Q: Need correct Maryland annotated code for $0 consideration Quitclaim deed transfer to LLC.
I am creating a Quitclaim deed for property in Worcester County, Maryland. The property has no mortgage, and I'm transferring the deed from my husband and me to our LLC, where we are equal members. I have prepared the deed with $0 consideration. The Worcester County Tax Specialist advised me to state the correct Maryland annotated code and the reason for zero consideration in the deed.
I included this statement: "This deed is exempt from Maryland transfer and recordation taxes pursuant to Md. Code, Tax-Property § 12-108(y), as the transfer is for no consideration and is made solely to an LLC in which the Grantors hold the same proportional interest both before and after the transfer." However, the specialist insists the code I'm using is incomplete or incorrect.
Can someone guide me on what the correct code should be for this transfer?
A:
While deeds are not terribly complex, tax exempt deeds often have very exacting requirements. Our law firm regularly assists with exempt transfers to LLCs in MD so we're quite familiar with this.
Md. Ann Code, Tax Property Sect. 12-108 is the correct statute, but subsection (y) deals with predecessor entities. So if for example you & your husband had a LLP and were dissolving that and transferring the LLP's property to an LLC and the interests of both entities were identical, then (y) would be the section to use. It does not sound like you had any predecessor entity but instead that you & your husband simply held in your individual names. Thus it makes sense that the clerk is rejecting.
There are other code provisions in Tax Property 12-108 that may or may not apply, depending on the circumstances. You could either go through the 20+ different exemptions (only a few of these relate to entities), see if any others apply and if one does document each element of that exemption, or you might ask a real estate attorney to assist with the deed. An attorney cannot tell you what exemption might apply without knowing more about the specific circumstances.
While not legal advice I hope this helps answer your question.
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