Subchapter G. VALUATION


Sec.


91.131.    Definitions.
91.132.    Bona fide sale transactions.
91.133.    Leases.
91.134.    Family farm realty and real estate company realty.
91.135.    Judicial sales and other transactions.
91.136.    Appraisal.
91.137.    Construction contracts.

§ 91.131. Definitions.

 The following words and terms, when used in this subchapter, have the following meanings:

   Bona fide sales transaction—A transfer between a buyer, willing but not obligated to buy, and a seller, willing but not obligated to sell, each acting with adverse economic interests at arms-length in his own self-interest and with knowledge of the value of the realty transferred.

   Computed value—The amount determined by multiplying the assessed value of the realty for local real estate tax purposes by the common level ratio factor of the taxing district.

   Grantor’s affiliate—One of the following:

     (i)   An organization, trade or business, whether or not incorporated, which is owned or controlled directly or indirectly by the grantor or by the same interests which own or control directly or indirectly the grantor.

     (ii)   A person who stands in one of the following relationships with the grantor with respect to the transaction between the grantor and grantee:

       (A)   Principal.

       (B)   Agent.

       (C)   Partner.

       (D)   Joint adventurer.

Authority

   The provisions of this §  91.131 issued under section 1107-C of the Tax Reform Code of 1971 (72 P. S. §  8107-C).

Source

   The provisions of this §  91.131 adopted September 9, 1988, effective September 10, 1988, 18 Pa.B. 4096.

Cross References

   This section cited in 61 Pa. Code §  91.170 (relating to rule in Baehr Bros. v. Commonwealth, 487 Pa. 233, 409 A.2d 326 (1979)).

§ 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).

§ 91.133. Leases.

 The value of leased realty is its computed value. If the leased premises constitute only a part of the assessed realty, the value of the leased premises is determined by multiplying the computed value of the assessed realty for local tax purposes by a fraction, the numerator being the fair rental value of the leased premises and the denominator being the fair rental value of the assessed realty.

Authority

   The provisions of this §  91.133 issued under section 1107-C of the Tax Reform Code of 1971 (72 P. S. §  8107-C).

Source

   The provisions of this §  91.133 adopted September 9, 1988, effective September 10, 1988, 18 Pa.B. 4096.

Cross References

   This section cited in 61 Pa. Code §  91.136 (relating to appraisal).

§ 91.134. Family farm realty and real estate company realty.

 The value of family farm realty and real estate company realty is its computed value.

Authority

   The provisions of this §  91.134 issued under section 1107-C of the Tax Reform Code of 1971 (72 P. S. §  8107-C).

Source

   The provisions of this §  91.134 adopted September 9, 1988, effective September 10, 1988, 18 Pa.B. 4096.

§ 91.135. Judicial sales and other transactions.

 The value of real estate is its computed value where the real estate is transferred through any of the following:

   (1)  By execution upon a judgment or upon foreclosure of a mortgage or under a judicial sale or tax sale or a transfer to a transferee or assignee of a bid or other rights of a purchaser under a judicial or tax sale.

   (2)  In exchange for stock in a corporation, an interest in a partnership, limited partnership or association, or property—other than cash or credit—in a bona fide sale or otherwise.

   (3)  By gift or otherwise without consideration or for a nominal consideration.

   (4)  Under a transaction other than a bona fide sale.

Authority

   The provisions of this §  91.135 issued under section 1107-C of the Tax Reform Code of 1971 (72 P. S. §  8107-C).

Source

   The provisions of this §  91.135 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 page (233362).

Cross References

   This section cited in 61 Pa. Code §  91.160 (relating to exchange of interest in real estate); 61 Pa. Code §  91.165 (relating to reservations on conveyances of life estates); and 61 Pa. Code §  91.166 (relating to life maintenance).

§ 91.136. Appraisal.

 The value of real estate shall be determined by appraisal only when one of the following occurs:

   (1)  The real estate was transferred in lieu of foreclosure.

   (2)  The real estate is not the subject of a bona fide sale, cannot be valued under §  91.133 (relating to leases) and is not separately assessed for local real estate tax purposes.

Authority

   The provisions of this §  91.136 issued under section 1107-C of the Tax Reform Code of 1971 (72 P. S. §  8107-C).

Source

   The provisions of this §  91.136 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 (233362) and (322419).

§ 91.137. Construction contracts.

 The value of realty also includes the value of contracted-for improvements to the realty, such as a building to be made as a permanent addition if under the construction agreement the grantor or grantor’s affiliate is contractually obligated to the grantee to make the contracted-for improvements to the realty granted upon payment of the agreed consideration or a contractor is contractually obligated to the grantor and to the grantor’s successors in interest to make contracted-for improvements to the realty granted upon payment of the agreed consideration and the contractual obligation is effective with the transfer or was effective prior to the transfer and not removed thereby.
 Example 1:

 O’Brien Land Company sells a lot to B for $10,000. Prior to the transfer of the lot, B enters into a contract with O’Brien Construction Company for the construction of a home on the lot for the contract price of $50,000. O’Brien Construction Company and O’Brien Land Company are subsidiaries of O’Brien Development Company. Tax is based on $60,000.
 Example 2:

 After entering into an agreement with Acme Construction Company to have a home constructed on his lot for the contract price of $50,000, D sells the lot and assigns his interest in the construction contract to B for $25,000. The balance due on the construction contract is $35,000. As $15,000—$50,000 less $35,000—of the sales price is attributable to the contracted-for improvements, tax is based on $10,000 for the lot and $50,000 for contracted-for improvements for a total of $60,000.
 Example 3:

 D, a developer who routinely sells options to purchase unimproved lots in his development to Acme Construction Company, agrees to sell one of the option lots to B for $10,000. Acme Construction Company requires B to enter into a construction agreement with it to build a home for $50,000 as consideration for the release of its option to purchase the lot. Tax is based on $60,000.
 Example 4:

 D, a developer, having agreed with Acme Construction Company that Acme Construction Company will be the exclusive builder for D’s development, requires as a condition of sale that all buyers use Acme Construction Company as their builder. B buys a lot from D for $10,000 and enters into a contract with Acme Construction Company for the construction of a home for the contract price of $50,000. The tax is based on $60,000.
 Example 5:

 D agrees to sell a lot to B for $10,000. Prior to the transfer of the lot, B enters into a contract with Acme Construction Company for the construction of a home on the lot. There is no relationship between D and Acme Construction Company. Tax is based on the $10,000 consideration for the lot.

Authority

   The provisions of this §  91.137 issued under section 1107-C of the Tax Reform Code of 1971 (72 P. S. §  8107-C).

Source

   The provisions of this §  91.137 adopted September 9, 1988, effective September 10, 1988, 18 Pa.B. 4096.

Notes of Decisions

   Construction Contract Price Taxable

   For purposes of the realty transfer tax, the value of the conveyance of land from developer to purchaser included not only the price of the property listed on the deed, but also the price executory house construction contract on the property that purchaser executed on the same day as the deed. Harmon Homes, Inc. v. Commonwealth, 898 A.2d 1200, 1204 (Pa. Cmwlth. 2006).



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