Susan is transferring her Brookline investment property valued at $900,000 to her adult son for $1 as a gift deed. The Registry of Deeds clerk informs Susan that the deed excise tax will be calculated on the full $900,000 fair market value, not on the $1 stated consideration. Which of the following best explains why the Registry of Deeds takes this position?
Correct Answer
D) Massachusetts law requires that all deeds be taxed on the higher of the stated consideration or the fair market value to prevent tax avoidance on nominal or below-market transfers.
Under MGL Chapter 64D and related Massachusetts Department of Revenue guidance, when the consideration stated in a deed is nominal or clearly below fair market value (such as a $1 gift deed), the deed excise tax is assessed on the greater of the stated consideration or the fair market value of the property. This rule exists specifically to prevent tax avoidance through artificially low stated prices on deeds. The Registry of Deeds is correct to apply the $900,000 fair market value as the tax base.
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