The opinion of the court was delivered by: Senior Judge Kelley
Submitted: October 31, 2008
BEFORE: HONORABLE BERNARD L. McGINLEY, Judge, HONORABLE ROBERT SIMPSON, Judge, HONORABLE JAMES R. KELLEY, Senior Judge.
John C. Gudzan petitions for review of an order of the Board of Finance and Revenue (Board) sustaining the assessment against him by the Department of Revenue (Department) for the realty transfer tax in the amount of $2,511.33, with interest in the amount of $21.33, on transferred property valued at $251,231.50. We affirm.
The relevant facts in this matter, as stipulated by the parties, are as follows.*fn1 Gudzan is an individual residing in Conway, Pennsylvania. After Gudzan and his wife divorced on or about September 28, 2004, Gudzan agreed to purchase from his former spouse her interest in 12 parcels of rental real estate located in Beaver County, Pennsylvania, which they jointly owned. On or about May 11, 2005, a deed evidencing the transfer of realty from Gudzan and his former spouse, as husband and wife, to Gudzan, an individual, was recorded by the Beaver County Recorder of Deeds. Since this transfer was exempt under Pennsylvania law as a transfer between persons who were previously husband and wife, no realty transfer tax was assessed on the transfer.
On or about March 16, 2005, Gudzan created The California Avenue Land Trust. On or about May 19, 2005, a deed evidencing the transfer of the realty (described as parcel 8 in the joint deed) from Gudzan to The California Avenue Land Trust was recorded by the Beaver County Recorder of Deeds. Pennsylvania realty transfer tax was not paid on this transfer. On the Realty Transfer Tax Statement of Value form filed with the Department with respect to this transfer, Gudzan's representative claimed an exemption from the tax by checking the following box on the form: "Transfer to a trust."
On or about July 5, 2005, the Department issued a Pennsylvania Realty Transfer Tax Notice of Assessment (Notice of Assessment) to Gudzan relating to the transfer of realty from him to The California Avenue Land Trust. The Notice of Assessment provided that the transfer of realty from Gudzan to The California Avenue Land Trust was subject to the following tax: $2,511.33 in Pennsylvania realty transfer tax and $21.33 in interest accrued from May 19, 2005 through and including July 20, 2005, for a total of $2,532.66. The Notice of Assessment also provided that the Department had disallowed Gudzan's claimed exemption.
Gudzan timely filed a petition with the Board of Appeals, Pennsylvania Department of Revenue, on or about October 3, 2005. The petition challenged the Department's July 5, 2005 assessment of $2,511.33 in Pennsylvania realty transfer tax plus applicable interest. On or about April 16, 2006, the Board of Appeals issued a decision and order sustaining the realty transfer tax deficiency.
On or about July 10, 2006, Gudzan filed a petition with the Board. On or about November 17, 2006, the Board issued an order upholding the decision of the Board of Appeals and sustaining the assessment of the realty transfer tax. Therein, the Board concluded that Gudzan had failed to demonstrate The California Avenue Land Trust was an "ordinary" or "living" trust thereby entitling the transfer to an exclusion from the imposition of the realty transfer tax pursuant to the Realty Transfer Tax Act (Act).*fn2 Consequently, the Board concluded that the transfer of the property to the trust was properly subject to the realty transfer tax. On or about December 18, 2006, Gudzan filed a petition of review with this Court seeking a review of the Board's order.*fn3
Herein, Gudzan raises the following issues for our review: (1) Whether the Board erred in sustaining the order of the Board of Appeals and determination of the Department that realty transfer tax was due because the deed from Gudzan to The California Avenue Land Trust does not effect a real transfer of interest in property to someone other than the grantor of said trust; (2) Whether the Board erred in sustaining the order of the Board of Appeals and determination of the Department that realty transfer tax was due because The California Avenue Land Trust is not an ordinary trust exempt from the tax; and (3) Whether the Board erred in sustaining the order of the Board of Appeals and determination of the Department that realty transfer tax was due because The California Avenue Land Trust is not a living trust exempt from the tax.*fn4
In support of these issues, Gudzan first argues that the deed transferring the property into The California Avenue Land Trust shows that the grantor, Gudzan, continues to have all, or substantially all, of the interest in the property after the conveyance as he had before the conveyance. The trustee under the terms of the trust could take certain actions, including among others, selling, leasing and occupying the property. However, the powers of the trustee were subject to the consent of the sole beneficiary, which is Gudzan. Therefore, the grantor and the beneficiary are the same person. Gudzan argues that the Board is placing form over substance because the grantor and the beneficiary are the same person; therefore, there was no real transfer in interest by placing the property in The California Avenue Land Trust.
Second, Gudzan argues that it is also clear that the Board is placing form over substance by its interpretation of "ordinary" and "living" trusts. Gudzan contends that the Board's interpretations are overly technical given the fact that the only beneficiary of the trust is the grantor. Gudzan contends that whether or not the property is in trust, he has the power and right to transfer all or part of his interest in the property by written agreement. Finally, Gudzan advances the same argument based on the Board's hyper technical interpretation of the Act with regard to his contention that the Board erred in concluding that The California Avenue Land Trust constitutes a living trust.
Section 1102-C of the Act provides as follows: Every person who makes, executes, delivers, accepts or presents for recording any document or in whose behalf any document is made, executed, delivered, accepted or presented for recording, shall be subject to pay for and in respect to the transaction or any part thereof, or for or in respect of the vellum parchment or paper upon which such document is written or printed, a State tax at the rate of one per cent of the value of the real estate represented by such document, which State tax shall be payable at the earlier of the time ...