STATE OF SOUTH DAKOTA
OFFICE OF
THE ATTORNEY GENERAL

June 24, 1970

Richard Kolker
Deputy State's Attorney
Brown County
Aberdeen, South Dakota 57401

OFFICIAL OPINION NO. 70-27

Real estate transfer fee is applicable to and collectible upon the exchange of land between parties. Method of computing fee. (SDCL 43-4-20 through 43-4-26)

Dear Mr. Kolker:

You have requested my opinion relative to this factual situation:

"A" a farmer and "B" a motel owner enter into a transaction wherein A trades his farm land for B's motel. To effectuate such transaction A deeds his farm to B, and B deeds such motel to A. There is no extra money or credit, or assumption of any mortgage, lien or other indebtedness or liability on the part of either party to such transaction.

Your questions relate to the application of the Real Estate Transfer Fee Statutes (SDCL pocket part, 43-4-20 through 43-4-26) to this transaction. The questions submitted are as follows:

1. Where there is no actual consideration between the parties, involving cash or assumption of any obligation or indebtedness, is it required for the register of deeds, in pursuance to the Real Estate Transfer Fee Statutes, to refuse to accept and record the deeds without the payment of the transfer tax as required by law?

2. SDCL 43-4-20, Subsection 3, defines "value" for the purposes of such transfer fee act. How is such "value" computed in the given fact situation where no money or obligations are assumed or paid?

3. If there is "value" in the described transfer, so that such real estate transfer fee may be imposed on the transaction, what is the proper fee to be assessed against each party to the transaction?

SDCL 43-4-21 provides:

A fee is hereby imposed at the rate of fifty cents for each five hundred dollars of value or fraction thereof upon the privilege of transferring title to real property in the State of South Dakota, which fee shall be paid by the grantor.

Value, for the purposes of such transfer fee, as you have pointed out, is defined in SDCL 43-4-20(3) as follows:

Value shall mean in the case of any deed, not a gift, the amount of the full consideration therefor paid, or to be paid, less the amount of any lien or liens assumed thereon.

Some twelve separate exemptions to the imposition of the transfer fee are set forth in SDCL 43-4-22. None of these exemptions cover a factual situation, such as you have described, wherein certain land is conveyed for the receipt of a conveyance of other realty.

In such a situation, where there is no question that "A" is executing a deed to his farm land to "B", and in turn "B" is executing a deed to his motel to "A", it cannot be successfully contended that neither "A" nor "B" is not exercising the privilege of transferring title to real property. Likewise, it cannot be successfully contended that this exchange of land comes within any exemption to the imposition of the real estate transfer fee. Each of such transfers of title to real estate are subject to such fee and the register of deeds properly refused to accept and record either of such deeds without the computation and collection of such fee which is imposed by statute.

An inspection of SDCL 43-4-20(3) reveals that "value" is the full consideration paid, or to be paid for the transfer of the title to real estate to the grantee. Consideration need not be in money. (Hayes v. Ricard, 244 NC 313, 93 SE 2d 540,) It may be something of benefit or value, other than money, moving from the purchaser of such real estate to the seller. But a moment of reflection reveals this to be true.

Let us assume in the problem here presented that "A" was conveying his farm land to "B", and in return "B" was to give "A" title to ten separate motor trucks, free and clear of any encumbrances. Certainly no money has changed hands, but it cannot be successfully maintained that no "consideration was paid" to "A" for the conveyance of title to such real property. There is consideration, and such "consideration" is measured by the value of such ten trucks which are exchanged for such land.

Likewise, in the factual situation you have presented, there is a "consideration paid" to "A" for the conveyance of his land to "B". This consideration is the value of "B's" land. Likewise, the reverse is true. There is a "consideration paid" to "B" for the conveyance of his land. This is the value of "A's" land.

It is the value of "B's" land which furnishes the consideration for, and measures the transfer fee on "A's" exercise of his privilege of transferring title to such farm land to "B"; conversely, it is the value of "A's" land that measures the transfer fee on "B's" exercise of his privilege of transferring title to his motel to "A".

As I have previously ruled in my Opinion 69-15, issued February 18, 1969, and addressed to Lee A. Tappe, the valuations to be placed upon such transfer is to be made by the person delivering such deed to the register of deeds for recordation. The register of deeds is to compute the proper transfer fee from such declared valuation. In the event there is a wilful falsification of such value, such declarant has committed a crime and violated SDCL 43-4-26. In recapitulation, may I say my answer to question No.1 is in the AFFIRMATIVE, and I believe my previous discussion has made it clear that each of the conveyances of real property is subject to such transfer fee, to be computed in the manner as I have outlined.

Respectfully submitted,

Gordon Mydland
Attorney General