, but X wants to record a deed indicating AB, LLC is now a solely owned LLC. Is this transaction subject to transfer fee?

    No. The selling of membership in a LLC is personal property and 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), this is exempt from the transfer return and the fee. To exempt the recording from a transfer return, a description should be added to the deed explaining "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." This section defines conveyances. If you prefer to use a transfer return, Exemption (3) may be used on the "Fee Computation" page.   The document number of the deed by which the LLC took title of the real estate originally will also need to be listed on the "Fee Computation" page.

  12. If the sole members of an LLC are "A" and "B", who are unrelated 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 (15m) and then from the individuals to the LLC using (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" husband "D" is the brother of "B", "A" and "B" are not considered in-laws per § 77.25 (15s) 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.

  13. "A" was the brother-in-law of "B" and both of them 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 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 fair market value of the property.

  14. What are some examples of required relationships for Exemption (15) for corporations, (15m) for partnerships and (15s) for limited liability companies?

    All Exemption (15) series require relationships to each other as spouses, lineal ascendants, lineal descendants, siblings or spouses of siblings. Examples would be as follows:

    • Sole: Sole individual (Corporation or LLC only)
    • Spouses: Husband and wife
    • Lineal: Parent(s) and child(ren), parent(s) and son-in-law/daughter-in-law, grandparent(s), parent(s) and grandchild(ren)
    • Siblings: Brother(s) and sister(s)
    • Spouses of Siblings: Brother(s) and sister(s)-in-law/brother(s) and brother(s)-in-law sister(s) and sister(s)-in-law/sister(s) and brother(s)-in-law brother(s)-in-law and sister(s)-in-law or brother(s)-in-law

    Any combination of the above relationships would qualify.
    The conveyance can be to or from the entity.

    Note:

    • Conveyances from a corporation have an additional requirement of having to have been owned by the corporation for three or more years.
    • Uncles, aunts, nieces and nephews do not meet the above relationship requirements.
  15. Two single-member LLC's hold title as tenants in common to 6 condos and are interested in splitting up these properties.  Is a transfer fee due on the value of each condo, or does Exemption (5), "on partition", apply?  LLC A will convey to LLC B units 3, 4 & 9 and LLC B will convey to LLC A units 10, 11 & 12, plus $11,000 cash.

    The co-owners can be individuals, entities or a combination of either. Here the two entities (LLCs) are going to divide the 6 condo units between them. Exemption (5) for partition applies up to the point where the partition is equal, thus the cash boot of $11,000 is subject to transfer fee. The party receiving the cash boot is the party that owes the transfer fee because they are giving up more than they are receiving. They would use Exemption (5) and there would be a fee due on the cash boot of $11,000.

  16. Can a conveyance from a corporation or partnership to an LLC whose members are the same as the shareholders in the corporation or the partners in the partnership be exempt from transfer fees?

    No. A fee is due on the full value of the real property.

  17. 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 fees?

    Yes, if the members are not related as required by exemption (15s). The transfer fee would be due on the full value of the real property.

FOR MORE INFORMATION CONTACT:

WISCONSIN DEPARTMENT OF REVENUE
Equalization Bureau
P.O. Box 8971 MS 6-97
Madison, WI 53708-8971
Phone: (608) 264-6885 or (608) 266-1594
Fax: (608) 264-6897
E-Mail Additional Questions to eretr@revenue.wi.gov

March 21, 2014