Applicabiity of Real Estate Sales Tax to Transfers for Benefit of Unformed Corporation

A corporate promoter entered into an earnest money agreement which contemplated corporate purchase of real property. At the planned closing date, the incorporation process was incomplete. To avoid losing the property, the promoter entered into a real estate contract naming himself and two nominees as purchaser-trustees to hold the property in trust for the benefit of the proposed corporation. The one-percent real estate sales tax was paid by the seller, since the transfer to the trustees constituted a sale. One month later, the beneficiary was incorporated. Pursuant to the trust agreement, the trustees transferred the property to the corporation by quitclaim deeds executed separately by each trustee for nominal consideration. King County assessed an identical tax upon this transfer, contending that it was a second sale. The trustees, who were incorporators, paid the tax under protest, claiming double assessment, and brought action to recover the tax. On appeal, judgment for plaintiffs was affirmed. Held: Where an earnest money agreement for purchase of real property expressly contemplates that the purchaser will be a corporation, and the incorporators accept title in trust since the incorporation process is incomplete, the subsequent conveyance of title from the incorporators to the beneficiary corporation is not a sale and hence not a taxable event for purposes of the transfer tax. Senfour Investment Co. v. King County, 66 Wash. Dec. 2d 61,401 P.2d 319 (1965)