Tuesday's Tip: Using Tax Stamps to Find Property Sale Price

Buying real estate is a very public event.  Often newspapers print a list of grantors, grantees, addresses and sales prices every week. No wonder people have been trying to hide the true sale price since the beginning of record keeping. When trying for privacy, the phrase used has not changed in some venues in all that time – ‘$1.00 and other valuable consideration’ or the equally unhelpful, ‘for consideration paid.’ There are a few ways to find the sale price.

Another reason to hide the sale price was the excise tax charged for each transaction.  Before 1968, the federal government used tax stamps affixed to deeds to collect revenue from each transaction. They looked like postage stamps. The rate on the sale price was $.55 per $500 or fraction thereof.  A property selling in 1967 for $30,500 would require one of the parties, usually the seller, to pay U.S. taxes of $33.55. After 1 Jan 1968, the U.S. government stopped taxing land sales, but the states decided to tax property transfers themselves. Some states were doing so before that time.  From 19 Jun 1940 to 28 Dec 1967, Massachusetts had its own tax on the $30,500 transaction cited above of $34.00 for a total of $67.55 in taxes on the transaction.

The stamps were bought and attached at the time of recording. (Note that if a mortgage was assumed, the feds only charged taxes on the difference between the mortgage amount and the sale price.) Some jurisdictions let the parties hide the sale price by not putting stamps on deeds where the consideration was $1.00. Other counties put the stamps on for the real amount which allows us to calculate the price with simple math.

If you are at a recorder’s office or find its website, it often has the tax rates through the years because genealogists make them FAQs.  To figure out the rate yourself, read this example:

In a 1975 Massachusetts deed, the sales price was $70,000 and the tax stamp was $159.60. Divide the tax by the number of thousands in the sale price to see that the tax rate was $2.28 per thousand.

$159.60 ÷ 70 = $2.28

Now that you know the tax rate at that time, you may be able to use that rate and the amount of tax stamps to determine the sales price on another deed that tries to conceal it. First find a deed with tax stamps and no sale price. Divide the amount of the tax stamps by the tax rate of $2.28. For example, if the deed indicates $171.00 in taxes, divide it by $2.28/thousand. The answer will be ‘75’ which you translate to $75,000.

©2011, Susan Lewis Well