James purchases a duplex in Nashville from a bank that acquired the property through non-judicial foreclosure. The bank sells the property to James for $198,500. James's affiliate broker tells him that because the prior owner lost the property in foreclosure, the Tennessee realty transfer tax does not apply to this purchase. Which of the following best evaluates the affiliate broker's statement?
Correct Answer
D) The statement is incorrect, because the transfer tax exemption for foreclosure applies only to the foreclosure sale itself, not to subsequent resales by the acquiring party
The affiliate broker's statement is incorrect. Under Tennessee law, while certain transfers related to foreclosure may qualify for exemptions or reduced treatment, any subsequent resale by the bank (as the REO owner) to a third-party buyer like James is a standard taxable transfer subject to the Tennessee realty transfer tax under Tenn. Code Ann. § 67-4-409. The foreclosure-related exemption, where applicable, pertains to the specific foreclosure conveyance — not to all future sales of the property by whoever acquires it. The bank's sale to James at $198,500 is a new, independent transfer of consideration and is taxable accordingly.
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Related Topics & Key Terms
Key Terms:
Related Concepts
The income approach estimates a property's value based on the income it generates by converting net operating income into a value estimate using a capitalization rate. It is the preferred method for income-producing properties.
Many states have laws to limit how much property taxes can increase each year, regardless of market value fluctuations.
Various programs and exemptions exist to reduce the property tax burden for specific groups, such as seniors, homesteaders, or veterans.
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