Real estate transfer taxes matter in a distressed economy


Why real estate transfer taxes matter

Businesses considering buying or selling real property, making improvements to real property, or undergoing a merger or transfer of a controlling interest, must consider the impact of state and local real estate transfer taxes. Many businesses are facing unprecedented challenges with global pandemics and uncertain economic conditions resulting in more frequent transfers or organizational changes. Regardless of economic conditions, real estate transfer taxes can stymie the most prepared transaction team. Preparation is key, thus all due diligence should include a comprehensive review of whether and how transfer taxes apply to a transaction.

Virtually all businesses, no matter the industry, own or maintain long term leases on real estate. Many businesses undergoing mergers and acquisition activity, incurring losses or experiencing negative cash flow, are contemplating the future of their real estate holdings. This is particularly true of businesses with unused office space due to employees working remotely due to COVID-19 restrictions. COVID-19 and a distressed economy could result in some businesses seeking to sell real property. Many businesses will try to renegotiate long-term leases. Still other businesses are likely to see property ownership change by virtue of a merger, acquisition or change in entity form. At the same time, there are segments of the economy that are expanding both in terms of revenue and capital investment. Weathering the crisis relatively well, these businesses may seek to take advantage of a down market by becoming buyers of real estate. There will also be companies improving their real property as they re-tool and re-focus their business.

How they work

Whether buying, selling, or improving property, businesses should know that most states impose a real estate transfer tax that, if applicable, can affect the costs of a transaction. Thirty-nine states and the District of Columbia impose some form of real estate transfer tax. The trigger for the tax is almost always a transfer of title. But there are many other circumstances that result in tax such as capital acquisitions, indirect transfers of ownership, financing and leases. There are simply many real estate scenarios that may give rise to tax liability, even in scenarios where ultimate ownership may not change, or may not change very much. For those financing or refinancing mortgages, it should be noted that some states impose a mortgage recordation tax that is separate from the real estate transfer tax.

As businesses consider the appropriate approach to a transfer of real estate, they should know that in some states the tax liability is imposed on the transferor or seller. Other states impose the burden on the transferee or buyer. States also provide many exemptions and exclusions from tax, such as transfers to the government or certain reorganization, but not all states share the same exemption provisions.

Real estate transfer taxes are imposed on the value of the property being transferred. Rates vary widely throughout the United States from 0.1% to over 4%. Additionally, several states authorize local option real estate transfer taxes. Thus, total state and local real estate transfer taxes can add considerable costs to the purchase or sale of real property.


The RSM State and Local Tax group can assist companies in navigating the complicated nationwide landscape of real estate transfer taxes. Depending on the state, the tax is significant. Businesses need to know whether particular transactions, such as change in ownership, might trigger liability. As noted, renegotiating a lease, or increasing a mortgage might lead to increased tax liability. Planning ahead and understanding the impact of real estate transfer taxes can ultimately save money and result in tax efficient transactions.     

Let’s Talk!

Call us at (831) 759-6300 or fill out the form below and we’ll contact you to discuss your specific situation.

  • Should be Empty:
  • Topic Name:

This article was written by David Brunori , Brian Kirkell, Mo Bell-Jacobs, John Wojcik and originally appeared on 2020-05-28.
2020 RSM US LLP. All rights reserved.

The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

Hayashi Wayland is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.

For more information on how the Hayashi Wayland can assist you, please call us at contact us.