“Real Property Transfer Tax” is due for the transfer by deed of any interest in real property, including a water right, permit, certificate or application.  Personal property is not taxed.

“Real property” is a legal term that includes real estate and ownership interests in real estate and improvements, generally, the residence (immovable property). It is a type of property differentiated from “personal property,” which is movable property; any property that can be moved from one location to another.

There is often confusion and there are many court cases discussing the hyper-technical legal differences between personal property and fixtures (which are attached to real property and transfer with the real property).  However, in general, personal property includes items that are easily movable and that upon movement, do not leave damage.  Examples of personal property include a refrigerator, a washer, a dryer, and a dishwasher.  Examples of fixtures, which generally transfer along with the residence, include toilets, bathtubs, vanities, and arguably shutters.

Nevada Revised Statutes Chapter 375 describes how transfer tax is calculated and paid on the transfer of real property.   According to statute, both the seller and buyer are liable for payment of the transfer tax, irrespective of the contractual or escrow splitting of the tax.

In Clark County, transfer tax is charged on the “value” of the real property conveyed at the rate of $5.10 per $1,000 in value.

So, there is a “value” difference between selling an unfurnished home versus a furnished home that can be taken advantage of for purposes of transfer tax.   If a custom residence is fully furnished and being sold, the purchase agreement should establish a separate value for the land and improvements versus the personal property.  For example, if the total purchase price is $200,000 but the land and improvements are valued at $180,000 while the personal property is valued at $20,000, transfer tax of $5.10 per $1,000.00 of “value” (for a sale in Clark County) would be due on the $180,000.  No transfer tax is due on the $20,000 of personal property.  If calculated correctly, this could save the parties $102.  This article does NOT address any gain issues for federal income tax potentially due under the Internal Revenue Code.

The contract should specifically list the $20,000 in personal property being transferred, perhaps on a schedule.  Alternatively, or in addition, a bill of sale might be completed for the transaction.  While a bill of sale is not a requirement by statute, it helps to confirm that buyer is receiving personal property for a specific price.

There are different types of bills of sale.  Consider whether to use a bill of sale either with or without a warranty of fitness or condition.  That is, is the personal property being transferred “as is”?  However, it is fair for seller to provide a warranty to buyer that no one else holds lien rights over that personal property.

An interesting case involved a furnished residence where one piece of personal property was a working Harley-Davidson® motorcycle that was used as “art” in a special built-in niche.  In that case, not only was a bill of sale required, but title transfer documents were filed with the Department of Motor Vehicles just like the transfer of any other vehicle.

In sum, there may be occasions where the seller and/or buyer (depending who is paying the transfer tax) can benefit from valuing personal property in a residential purchase and sale, but to avoid liability, the parties must be able to substantiate the “value”.  A contract allocating the purchase price and listing the personal property and its value should go a long way to establishing a defense, if needed.

 


Category: Uncategorized

About the Author


Comments are closed.