Wash. Admin. Code § 458-61A-107 - Option to purchase
(1)
Introduction. The real estate excise tax applies to a conveyance
of real property upon the exercise of an option to purchase.
(2)
Taxability of sales of
options. The real estate excise tax does not apply to the grant or sale
of an option and the real estate excise tax affidavit is not required for that
transaction. However, the sale of an option is subject to business and
occupation tax under the service and other category and should be reported on
the combined excise tax return.
RCW
82.04.290.
(3) For the sole purpose of determining
whether a transfer or acquisition of a controlling interest pursuant to the
exercise of an option occurred within the period provided in
RCW
82.45.010 and WAC
458-61A-101,
the date on which the option agreement was executed is deemed to be the date of
the transfer or acquisition. For any other purpose; however, the date on which
the option is exercised is the date of the transfer or acquisition.
RCW
82.45.010(2)(b). See WAC
458-61A-101.
(4)
Examples.
(a) Joe acquires an option at a cost of
$100,000. The option, if exercised, allows Joe to purchase ten parcels of land
for $700,000. As individual parcels, these lots of land are uneconomical to
develop. Joe "packages" the land, making it economically feasible to develop by
either obtaining sufficient acreage or required studies. Buildup, a real estate
development and construction company, purchases Joe's option on the property
for $2.3 million and subsequently exercises the option, paying $700,000 for the
land. The real estate excise tax does not apply to the sale of the option,
however the $2.3 million received for the option is subject to the business and
occupation tax under the service and other category. The measure of the real
estate excise tax is the $700,000 purchase price paid on the transfer of the
land.
(b) Consider the same initial
facts as in the example in (a) of this subsection, but instead, Joe exercises
the option, and subsequently sells the land to Buildup. The real estate excise
tax applies to both the transfer to Joe and the subsequent transfer from Joe to
Buildup.
Notes
Statutory Authority: RCW 82.45.150, 82.32.300, and 82.01.060. 11-16-106, § 458-61A-107, filed 8/3/11, effective 9/3/11. Statutory Authority: RCW 82.32.300, 82.01.060(2), and 82.45.150. 05-23-093, § 458-61A-107, filed 11/16/05, effective 12/17/05.
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