FACTS: Is the partitioning of jointly held real property subject to the Massachusetts deeds excise?

DISCUSSION: Massachusetts imposes an excise upon the transfer of any deed, instrument or other writing whereby realty sold is conveyed to a purchaser. G.L. c. 64D, § 1. The excise is based upon the consideration given for the property and applies whenever the consideration, exclusive of any lien or encumbrance remaining on the property, is greater than $100. The tax is paid by the person making or signing the deed and is evidenced by an affixed stamp. As of July 1, 1989, the tax is $2.00 for each $500, or fraction, of consideration plus an additional tax of 14% of the tax imposed, i.e., $2.28/$500, except in Barnstable County where the rate, including surtax, is $2.85/$500. The rates are currently scheduled to change on July 1, 1992.

When parties partition property they own jointly, there is no deeds excise due unless for consideration some of the parties take shares greater in value than their undivided interests. In that event, a tax attaches to each deed conveying the greater share, computed upon the consideration for the excess. In addition, where property is conveyed subject to existing encumbrances, the amount of the encumbrance is not taxable. No deduction may be made, however, for encumbrances placed on the property at the time of sale. See DOR-D 88-18.

Example 1: George and Georgia, who are not married, bought a house in Wellesley in 1978 and took the property in equal shares as joint tenants. The cost of the house was $100,000. Each put $10,000 down. In 1989, the decided to change from a joint tenancy to a tenancy in common. A new deed was executed showing the change. At the time of the change, George and Georgia agreed that the house was worth $200,000; $60,000 remained outstanding on the original mortgage, and the property was not refinanced.

Here, the property is being split in accordance with the undivided interests originally owned by the parties. Since neither party receives a greater interest than that party had before, there is no deeds excise due.

Example 2: Same facts as above, except that, in settlement of a debt, George agrees to convey a portion of his interest in the house to Georgia at fair market value; a new deed issues showing Georgia as owner of 2/3 of the property and George as owner of 1/3.

Here, the property is not being split in accordance with the undivided interests originally owned by the parties; Georgia is to receive a greater interest. George must, therefore, pay a deeds excise on the excess conveyed, computed as follows:

Value of property $200,000
Encumbrance $ (60,000)
$140,000

Value of 2/3 interest $ 93,324
Value of 1/3 interest $(70,000)
Excess conveyed: $23,324
Excise $ 107.16

($23,324/$500 = $46.648)
(47 x $2.28 = $107.16)

Example 3: Frank and Felicia, who are not married, partition their jointly held property in Somerville by selling Frank's half to a third party. The property is worth $250,000 at the time of sale and the property will be refinanced.

Here, a new buyer is taking a 1/2 interest in the property and Felicia is maintaining her prior 1/2 interest. A deeds excise is therefore due from Frank on his 1/2 of the property, computed on the entire consideration given for that half, of $125,000. The excise is $570 ($125,000/$500 x $2.28). Since the property is being refinanced, no lien or other encumbrance remains on the property at the time of sale and no deduction is allowed for the amount of any mortgage.

DIRECTIVE: Where no party in partition of a joint tenancy receives a greater interest than he or she held before, no deeds excise is due. Where any party receives an interest in jointly owned property greater than his or her original undivided interest, there is a deeds excise imposed based on the consideration given for the excess value of the property. Where an interest in property is conveyed out to a third party, a deeds excise is due on the consideration paid for the portion conveyed. In each case where an excise is due, it is to be paid by the person making or signing the deed.

REFERENCE: G.L. c. 64D, § 1; DOR-D 88-18.

/s/Stephen W. Kidder
Stephen W. Kidder
Commissioner of Revenue

December 11, 1989

DOR-D 89-13


This Directive represents the official position of the Department of Revenue on the application of the law to the facts as stated. The Department and its personnel will follow this Directive, and taxpayers may rely upon it, unless it is revoked or modified pursuant to 830 CMR 62C.01(5)(e). In applying this Directive, however, the effect of subsequent legislation, regulations, court decisions, Directives, and TIRs must be considered, and Department personnel and taxpayers may rely upon this Directive only if the facts, circumstances and issues presented in other cases are substantially the same as those set forth in this Directive.