Circuit Court Says Goodwill Is Subject to Recordation and Transfer Taxes
The Circuit Court for Baltimore County recently held that the portion of a sale of three senior living facilities relating to the goodwill of the business was subject to recordation and transfer taxes. In the Matter of Shelter Senior Living IV, L.L.C. v. Montgomery County, Clerk of the Circuit Court for Montgomery County, Baltimore County, and Clerk of the Circuit Court for Baltimore County, Circuit Court for Baltimore County, Case No. 03-C-18-009042 (Aug. 2, 2019).
The owner of senior living facilities in Rockville, Towson and White Marsh sold them in July 2014 for a total of $93,400,000. Of that amount, the parties claimed that $48,114,221 was for the goodwill of the enterprises and was not subject to recordation or transfer tax. The parties also claimed that these taxes were not due on $3,143,579, the price for the tangible personal property, because sales tax was applicable to that.
Recordation and transfer taxes were tendered with the deeds based on the consideration of $40,142,200 for the real property. The clerks rejected that. To get the deeds recorded, tax was paid on $90,256,421, the purchase price less the value of the tangible personal property. The taxpayer filed for a refund, which was denied, so it appealed to the Maryland Tax Court, which sided with the taxing authorities. On further appeal, the Circuit Court for Baltimore County affirmed the decision of the Tax Court.
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