B-171440, MAR 3, 1970

B-171440: Mar 3, 1970

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

REVENUE STAMPS AND RECORDING FEES INCURRED IN CONNECTION WITH THE PURCHASE OF A RESIDENCE AT NEW OFFICIAL STATION ON BASIS THAT RECORD SHOWED SUCH COSTS WERE INCLUDED IN THE PURCHASE PRICE OF THE RESIDENCE AND WERE PAID BY THE SELLER. CLOSING COSTS ACTUALLY PAID BY A PURCHASER EVEN THOUGH GIVEN TO THE SELLER WHO IN TURN ACTUALLY TENDERED PAYMENT FOR THE VARIOUS COSTS ARE REIMBURSABLE BUT. THE PAYMENT OF A DOWNPAYMENT WHICH IS MERELY A PERCENTAGE OF THE PURCHASE PRICE WITH NO AMOUNT SPECIFICALLY ATTRIBUTABLE TO CLOSING COSTS DOES NOT MEET THE REQUIREMENT OF BOB CIRCULAR. THE DISALLOWANCE OF YOUR CLAIM WAS PREDICATED ON THE FACT THAT THE RECORD SHOWED SUCH COSTS WERE INCLUDED IN THE PURCHASE PRICE OF YOUR RESIDENCE AND WERE PAID BY THE SELLER.

B-171440, MAR 3, 1970

TRANSFERS - PURCHASE OF RESIDENCE - INCIDENTAL EXPENSES DENIAL OF CLAIM FOR EXPENSES INCLUDING TRANSFER TAXES, REVENUE STAMPS AND RECORDING FEES INCURRED IN CONNECTION WITH THE PURCHASE OF A RESIDENCE AT NEW OFFICIAL STATION ON BASIS THAT RECORD SHOWED SUCH COSTS WERE INCLUDED IN THE PURCHASE PRICE OF THE RESIDENCE AND WERE PAID BY THE SELLER. CLOSING COSTS ACTUALLY PAID BY A PURCHASER EVEN THOUGH GIVEN TO THE SELLER WHO IN TURN ACTUALLY TENDERED PAYMENT FOR THE VARIOUS COSTS ARE REIMBURSABLE BUT, AS IN THIS CASE, THE PAYMENT OF A DOWNPAYMENT WHICH IS MERELY A PERCENTAGE OF THE PURCHASE PRICE WITH NO AMOUNT SPECIFICALLY ATTRIBUTABLE TO CLOSING COSTS DOES NOT MEET THE REQUIREMENT OF BOB CIRCULAR, NO. A-56, THAT THE COST BE INCURRED AND PAID BY THE PURCHASER.

TO MR. ALEXANDER S. KOPSTEIN:

WE REFER TO YOUR LETTER OF OCTOBER 30, 1970, REQUESTING RECONSIDERATION OF OUR OFFICE SETTLEMENT DATED AUGUST 21, 1970, WHICH DISALLOWED YOUR CLAIM FOR REIMBURSEMENT OF CERTAIN EXPENSES, INCLUDING TRANSFER TAXES, REVENUE STAMPS AND RECORDING FEES, IN CONNECTION WITH THE PURCHASE OF A RESIDENCE AT YOUR NEW OFFICIAL STATION.

THE DISALLOWANCE OF YOUR CLAIM WAS PREDICATED ON THE FACT THAT THE RECORD SHOWED SUCH COSTS WERE INCLUDED IN THE PURCHASE PRICE OF YOUR RESIDENCE AND WERE PAID BY THE SELLER. WE INDICATED IN OUR SETTLEMENT LETTER THAT REGARDLESS OF THE FACT THAT SETTLEMENT COSTS WERE AN ELEMENT WHICH WENT INTO ESTABLISHING THE PURCHASE PRICE OF YOUR RESIDENCE THERE WAS NO BASIS FOR TREATING ANY PART OF THAT PRICE AS OTHER THAN THE PRICE OF THE REALTY.

YOU STATE THAT THIS RULE IS INEQUITABLE IN ITS APPLICATION TO PURCHASERS OF RESIDENCES FROM SELLERS WHO INCLUDE SELLING COSTS IN THE PURCHASE PRICE AS COMPARED TO PURCHASERS WHO PAY CLOSING COSTS THEMSELVES IN THAT THE ULTIMATE COST TO BOTH IS THE SAME. YOU ARGUE THAT WHERE CLOSING COSTS ARE INCLUDED IN THE SELLING PRICE, CERTAIN FEES ARE NEVERTHELESS REQUIRED TO BE PAID AND THAT IT MATTERS NOT THAT THE PURCHASER HIMSELF DID NOT PAY THOSE FEES SINCE BY INCLUSION IN THE SELLING PRICE, THE BUYER, IN EFFECT, DESIGNATED THE SELLER AS HIS AGENT FOR THE PURPOSE OF PAYING THOSE FEES. YOU ADD:

"AT THE TIME OF PURCHASE I PAID THE SELLER, LEVITT AND SONS INC. $6,300.00 IN CASH AND CERTIFIED CHECKS. THIS AMOUNT WOULD CERTAINLY COVER THE SELLER FOR HIS OUT OF POCKET EXPENDITURES AND SHOULD AVOID THE ARGUMENT THAT I WAS SPREADING THE PAYMENT OF CLOSING COSTS OVER A 25 YEAR MORTGAGE."

WE WOULD AGREE WHERE CLOSING COSTS ARE ACTUALLY PAID BY A PURCHASER AT CLOSING THAT IT MATTERS NOT THAT HE MAY HAVE GIVEN THE AMOUNT TO THE SELLER WHO IN TURN ACTUALLY TENDERED PAYMENT FOR THE VARIOUS COSTS ASSOCIATED WITH CLOSING OF THE SALE. ACCORDINGLY, IN B-165678, FEBRUARY 5, 1969, A COPY OF WHICH IS ENCLOSED, WE HELD THAT CLOSING COSTS WERE REIMBURSABLE WHERE, ALTHOUGH THE PRICE OF THE RESIDENCE DID NOT INCLUDE CLOSING COSTS, THEY WERE DEDUCTED FROM THE PRINCIPAL AMOUNT OF THE MORTGAGE AND THE PURCHASER PAID THE SELLER AN ADDITIONAL AMOUNT AT CLOSING TO MEET THE FULL SELLING PRICE OF THE RESIDENCE.

THIS SITUATION, HOWEVER, IS DIFFERENT FROM A CASE SUCH AS YOURS WHERE AN AMOUNT ATTRIBUTABLE TO CLOSING COSTS IS INCLUDED IN THE SELLING PRICE OF THE PROPERTY ON THE BASIS OF WHICH PRICE THE MORTGAGE IS EXECUTED. SEE THE COPIES OF B-165280, MARCH 3, 1969, AND B-165841, JANUARY 22, 1969, ATTACHED. IN THE LATTER TYPE OF CASE, THE DOWNPAYMENT, REGARDLESS OF HOW SIZEABLE, IS MERELY A PERCENTAGE OF THE PURCHASE PRICE AND NO AMOUNT THEREOF IS SPECIFICALLY ATTRIBUTABLE TO COSTS OF CLOSING. THUS AT THE TIME OF CLOSING, THE PURCHASER HAS NOT MET THE REQUIREMENT FOR REIMBURSEMENT OF OFFICE OF MANAGEMENT AND BUDGET CIRCULAR NO. A-56 THAT THE COST BE INCURRED AND PAID BY THE PURCHASER.

FOR THE REASONS DISCUSSED ABOVE, WE MUST SUSTAIN THE DISALLOWANCE OF YOUR CLAIM.