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No. 132013
| Lake Forest Partners 2, Inc., |
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Louis R. Johnson |
Petitioner-Appellee, |
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(Appeal from Ct of Appeals) |
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(Michigan Tax Tribunal) |
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| Department of Treasury, |
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Michael R. Bell |
| Respondent-Appellant. |
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| __________________________________________ |
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Click to view briefs in Adobe format:
Petitioner-Appellee's Brief in Opposition to Application for Leave to Appeal>>
Petitioner-Appellee's Supplemental Brief>>
Respondent-Appellant's Application for Leave to Appeal>>
Respondent-Appellant's Supplemental Brief>>
Michigan Association of Home Builders' Amicus Curiae Brief>>
Michigan Association of Realtors' Amicus Curiae Brief>>
Washtenaw County's Amicus Curiae Brief>>
Background
This case involves construction and application of the state real estate transfer tax act, MCL 207.521 et seq. Lake Forest Partners 2, Inc., a developer, sold vacant lots. The purchasers of the vacant lots would then hire a builder to construct a home on the lot. Sometimes the purchasers contracted with Johnson Building Group, a division of Lake Forest, to build the house. In those cases, both the sale of the lot and construction of the house were agreed to in a single document, the “purchase agreement.” Lake Forest would not pay the state transfer tax until closing, after the house was completed. The transfer tax was based on the value of the vacant land as of the date of the purchase agreement. In 2001, the Department of Treasury reviewed Lake Forest’s past tax payments of state real estate transfer taxes and determined that, from November 1997 through September 2000, Lake Forest had underpaid taxes in the amount of $65,968 and owed a penalty of $16,492 plus interest. Lake Forest challenged the ruling and eventually filed a petition with the Michigan Tax Tribunal. The Tribunal sustained the assessment, but the Court of Appeals reversed in a divided published opinion. The Court of Appeals majority concluded that the state real estate transfer tax act requires the transfer tax to be based on the value of property at the time the parties executed the purchase agreement. The dissenting judge thought that the act imposed a tax on the executed deed, and not the earlier and unrecorded purchase agreement. The Department appeals.
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