After the 1990 Legislature added SDCL 43-4-22(18), which exempts transfers 'for which no consideration was given' from the real estate transfer fee, is an exchange of one parcel of land for another parcel of land still subject to the transfer fee, or is it now exempt?

Plain-English summary

South Dakota imposes a real estate transfer fee under SDCL 43-4-21, payable when a deed is recorded. SDCL 43-4-22 lists exemptions, including transfers to or from the federal government.

The 1990 Legislature added a new exemption at SDCL 43-4-22(18): "For which no consideration was given." On its face, the exemption reaches transfers made without consideration, such as outright gifts.

Within weeks of the amendment taking effect, a county official asked AG Roger Tellinghuisen a more practical question. Several land swaps had come into the recording office: Owner A trades Parcel X to Owner B in exchange for Parcel Y. The parties claim the transfer is exempt under SDCL 43-4-22(18) because, they argue, no cash changed hands and therefore there was "no consideration." The county attorney advised collecting the fee anyway, valuing each parcel and computing the fee on the value transferred. Was the county attorney right?

Yes, Tellinghuisen ruled. The 1990 amendment did not change the meaning of "consideration" in contract law. Consideration is not limited to cash. The American Heritage Dictionary defines consideration as "[s]omething promised, given, or done that has the effect of making an agreement a legally enforceable contract." Black's Law Dictionary defines it as "[s]ome right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other." Even the criminal statute SDCL 22-1-2(7) defines consideration broadly: "any type of property or thing of legal value . . . [a]ny amount, advantage or inconvenience, no matter how trifling, is sufficient."

A land exchange has consideration in every reasonable sense: each parcel is the consideration for the other. Owner A receives Parcel Y in return for transferring Parcel X. The fact that the consideration is real estate rather than cash does not eliminate it; it just changes the form.

Tellinghuisen also reaffirmed two prior AG opinions (70-27 and 81-12) that had reached the same conclusion under the pre-1990 statute. The 1990 amendment did not disturb those precedents; it merely codified the (separate) gratuitous-transfer exception. Exchanges remained taxable.

The opinion settled on a practical valuation rule, agreeing with the county attorney: the value of the land being transferred is the value used to compute the fee. For an exchange of unequal parcels, that means valuing each parcel separately and applying the fee to the value of each transfer.

The opinion also flagged a parallel exemption: the requesting official had noted that the U.S. Forest Service might be involved in some of these transactions, and the AG pointed out that SDCL 43-4-22(2) already exempts transfers to or from the federal government, independent of the SDCL 43-4-22(18) analysis.

Currency note

This opinion was issued in 1990. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. SDCL chapter 43-4 has been amended several times since 1990, including changes to the transfer-fee rate, exemption categories, and exchange-specific provisions. Modern questions about real estate transfer fees in South Dakota should be verified against current SDCL chapter 43-4 statutes and modern Register of Deeds practice rather than relied upon from this 1990 opinion.

What the opinion meant at the time

For county registers of deeds, the opinion confirmed standard practice: collect the transfer fee on land exchanges, valuing each parcel separately. The 1990 amendment did not create a back-door way for landowners to escape the fee by structuring a sale as an exchange.

For real estate attorneys advising clients on land swaps, the opinion meant the fee had to be budgeted into the transaction. There was no clever structure that would avoid the fee for a true exchange between two private parties.

For ranchers and farmers consolidating holdings through swaps with neighbors, the opinion meant the fee was an unavoidable transaction cost. The parties could allocate it as they wished by contract but could not eliminate it by structuring around SDCL 43-4-22(18).

For state and county fiscal planners, the opinion preserved the transfer-fee revenue base. Without this ruling, landowners would have had a strong incentive to recast cash sales as land exchanges to evade the fee.

For exchanges involving the U.S. Forest Service, the opinion was a reminder that transfers to or from the federal government remained exempt under SDCL 43-4-22(2), independent of the SDCL 43-4-22(18) consideration analysis.

Common questions

Q: What if the parcels have equal value? Is there still consideration?
A: Yes. Equality of value is not relevant to whether consideration exists. The exchange of one thing for another is consideration regardless of whether the values match. Even where parcels are equal in value, each is the consideration for the other.

Q: How is the fee computed on an exchange?
A: The opinion adopted the county state's attorney's position that the value of the land being transferred is the value used to determine the fee. Beyond confirming that valuation standard, the opinion did not lay out a detailed formula for exchanges of unequal parcels.

Q: What is the "no consideration" exemption actually for?
A: Gifts and gratuitous transfers. Parent transfers land to child for love and affection. Charitable donor transfers land to a tax-exempt charity. Estate transfers a parcel by operation of law to a beneficiary. These transfers truly have no consideration (in the legal sense of consideration), and the 1990 amendment codified an exemption for them.

Q: Does the U.S. Forest Service exemption work in both directions?
A: Yes. SDCL 43-4-22(2) covers transfers to and from the federal government. A private landowner transferring land to USFS does not pay the fee; USFS transferring land to a private owner is also exempt. The Forest Service comment in the opinion confirms this.

Background and statutory framework

South Dakota's real estate transfer fee is one of the older revenue mechanisms in the state's property law toolkit. It funds (in part) the operations of the recording offices and contributes to general state revenue. The exemptions in SDCL 43-4-22 have grown over the years as the Legislature has identified categories of transfers it does not want to burden with the fee.

The 1990 amendment adding subsection (18) was part of a broader update to clean up the exemption list. The amendment used very general language ("for which no consideration was given") rather than spelling out specific categories. That generality is what created Ms. Hallett's question: does the broad language reach land-for-land exchanges?

Tellinghuisen's opinion applied a standard rule of statutory construction: give words their plain meaning. He cited the South Dakota Supreme Court's Famous Brands decision for the proposition that "one of the primary rules of statutory and constitutional construction is to give words and phrases their plain meaning and effect." The plain meaning of "consideration" includes non-cash exchanges.

The opinion also relied on a useful structural inference: prior AG Opinions 70-27 and 81-12 had held land exchanges were taxable under the pre-1990 statute. The 1990 amendment did not address those opinions or signal any intent to overrule them. So the new subsection (18) had to be read consistently with the pre-existing AG position.

Source

• Landing page: https://atg.sd.gov/OurOffice/OfficialOpinions/opinionhtml.aspx?id=80

Original opinion text

OFFICIAL OPINION NO. 90-39

Definition of the Consideration for SDCL 43-4-22(18)

Dear Ms. Hallett:

You have requested an official opinion from this Office concerning the following factual situation:

FACTS:

The 1990 Legislature amended SDCL 43-4-22 to include a new subsection found at SDCL 43-4-22(18). That provision now provides, in pertinent part:

The fee imposed by Section 43-4-21 does not apply to any transfer of title:

(18) For which no consideration was given.

The situation has arisen in our County where there are exchanges of land between parties and they are claiming that these transfers are exempt pursuant to SDCL 43-4-22(18). You had previously issued opinions on the question of whether an exchange of land between parties was subject to the transfer fee imposed by SDCL 43-4-21 and you have held that the transfer fee was applicable. AG Opinion Nos. 70-27, 81-12. The party seeking to record the deeds presently claim that as a result of the Legislative Amendment

SDCL 43-4-22, there is no consideration being exchanged since it merely involves an exchange of land. Our County Attorney has advised me to collect a transfer fee pursuant to SDCL 43-4-21 and that the value of the land being transferred is the value to determine what amount of fee to impose upon the transaction.

Based on the above facts, you have asked the following question:

QUESTION:

Whether SDCL 43-4-22(18) makes an exchange of land between parties exempt from the transfer fee imposed by SDCL 43-4-21?

IN RE QUESTION:

SDCL 43-4-22 was amended by the 1990 Legislature. 1990 S.D. Sess.Laws Ch. 346. The pertinent part of that statute now reads as follows:

SDCL 43-4-22. The fee imposed by 43-4-21 does not apply to any transfer of title:

(18) For which no consideration was given.

The question presented essentially asked whether the "consideration" of SDCL 43-4-22(18) is present when one parcel of land is traded for another parcel.

"One of the primary rules of statutory and constitutional construction is to give words and phrases their plain meaning and effect," In Re Petition of Famous Brands, Inc., 347 N.W.2d 882, 885 (S.D. 1984). Consideration has been defined as "[s]omething promised, given, or done that has the effect of making an agreement a legally enforceable contract." American Heritage Dictionary 284 (New College Ed. 1982). Consideration has also been defined as "[s]ome right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other." Black's Law Dictionary 277 (5th Ed. 1979). In a criminal context, consideration has been defined as follows:

SDCL 22-1-2. ...

(7) "Consideration," any type of property or thing of legal value, whether delivered in the past, present or to be delivered in the future. The term includes an unfulfilled promise to deliver. The term may include an advantage or benefit to the promisor or a loss or detriment to the promisee. Any amount, advantage or inconvenience, no matter how trifling, is sufficient to constitute consideration....

Under the facts presented, one party is exchanging one parcel for another parcel of property. I am of the opinion that trading one parcel for another parcel is a transaction in which there is consideration present, and therefore the exemption of SDCL 43-4-22(18) does not apply. Further, I am in agreement with your local State's Attorney that the value of the land being transferred is the value to determine the amount of fee to impose upon the transaction.

I did note that, in your letter to me, you indicated that the U.S. Forest Service is or may be involved in some of these transactions. I am sure you are aware that SDCL 43-4-22(2) exempts these transactions from the fee.

Sincerely,

ROGER A. TELLINGHUISEN

ATTORNEY GENERAL

RAT:ss