Were documentary stamps required when a bank transferred trust-account real estate without consideration from its trust division to a newly separate trust company?

Plain-English summary

South Carolina Private Letter Ruling 88-14 concluded that deeds transferring trust-account real estate from a bank's trust division to a newly separate trust company were not subject to documentary tax.

The transfers involved no consideration and were part of a corporate realignment rather than a sale. Legal title moved from one trustee organization to another, while beneficial ownership remained with the individuals named in the trust agreements.

Because section 12-21-380 taxed conveyances of "realty sold," the Commission found that these no-consideration title changes fell outside the tax.

The trust-company reorganization

Before January 1, 1987, XYZ Trust Company was the trust division of XYZ Bank of South Carolina. On that date, under section 34-3-850, the trust company became a separate corporation.

The new trust company was owned by a trust holding company, which in turn was owned by XYZ Corporation, a bank holding company.

The bank planned to transfer its former trust division's assets to the new corporation. Those assets included trust accounts holding real estate.

For that real estate:

• legal ownership was held by the trustee;
• beneficial ownership belonged to the individual or individuals named in each trust agreement; and
• no consideration was paid for transferring the accounts.

The documentary-tax statute

Section 12-21-380 imposed tax on a deed or other instrument conveying "realty sold" when the consideration or value of the interest conveyed exceeded the statutory threshold.

The ruling contrasted the trust-company transaction with two South Carolina Attorney General opinions involving real estate transferred between corporations in exchange for subsidiary stock. In those cases, the stock was consideration and documentary stamps were required.

XYZ's transfer did not involve stock or other consideration given for the trust real estate.

Why corporate realignment was not a sale

The Commission relied on United States v. Niagara Hudson Power Corporation, which interpreted a similar federal documentary-tax statute and distinguished a mere change of legal title from a taxable sale of realty.

That decision described reorganizations, mergers, and consolidations as corporate readjustments of existing interests rather than sales in which the transferor parts with its interest for cash or other property.

The ruling also cited a former federal regulation treating real estate transferred in a statutory merger or consolidation as a nontaxable conveyance.

Applying those authorities, the Commission classified XYZ's deeds as a corporate realignment and not a sale.

What this means for you

Trust companies and banks

PLR 88-14 focused on the absence of consideration and the continuity of beneficial ownership. Moving fiduciary accounts to a newly separate trust company did not create a sale on the stated facts.

Corporate reorganization teams

The ruling distinguished a no-consideration realignment from a transfer in exchange for stock. Corporate affiliation alone did not establish the answer; the transaction's consideration and substance mattered.

Trustees and beneficiaries

The trustee held legal title to the real estate, but the trust beneficiaries retained beneficial ownership. The ruling treated the transfer as changing the legal-title holder within the reorganization.

Real-estate and title professionals

The deed-tax question required determining whether the conveyance was "realty sold." A deed could transfer title without meeting that sale requirement.

Readers applying the ruling today

PLR 88-14 addressed a particular bank-to-trust-company realignment under 1988 law. Current deed-tax statutes, merger rules, consideration definitions, trust documents, beneficial ownership, and reorganization structure must be reviewed independently.

Common questions

Q: Were documentary stamps required on the deeds?

A: No. The Commission concluded that the transfers were a corporate realignment rather than a sale.

Q: Was any consideration paid?

A: No. The ruling's facts expressly stated that no consideration was given for transferring the trust accounts.

Q: Who beneficially owned the real estate?

A: The individuals named in the trust agreements; the trustee held legal title.

Q: Would receiving stock for the property be the same transaction?

A: No. The ruling contrasted Attorney General opinions in which stock received for real estate was consideration and the deeds were taxable.

Q: Did any transfer of legal title automatically trigger the tax?

A: No. The Commission required "realty sold" and treated this no-consideration legal-title change as outside that category.

Q: Can another bank or trust company rely on PLR 88-14?

A: No. The ruling states that it applied only to XYZ's specific facts, had no precedential value, and was not intended for general distribution.

Citations and references

• S.C. Code section 12-21-380 (1976) — documentary tax on conveyances of realty sold
• S.C. Code section 34-3-850 — trust-company separation authority cited in the facts
• South Carolina Attorney General Opinions No. 2018 (1965-66) and No. 2413 (1967-68) — stock as consideration for intercorporate real-estate transfers
• United States v. Niagara Hudson Power Corporation, 53 F. Supp. 796 (1944) — mere change of legal title versus realty sold
• Cortland Special Co. v. Commissioner, 60 F.2d 937, and New York Central R. Co. v. Commissioner, 79 F.2d 247 — reorganization and consolidation authorities as named in the ruling
• Former Internal Revenue Regulation 47.4361-2(b)(12) — statutory-merger or consolidation transfer cited in the ruling
• S.C. Code section 12-3-170 (1976) and SC Revenue Procedure 87-3 — private-letter-ruling authority

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/PLR88-14.pdf

Original ruling text

SC PRIVATE LETTER RULING #88-14

TO:

XYZ Trust Company

SUBJECT:

Documentary Tax - Real Estate Transfer

REFERENCE:

S.C. Code Ann. Section 12-21-380 (1976)

AUTHORITY:

S.C. Code Ann. Section 12-3-170 (1976)
SC Revenue Procedure #87-3

SCOPE:

A Private Letter Ruling is a temporary document issued to a taxpayer,
upon request, and it applies only to the specific facts or circumstances
related in the request. Private Letter Rulings have no precedential value
and are not intended for general distribution.

Question:
Pursuant to Code Section 12-21-380, are documentary stamps required on deeds which transfer
real estate without consideration from a division of a bank to a separate corporation?
Facts:
Until January 1, 1987, XYZ Trust Company (S.C.) N.A. was the Trust Division of XYZ Bank of
South Carolina. On January 1, 1987, in accordance with South Carolina Code Section 34-3-850,
the Trust Company became a separate company owned by a trust holding company, which is
owned by the XYZ Corporation, a bank holding company.
XYZ Bank of South Carolina will be transferring assets of its trust division to the new
corporation. Among the assets to be transferred are trust accounts, many of which hold real
estate. The legal ownership of the real estate lies in the trustee, but the beneficial ownership lies
with the individual, or individuals named under the trust agreement. No consideration is being
given for the transfer of these accounts.
Discussion:
Code Section 12-21-380 reads, in part:
A deed, instrument, or writing whereby any lands, tenements, or other realty sold is
granted, assigned, transferred, or otherwise conveyed to, or vested in, the purchaser or any
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other person by his direction when the consideration or value of the interest or property
conveyed exclusive of the value of any lien or encumbrance remaining thereon at the time
of sale exceeds one hundred dollars and does not exceed five hundred dollars must be taxed
one dollar and ten cents and for each additional five hundred dollars, or fractional part
thereof, one dollar and ten cents. (emphasis added)
In Opinion of the Attorney General Number 2018, 1965-66, p.81, it was held that the deed
transferring real property from one corporation to another required documentary stamps, since
stock received by the grantor corporation represented consideration for the property. The tax
was upheld in a similar instance, outlined in Opinion of the Attorney General Number 2413,
1967-68, p.62. In that case, real property was transferred from a parent corporation to a whollyowned subsidiary in exchange for stock of the subsidiary.
However, the U.S. District Court of New York stated in United States v. Niagara Hudson Power
Corporation, 53 F. Supp. 796 (1944), a case concerning a federal documentary tax statute similar
to South Carolina Code Section 12-21-380:
Whether a transfer of realty should be taxable as well as property consisting of securities is
not for the court to say. However, a mere transfer or change of legal title is not a taxable
transaction under Schedule A-8 which, as it now stands, expressly confines taxable
transfers to "realty sold". (emphasis added)
The court further stated:
In Cortland Special Co. v Commissioner of Internal Revenue, 2 Cir., 60 F2d 937 it is said "Reorganization, merger, and consoidation are words indicating corporate readjustments of
existing interests. They all differ fundamentally from a sale where the vendor corporation
parts with its interest for cash and receives nothing more." Page 939.
In New York Central R. Co. v. Commissioner of Internal Revenue, 2 Cir., 79 F2d 247
certiorari denied Helvering v. New York Central R. Co. 296 U.S. 653, 56 S.Ct 370, 80
L.Ed 465, the court said- "The consolidated corporation does not succeed to the rights and
liabilities *** as a purchaser but as a successor by operation of law." Page 249 of 79 F.2d
The court concluded that the change of title of real estate effected solely by a certificate of
consolidation was not a "realty sold" and therefore not subject to the tax.
Furthermore, a now rescinded Internal Revenue Regulation, 47.4361-2(b)(12), stated that a
"[t]ransfer of real estate in a statutory merger or consolidation from a constituent corporation to
the continuing or new corporation" is a conveyance not subject to the tax. The regulation
concerned the federal documentary tax on conveyances.

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Conclusion:
As the transfers in question do not constitute a sale, but rather a corporate realignment, they are
not subject to taxation under Code Section 12-21-380.

SOUTH CAROLINA TAX COMMISSION

s/S. Hunter Howard, Jr.
S. Hunter Howard, Jr., Chairman

s/John M. Rucker
John M. Rucker, Commissioner

s/A. Crawford Clarkson, Jr.
A. Crawford Clarkson, Jr., Commissioner
Columbia, South Carolina
June 23
, 1988

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