690 A.2d 902 | Conn. Super. Ct. | 1996
The single issue in these cases is whether a conveyance of real estate to a corporation wholly owned by the grantor is subject to a real estate conveyance tax based on the amount stated in the deed or on the value of the interest being conveyed. Both cases involve a transfer of real estate to a corporation wholly owned by the grantor, followed immediately *355 thereafter by a conveyance from the corporation to a nonrelated third party for the full value of the property.
In the first case, the plaintiff, Stanley Bjurback, the sole shareholder of Scandesign Homes, Inc., a Connecticut construction corporation, conveyed a subdivision lot and house in the city of Danbury by quitclaim deed to Scandesign Homes, Inc. for one dollar stated consideration. On the next day, Scandesign Homes, Inc. transferred its interest by warranty deed to Isauro Fernandez and Tracy Meyer Fernandez for the stated price of $280,000. Scandesign Homes, Inc. paid a conveyance tax of $1400 to the state, and $308 to the city of Danbury pursuant to General Statutes §
In the second case, the plaintiff, Landsiedel Estate Partnership, the sole shareholder of First Landsiedel Corp., a Connecticut construction corporation, conveyed a subdivision house and lot in the city of Danbury by quitclaim deed to First Landsiedel Corp. for one dollar stated consideration. On the same day, First Landsiedel Corp. conveyed the same premises by warranty deed to Barbara Kiselak for $115,000. First Landsiedel Corp. paid a real estate conveyance tax of $575 to the state of Connecticut and $126.50 to the city of Danbury pursuant to §
The defendant commissioner of revenue services (commissioner) assessed a real estate conveyance tax against Bjurback in the amount of $1400, and a derivative tax of $308 to the city of Danbury, plus interest and penalty, for the transfer from Bjurback to Scandesign Homes, Inc.
The commissioner assessed a real estate conveyance tax against Landsiedel Estate Partnership in the amount *356 of $317.70, plus interest and penalty, for the transfer of the property from Landsiedel Estate Partnership to First Landsiedel Corp. For purposes of this assessment, the commissioner determined that the consideration received by Landsiedel Estate Partnership was $63,540, the value of the lot portion of the transaction.
The common issue in both cases requires an analysis and interpretation of §
The plaintiffs claim that when there is a conveyance to a wholly owned corporation that subsequently conveys the real estate to the ultimate owner, no conveyance tax is due on the first step of this transaction. The plaintiffs do not view the conveyance of realty to a corporation to apply where the grantor is the sole owner of the grantee corporation. In a sense, the plaintiffs see this kind of transaction as transferring property from one "pocket" to another "pocket." The plaintiffs rely on two cases, Senfour Investment Co. v. King County,
Neither Senfour nor Wetherbee support the plaintiffs' position in these cases. In Senfour, trustees of a corporation yet to be formed took title to real estate so that when the corporation was formed, the trustees could convey title to it. The court in Senfour concluded: "When the trustees promptly conveyed the title by quitclaim deed to the newly formed corporation, the transfer was simply the mechanical performance of the obligation of the admitted trust. Such a transfer does *357
not constitute a sale in its ordinary meaning." (Internal quotation marks omitted.) Senfour Investment Co. v.King County, supra,
Similarly, Wetherbee involved husband and wife property owners who used their real estate to procure a loan. The Wetherbees conveyed their business property to their corporation, which executed a mortgage deed to the bank to receive the loan. The corporation reconveyed the property back to the Wetherbees subject to the mortgage. The court in Wetherbee pointed out that this transaction was exempt from a conveyance tax by virtue of the Vermont statute specifically exempting, "[t]ransfers to secure a debt or other obligations. . . ."Wetherbee v. State, supra,
The Bjurback and Landsiedel conveyances were neither trust arrangements nor financing arrangements. The obvious purpose of the conveyances in the present actions was to provide immunity from liability between the original owners of the property and the ultimate purchasers. Each of the quitclaim deeds from Bjurback and Landsiedel Estates Partnership to their respective wholly owned corporations insulate the original sellers on the sale by warranty deed from the corporations to the ultimate purchasers.
The commissioner's position is that the consideration for the conveyance of real estate to Scandesign Homes, Inc. and First Landsiedel Corp. was the increased value to the corporation caused by the conveyance to it of the real estate as measured by the subsequent sale to an arms length purchaser. The commissioner assumes an increase in the value of the shares of corporate stock owned by the grantor regardless of whether such shares were actually exchanged.
The commissioner relies on an opinion from the attorney general to support his position that a conveyance to a wholly owned corporation is subject to the real *358 estate conveyance tax. See Opinions, Conn. Atty. Gen. No. 89-020 (August 15, 1989), pp. 110, 113 and 119.
"Although an opinion of the attorney general is not binding on a court, it is entitled to careful consideration and is generally regarded as highly persuasive." (Internal quotation marks omitted.) State Medical Society v.Board of Examiners in Podiatry,
The court agrees with the attorney general that the "exchange of consideration is the touchstone for determining which transactions are subject to Connecticut's real estate conveyance tax. . . ." Opinions, Conn. Atty. Gen., supra, p. 118. Section
The attorney general concluded that the consideration for the conveyance of realty to the corporation was the increase in the value of the stock of the corporation. The attorney general noted that the measure of the tax in such instances would be the fair market value of the realty as of the time of the conveyance. Opinions, Conn. Atty. Gen., supra, p. 119.
The plaintiffs seek support from Judge Eldridge of the Maryland Court of Appeals in his dissenting opinion in Dean v. Pinder,
In Dean v. Pinder, the plaintiffs purchased two hotel properties and created a corporation known as the Imperial Hotel, Inc. Having no assets in the corporation, the plaintiffs caused the corporation to issue shares of stock to each of the plaintiffs. Subsequently, the plaintiffs conveyed the two pieces of property to the corporation. The corporation made no payments to the plaintiffs, nor was any additional stock issued. When the plaintiffs sought to record the deed, they marked the appended affidavit of consideration that no consideration was paid for the transaction. The clerk refused to accept the deed without payment of the conveyance *360 tax. The court upheld the imposition of the conveyance tax on the transfer of the properties to the corporation.
The court in Dean v. Pinder reasoned that "a corporation is a distinct legal entity, separate and apart from its stockholders. . . . Thus, where a corporation takes title to real property, it holds that property in its own name and right, and a stockholder, as such, does not hold legal title." (Citations omitted.) Id., 164. The court concurs with this reasoning. It is the actual consideration flowing between the parties that is determinative of value, not the amount of money or other tangible property that may have been exchanged, or what may have been stated on the deed as to value. Id., 162; see Regs., Conn. State Agencies §
Our legislature has seen fit to exempt seventeen transfers of title from the imposition of the real estate *361
conveyance tax. General Statutes (Rev. to 1991) §
Unless the legislature carves out an exemption to the imposition of the real estate conveyance tax to include a conveyance to a corporation by the sole stockholder of that corporation, the court cannot, by judicial construction, limit the meaning of "consideration" in §
Accordingly, the plaintiffs' appeals are dismissed.