1. (a) A real estate company becomes acquired upon a change in the ownership of the company, if the change in the ownership interest:

   1. (1) Does not affect the continuity of the company.
   2. (2) Together with prior changes within the preceding 3 years, has the effect of transferring, directly or indirectly, 90% or more of the total capital and profits ownership interest in the company.

2. (b) An ownership interest may be changed by any of the following:

   1. (1) A member’s or shareholder’s sale, exchange, gift, bequest or other transfer of the ownership interest.
   2. (2) A member’s withdrawal or the addition of a new member.

   3. (3) An issuance or cancellation of stock.

      Example 1:

      A and B are equal partners in their partnership. Over a period of 2 years, the partnership adds 18 new equal partners. As A and B own only 10% of the total ownership interest at the end of the 2-year period, the addition of the new members has the effect of transferring 90% of the total ownership interest in the partnership. The partnership, therefore, became an acquired company upon the admittance of the 20th partner.

      Example 2:

      C and D are equal partners in their partnership. C transfers her 50% partnership interest to E. One year later, E transfers the 50% partnership interest to F. The partnership does not become acquired as a result of these changes. As D still retains his 50% interest, 50% of the total ownership interest remains the same. The series of transactions relating to C’s interest has the effect only of transferring 50% of the total ownership interest.

3. (c) A transfer of ownership interest between members of the same family is not considered a change in ownership interest.

   Example: C and D each own all of the stock of a corporation in equal shares. C and D transfer their stock to E, C’s son, over a 3-year period. As C and E are members of the same family, the transfer between C and E is not a change in ownership interest. Thus, the stock transfers have the effect of transferring only 50% of the total ownership interest in the corporation and the corporation is not acquired.

4. (d) An acquired real estate company can become acquired again upon a change in ownership interest in the company, if the change:

   1. (1) Does not affect the continuity of the company.
   2. (2) Together with prior changes within the preceding 3-year period commencing with the date that it became acquired, has the effect of transferring, directly or indirectly, 90% or more of the total capital and profits ownership interest in the company.
5. (e) Changes in ownership interests which occurred prior to July 1, 1986, shall be taken into account in determining whether a real estate company becomes acquired.

Authority

The provisions of this § 91.202 issued under section 1107-C of the Tax Reform Code of 1971 (72 P. S. § 8107-C).

Source

The provisions of this § 91.202 adopted September 9, 1988, effective September 10, 1988, 18 Pa.B. 4096; amended December 14, 2007, effective December 15, 2007, 37 Pa.B. 6516. Immediately preceding text appears at serial pages (233383) to (233384).

Cross References

This section cited in 61 Pa. Code § 91.113 (relating to imposition of tax on declarations of acquisition); and 61 Pa. Code § 91.193 (relating to excluded transactions).