{"id":184,"date":"2010-01-26T04:36:00","date_gmt":"2010-01-26T08:36:00","guid":{"rendered":"http:\/\/dankrell.com\/blog\/?p=184"},"modified":"2019-06-27T13:20:22","modified_gmt":"2019-06-27T17:20:22","slug":"transfer-tax-controversy-brews-in-maryland-counties","status":"publish","type":"post","link":"https:\/\/dankrell.com\/blog\/2010\/01\/26\/transfer-tax-controversy-brews-in-maryland-counties\/","title":{"rendered":"Transfer tax controversy brews in Maryland Counties"},"content":{"rendered":"

\"\"<\/a>
\nby Dan Krell \u00a9 2010
\nDanKrell.com<\/a><\/p>\n

Most real estate issues usually do not grab people\u2019s attention – unless they are the ones affected. Eminent domain is a prime example; those affected usually become embroiled in the controversy. One current issue that you may have heard (although you may not have become fully aware) of is the transfer tax controversy that\u2019s brewing in Montgomery and Anne Arundel Counties. The anticipated opinion on the controversy from the Maryland Attorney General may have lasting and widespread consequences on how transfer tax is calculated in this state.<\/p>\n

The controversy surrounds the decision from Montgomery and Anne Arundel Counties to collect transfer tax on the \u201cforgiven\u201d mortgage amounts in a short sale. At face value, the policy of collecting transfer tax on the unpaid portion of a short sale appears to be a way for the counties to compensate for their declining tax base; however the fundamental method of calculating state and county transfer tax may be more the issue. On January 12th, however, Montgomery County put \u201ca hold\u201d on the collection of transfer tax of the \u201cforgiven\u201d mortgage amount until the Maryland Attorney General issues his opinion.<\/p>\n

The \u201cforgiven\u201d mortgage amount is the amount that the seller\u2019s lender agrees to not collect at the settlement of a short sale. However, this amount is not literally forgiven as the lender typically either considers it income and issues a 1099 to the seller or pursues payment through a deficiency judgment against the seller. Since part of the requirement for a short sale is usually to provide evidence of a hardship, some critics have argued that the collection of transfer tax on \u201cforgiven\u201d mortgage amounts to be punitive.<\/p>\n

The collection of transfer tax on forgiven mortgage amounts should not be confused with \u201cnominal consideration\u201d rules that are used in some jurisdictions around the country (including Washington, DC). \u201cNominal consideration\u201d rules typically calculate additional transfer tax when the sales price is less than the assessed value. In Washington, DC, a transaction is considered to be of \u201cnominal consideration\u201d when the sales price is less than 30% of the assessed value.<\/p>\n

Title 13 of the Tax-Property section of the Code of Maryland (COMAR) discusses the collection of transfer tax by the State and counties, as well as tax rates and possible exemptions. COMAR discusses various ways in which transfer taxes are calculated and collected; for example tax is calculated on the \u201cconsideration payable for the instrument of writing\u201d; and the tax is \u201cimposed on the instrument of writing.\u201d<\/p>\n

Some may have mistakenly thought that consideration is only the sales price and the instrument in writing is only the deed; however, others have argued that consideration also includes additional amounts involved in a transaction (such as assumed loans) and instruments in writing to also include deeds of trust. I am not an attorney and I am not attempting to practice or interpret law, but it appears that clarification from the Attorney General has become necessary in interpreting \u201cconsideration\u201d and \u201cinstruments of writing\u201d when calculating transfer tax in today\u2019s market.<\/p>\n

You might consider the collection of forgiven mortgage amounts another sign of a depreciated real estate market. However, the future of transfer tax calculation and collection (at least locally) is sure to be affected by the highly anticipated opinion of Attorney General Gansler.<\/p>\n

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this this article without permission is a violation of copyright laws. Copyright \u00a9 2010 Dan Krell<\/p>\n

**Update—HB 590\/SB 657 \u2013 Taxation of Forgiven Debt in Short Sales
\nSTATUS: PASSED \u2013 Effective May 20, 2010.
\nThis law clarifies that recordation and transfer taxes MAY NOT be imposed on the forgiven debt in short sale transactions.<\/p>\n","protected":false},"excerpt":{"rendered":"

by Dan Krell \u00a9 2010 DanKrell.com Most real estate issues usually do not grab people\u2019s attention – unless they are the ones affected. Eminent domain is a prime example; those affected usually become embroiled in the controversy. One current issue that you may have heard (although you may not have become fully aware) of is … <\/p>\n

Continue reading “Transfer tax controversy brews in Maryland Counties”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[78,331],"tags":[516,490,931,797,480,902],"class_list":["post-184","post","type-post","status-publish","format-standard","hentry","category-short-sale","category-transfer-tax","tag-buying-a-home","tag-home-buyer-2","tag-maryland","tag-real-estate","tag-short-sale-2","tag-transfer-tax"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p1VZLf-2Y","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"jetpack_likes_enabled":true,"_links":{"self":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts\/184","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/comments?post=184"}],"version-history":[{"count":4,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts\/184\/revisions"}],"predecessor-version":[{"id":5021,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts\/184\/revisions\/5021"}],"wp:attachment":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/media?parent=184"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/categories?post=184"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/tags?post=184"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}