Rev. Rul. 57-72

Advice has been requested whether a private owner of real property is liable for the documentary stamp tax where the United States or any agency or instrumentality thereof acquires the property in condemnation proceedings.

Section 4361 of the Internal Revenue Code of 1954 imposes a tax on each deed, instrument, or writing, whereby any lands, tenements, or other realty sold shall be granted, assigned, transferred, or otherwise conveyed to, or vested in, the purchaser or purchasers when the consideration or value of the interest or property conveyed, exclusive of the value of any liens or encumbrances remaining thereon at the time of sale, exceeds $100.

Section 4383 of the Code provides that the documentary stamp tax shall be paid by any person who makes, signs, issues, or sells any of the documents or instruments subject to tax, or for whose use or benefit the same are made, signed, issued, or sold. The United States or any agency or instrumentality thereof shall not be liable for the tax with respect to an instrument to which it is a party, and affixing of stamps thereby shall not be deemed payment for the tax, which may be collected by assessment from any other party liable therefor.

The documentary stamp tax imposed on deeds, when title to real estate is conveyed, is a tax on the transaction and is applicable to conveyances resulting from condemnation actions, as well as to voluntary conveyances. There is no distinction under the stamp tax law or regulations between voluntary and involuntary conveyances, and the tax applies equally to both. The term `sold' as defined by section 113.81(b) of Regulations 71, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, means a transfer of title for a valuable consideration which may involve money or anything of value. Section 113.83(d) of such regulations cites as an example of conveyances subject to the tax, `Deeds given by masters in chancery, sheriffs, clerks of court, etc., for realty sold under foreclosure or execution.'

In view of the foregoing, the United States or any agency or instrumentality thereof is not liable for the documentary stamp tax imposed by section 4361 of the Code with respect to a conveyance of real property acquired by it in a condemnation proceeding. However, this exemption does not relieve the other party to the transaction from his liability for such tax in view of the dual liability provisions of section 4383 of the Code, under which the tax is payable by and collectible from the grantor or the grantee, unless otherwise specifically exempt. Accordingly, it is held that the documentary stamp tax is payable by the grantor or condemnee, the nonexempt party to a transaction, when real property is conveyed in condemnation proceedings to the United States or any agency or instrumentality thereof. See Mimeograph 4497, C.B. XV-2, 354 (1936), which holds that in the case of a sale under foreclosure, where the puchaser is an exempt Federal agency, if the mortgagor does not voluntarily affix the stamps, the sheriff or other person making the sale should affix the required stamps on behalf of the mortgagor and include the cost thereof as a necessary expense of the sale.