Deed Tax Designated Transfer

(1) A deed between a sole owner and a legal entity owned directly or indirectly by that sole owner, or between two legal entities owned directly or indirectly by a sole owner.

(2) A deed between a husband and wife and a legal entity owned directly or indirectly by one or both spouses, or between two legal entities owned directly or indirectly by that couple.

(3) A deed between co-owners and a legal entity owned directly or indirectly by those co-owners, or between two legal entities owned directly or indirectly by those co-owners.   The co-owners must maintain the same percentage ownership interest after the transfer.

(4) A transfer of real property between a revocable trust and the grantor or grantors of the revocable trust.

(5) The transfer of substantially all the assets of a corporation, LLC, or partnership pursuant to a reorganization, as described in Minnesota Statute, section 287.20, subdivision 9.

As provided in M.S.  287.21(c)  , if within six months after the recording of a deed which qualifies as a designated transfer there is any change in the ownership interests in the grantee/transferee entity, deed tax is retroactively due on the initial transfer.  If the subsequent transfer was reasonably expected at the time of the designated transfer, the penalty under M.S. section 287.31, subd. 1, must be paid.

The daily trading of a publicly traded corporation stock does not establish an “ownership change” under M.S. 287.21(c). With regard to a business entity of which shares or other ownership interests are publicly traded, a “change in ownership” occurs when the control-group changes; it does not occur upon each transfer of a publicly traded ownership interest.

(A) Paul is the sole owner of real property. Paul transfers the real property to an LLC which he is the only member and owner. There is no change in the ownership of the grantee entity (“LLC”) within six-months of the designated transfer.

(B) LLC 1 is the sole owner of real property. LLC 1 transfers real property to LLC 2, a wholly-owned subsidiary.  There is no change in the ownership of the grantee entity (“LLC 2”) within six-months of the designated transfer.

(C) Paul and Julie (Husband & Wife) co-own real property. Paul and Julie transfer the real property to an LLC in which they each have a 50 % ownership interest.  There is no change in the ownership of the grantee entity (“LLC”) within six-months of the designated transfer.

(D) Anthony and Teresa transfer real property to a Limited Partnership. At the time of formation they will have 2 % ownership as general partners and 98 % as limited partners. One-year after the transfer Anthony and Teresa transfer a 5 % limited partner interest to each of their five children.  There is no change in the ownership of the grantee entity (“Limited Partnership”) within six-months of the designated transfer.

(E) Mr. and Mrs. Johnson transfer their home on Lake Superior into their Revocable Trust.  There is no change in the ownership of the grantee entity (“Revocable Trust”) within six-months of the designated transfer. 

(F) Publicly Traded Corporation ABC transfers real property to a 100 % owned/controlled subsidiary.  There is no change in the “control-group” within six-months of the transfer. 

When shares or other ownership interests are publicly traded, a “change in ownership” only occurs when the control-group changes; it does not occur upon each transfer of a publicly traded ownership interest.

(G) Entity A, which is owned by three brothers, owns: LLC # 1, LLC # 2, and LLC # 3. LLC # 3 forms SPE LLC and transfers real property to it.  LLC # 3 merges into LLC # 2 which sells a 25 % membership interest to a unrelated third-party five months after the transfer. 

There is no change in the ownership of the grantee entity (“SPE LLC”) within six-months of the designated transfer.

(A) Paul is the sole owner of real property. Paul transfers the real property to a LLC in which he has a 75 % ownership interest.  The transfer does not meet the definition of a “Designated Transfer” as provided in M.S. 287.20. subd. 3a.

(B) Paul and John indirectly own two pieces of real property through their general partnership in which they each have a 50 % ownership interest.  Paul and John dissolve their partnership and distribute the properties as follows:

Property A   Paul and John P/S ----------- Paul

Property B   Paul and John P/S ----------- John

The transfer does not meet the definition of a “Designated Transfer” as provided in M.S. 287.20, subd. 3a.

(C) Anthony and Teresa transfer real property to a limited partnership. At the time of formation they will have 2 % ownership as general partners and 98 % as limited partners. Two months after the transfer Anthony and Teresa transfer a 5 % limited partner interest to each of their five children.

An ownership interest in the grantee entity (“Limited Partnership”) was transferred within six-months of the designated transfer.

(D) Entity A transfers real property into a wholly owned LLC. Within six months Entity A sells an 80 % ownership interest in the LLC to Entity B.

An ownership interest in the grantee entity (“wholly owned LLC) was transferred within six-months of the designated transfer.