Legal Question in Real Estate Law in California

Documentary Transfer Tax on Quitclaim

Here's excerpt from advice recv'd:

Re: grant deed when grantor has remarried

Due to the possibility that the ex-husband's new wife may have acquired an interest in the house, she should also be a grantor; but since her interest, if any, would be difficult to determine, she should quitclaim rather than grant her interest.

Reply Posted By:

Bryan Whipple

I was able to file PCOR and Grant Deed from my ex-husband. However, when I tried to record the quitclaim from his new wife, the Clerk-Recorder said I needed to pay a documentary transfer tax. Why is the grant deed exempt from this tax, but not the quitclaim deed? The assessed value of the market value of the house is about $1 million. I don't want to pay this transfer tax, but I don't see why I have to.

(btw, thanks for your reply and previous advice)

Asked on 7/13/07, 8:56 pm

1 Answer from Attorneys

Bryan Whipple Bryan R. R. Whipple, Attorney at Law
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Re: Documentary Transfer Tax on Quitclaim

The transfer between ex-spouses as part of a divorce settlement is exempt as a matter of statute; see Revenue & Taxation Code section 11927. However, your ex-husband's new wife is not in that exemption category.

You should have a different exemption; your is under R&TC 11911, which applies to deeds issued to remove a cloud on title.

In theory, you do need to pay a transfer tax on the value of whatever portion or ownership she may have acquired. However, her interest would be very small, possibly zero (and difficult to determine except by a divorce lawyer with special software used for determining a spouse's "pro tanto" interest). If it's a million-dollar house, and the ex and the new wife have been married less than a year, her interest is probably less than 1% and the transfer tax ought to be around ten bucks, at most. However, I think you should just say it's a quitclaim to remove cloud on title per R&TC 11911.

Note that the recorder is supposed to rely upon whatever the person asking to record the deed declares, unless there is reason to doubt the declaration. Of course, if you say the house is worth $1 million, without claiming the exemption, they'll tax you on the whole million, which would be $1,100, more in some cities.

For a very good discussion of this subject, open the Sonoma County Recorder's page at http://www.sonoma-county.org/recorder/trnstax.asp and then click on the link for their DTT flyer. Note that they determine the tax based on what you declare; just point out that you're entitled to an exemption and that should do it.

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7/13/07, 10:16 pm

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