A New Hampshire developer, Victor, purchases a 500-acre parcel enrolled in Current Use for $2,000,000. The full market value of the land at closing is appraised at $2,500,000. Victor immediately begins permitting for a 200-lot residential subdivision covering the entire parcel. His closing attorney identifies two separate tax obligations triggered by this transaction. Which combination correctly identifies both taxes and their respective bases of calculation?
Correct Answer
D) Real estate transfer tax based on $2,000,000 purchase price, and land use change tax based on $2,500,000 full market value
Two distinct taxes apply here. First, the NH Real Estate Transfer Tax (RSA Chapter 78-B) is calculated on the 'full consideration' paid for the property, which is the $2,000,000 purchase price — the actual amount paid in the transaction. Second, the Land Use Change Tax (RSA Chapter 79-A) is assessed at 10% of the 'full market value' of the land at the time it is removed from Current Use, which is the $2,500,000 appraised value. These two taxes use different bases: the transfer tax uses the actual consideration (purchase price), while the land use change tax uses full market value at the time of the change. This distinction is a critical and frequently tested point in NH real estate exams.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A trust account, also called an escrow account, is a separate bank account maintained by a broker to hold funds belonging to others, such as earnest money deposits, security deposits, or other client funds.
Advertising regulations govern how real estate licensees may market properties and services, requiring truthful, non-deceptive advertising that includes proper identification of the brokerage.
Antitrust violations in real estate occur when competing brokerages or agents engage in practices that restrain trade, reduce competition, or harm consumers through collusion. These violations are governed by the Sherman Antitrust Act and can result in severe penalties.
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