Homes, Inc. v. Commonwealth, 050906 PACCA, 487 F.R. 2004

Docket Nº:487 F.R. 2004
Party Name:Harmon Homes, Inc., Petitioner v. Commonwealth of Pennsylvania, Respondent.
Case Date:May 09, 2006
Court:Court of Appeals of Pennsylvania

Harmon Homes, Inc., Petitioner


Commonwealth of Pennsylvania, Respondent.

No. 487 F.R. 2004

Court of Appeals of Pennsylvania

May 9, 2006

Argued April 4, 2004




Harmon Homes, Inc., petitions for review of an order of the Board of Finance and Revenue, sustaining the Department of Revenue’s (Department) calculation of the transfer tax owed upon a conveyance of land from Harmon Homes to Gerald L. Robbins, Jr. Because Robbins also contracted for the construction of a home on the land received from Harmon Homes, the Department combined the value of both contracts to produce the amount of tax owed. We affirm the Board.

The parties have stipulated to the facts relevant to this petition.1 On February 4, 2002, a deed was filed in Monroe County to record a transfer of real estate from Harmon Homes2 to Robbins that took place on January 28, 2002. The deed identified the subject realty as Lot Numbers 277 and 278, “Plotting of Wilderness Acres,” Middle Smithfield Township, Monroe County, and stated that the consideration for the conveyance was $40,000. At the deed’s recording, a realty transfer tax of $400 was paid in accordance with the relevant provisions of the Tax Reform Code of 1971, commonly referred to as the Realty Transfer Tax Act (Act).3 The same day Lots 277 and 278 were conveyed, January 28, 2002, Robbins entered into a contract with P.P.F. Homes, Inc., an affiliate of Harmon Homes, for the construction of a two-story “Nantucket” home, at a cost of $138,000, on Lots 277 and 278.

On February 24, 2002, Robbins conveyed Lots 277 and 278 to One Stop Realty, Inc., for $1. At the recording of the deed on March 4, 2002, the parties presented a Statement of Value attesting that the transfer was a “turnkey project” and as such not taxable.4 Upon completion of the construction of the Nantucket home on Lots 277 and 278, on October 4, 2002, One Stop Realty reconveyed Lots 277 and 278 to Robbins for $1. At the recording of the deed transferring the realty to Robbins, the parties again claimed the transfer was a turnkey project and not taxable.

On March 21, 2003, the Department notified Harmon Homes that it owed additional tax on the January 28, 2002, transfer of Lots 277 and 278 to Robbins.5 The Department explained that the real estate transferred on January 28, 2002, had a value of $178,000, not $40,000 as reported, because of the executory building contract between Robbins and P.P.F. Homes6 signed the same day Robbins purchased Lots 277 and 278. Harmon Homes appealed. The Department's Board of Appeals and, next, the Board of Finance and Revenue sustained the Department's imposition of the additional tax. This appeal followed.

On appeal,7 Harmon Homes presents one issue for our consideration. It contends that the value of the building contract executed by Robbins was irrelevant to his purchase of land from Harmon Homes because Robbins did not own Lots 277 and 278 while the Nantucket home was being constructed. It contends that Robbins’ conveyance to One Stop Realty separated the value of the executory contract from the value of the real estate conveyed by Harmon Homes to Robbins and, thus, it was error for the Department to combine the value of both contracts in calculating the amount of the realty transfer tax. The Department counters that the only way to separate the value of the executory contract from the value of the land transfer would have been for either Robbins or P.P.F. Homes to have rescinded the construction contract on or before the date of the land transfer from Harmon Homes to Robbins. Neither party did so.

We begin our analysis with a review of the applicable statutory law. Section 1102-C of the Act taxes

[e]very person who makes, executes, delivers, accepts or presents for recording any document … at the rate of one per cent of the value of the real estate represented by such document.

72 P.S. §8102-C. The “document” presented for recording is one that transfers title to real estate.8 The value of the real estaterepresented by that...

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