§ 91.132. Bona fide sale transactions.
(a) In a bona fide sale of real estate, the value of the real estate is the total agreed consideration for the sale which is paid or to be paid.
(b) The value includes liens existing before the transfer and not removed thereby—whether or not the underlying indebtedness is assumed—or a commensurate part of the liens, if they also encumber other real estate.
Example 1 (existing mortgage lien):
S conveyed a parcel to P in a bona fide sale. The agreed cash consideration was $20,000. P also agreed to assume S’s mortgage on the parcel which had a remaining balance due of $10,000. The value of the realty conveyed to P is $20,000 plus $10,000 or a total of $30,000, because the existing mortgage lien was not removed by the transfer.
Example 2 (a lien encumbers both the transferred realty and other realty):
S owns two lots, both of which are encumbered by a single $10,000 lien. The assessed value of the lots are $4,000 and $6,000. S sells the lot assessed at $4,000 to B for $20,000 in a bona fide sale. If the lien is removed by the sale, the total consideration for the sale is $20,000. If the lien is not removed by the sale the total consideration is $24,000 which is computed as follows:
$20,000 (actual consideration) + [ $10,000 (amount of lien)
x
$4,000 (assessed value of lot sold to B)
$4,000 + $6,000 (assessed value of two lots encumbered by lien)
](c) The value for which a seller will be liable for the payment of tax does not include the value of consideration paid by a buyer’s assignee, or a subsequent assignee thereof, for the right to have the seller convey the real estate to the assignee or subsequent assignee unless the seller or the seller’s affiliate is a party to the assignment and receives part or all of the consideration paid for the assignment. If the seller or the seller’s affiliate is a party to the assignment and receives part or all of the consideration paid for the assignment, the value shall include the value of the consideration that the seller and its affiliate receives. For purposes of this section, the term ‘‘seller’s affiliate’’ has the same meaning as the term grantor’s affiliate in § 91.131 (relating to definitions).
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 for which X is liable is $100,000.
Example 2. X enters into an agreement of sale with Y for the conveyance of real estate for $100,000, plus 20% of the value of any consideration that Y receives for an assignment of the agreement of sale. 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, plus 20% of the assignment price of $1 million ($200,000). The taxable value of the deed from X to Z for which X is liable is $300,000.
Example 3. X enters into an agreement of sale with Y, X’s wholly-owned entity, for the conveyance of real estate for $100,000. Y subsequently assigns the sales agreement to Z for $500,000. X executes a deed for the conveyance of the real estate to Z. X receives $100,000 from Y and Y receives $500,000 from Z for the conveyance. The taxable value of the deed from X to Z for which X is liable is $600,000.
Authority The provisions of this § 91.132 issued under section 1107-C of the Tax Reform Code of 1971 (72 P. S. § 8107-C).
Source The provisions of this § 91.132 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 (233360) to (233361).
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