TransferOwnershipGuidelines excerpt pg 33-34.pdf

Laura McCool Graham Petitioner V Township Of Peninsula, Sally A Murray Respondents · 26-002851-TT

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4. A secondary public offering 

of the stock of 

a company 

(a secondary public 

offering occurs when 

a company whose stock 

is already publicly traded issues 

additional new stock for sale to the public) 

5. The trading of the stock of a privately held company 

(a privately held company 

is 

a company whose stock is not available for sale to the public) 

6. A takeover involving a public offer by someone to buy stock from present 

stockholders in 

order to gain control of a company 

c 

ly C 

lled Entiti 

If entities are commonly controlled, is a transfer of property (or ownership interests) 

among the entities a transfer of ownership? 

No. See MCL 211.27a(7)(m). 

With regard to entities under common control, what is meant by “entities”? 

“Entities” in this context means corporations, partnerships, limited liability companies, 

limited liability partnerships, or any other legal entity. 

When are entities considered to be commonly controlled? 

The State Tax Commission has directed that Michigan Revenue Administrative Bulletin 

1989-48 is to be used in determining whether entities are commonly controlled. This 

bulletin is available on the Internet at www.michigan.gov/treasury. This bulletin details 

three categories of common 

control: 

1. 

A parent-subsidiary group of trades or businesses 

2. 

A brother-sister group of trades or businesses 

3. 

A combined group of trades or businesses (a specific combination of a parent- 

subsidiary group and a brother-sister group of trades or businesses) 

For entities to be commonly controlled under Michigan Revenue Administrative Bulletin 

1989-48, the entities must be engaged 

in 

a business or trades activity. See 

C & J 

Investments of Grayling, LLC v City of Grayling, unpublished opinion per curiam of the 

Court of Appeals, issued November 13, 2007 (Docket No. 270989). The term “common” is 

defined as “belonging equally to, or shared alike by, two or more or all 

in question.” 

Entities which are not engaged 

in 

a business activity cannot be entities under common 

control under Michigan Revenue Administrative Bulletin 1989-48. 

Example: A husband and wife own their personal residence together as tenants by the 

entireties. 

For estate planning and other purposes, they convey the property to a limited 

liability company 

of which the wife 

is the only member. The entities involved (the 

husband and wife and the 

limited liability company) cannot be considered entities under 

common control under Michigan 

Revenue Administrative Bulletin 1989-48 since no 

business activity exists in this situation. 

Note: Michigan Revenue Administrative Bulletin 1989-48 refers to Internal Revenue 

Service 

regulations concerning constructive ownership (also commonly known as 

ownership attribution). 

It is the opinion of the State Tax Commission that, although 

Michigan Revenue Administrative Bulletin 1989-48 is to be used in determining entities 

under common control, the Internal Revenue Service regulations concerning 

constructive ownership are 

to be disregarded. 

Application of the regulations regarding 

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constructive ownership (ownership attribution) would 

result in transfer of ownership 

exemptions that were clearly not intended by the legislature. 

Is it possible for entities not to qualify as entities under common control under 

Michigan 

Revenue Administrative Bulletin 1989-48 but still be considered entities 

under common 

control? 

Yes. 

If there is a business purpose, there are two circumstances that constitute 

a common 

control 

situation—even though the entities involved may not qualify as entities under 

common control 

under Michigan Revenue Administrative Bulletin 1989-48: 

1. 

Initial transfers by individuals of a fee simple interest in a property, made to an 

entity such as a corporation, a limited liability company or a partnership, are 

considered to be 

transfers between commonly controlled entities and 

not 

transfers of ownership, 

if the 

ownership interests and extent of control which 

the individuals have 

in the entity are identical to the ownership interest and extent 

of control which each of the individuals had 

in the property prior to the initial 

transfer. Transfers to limited partnerships would not qualify for the reason that 

such transfers involve a change in control. 

2. 

Transfers where the fee simple interest in a property is conveyed 

(retransferred) from 

an initial transferee entity, as described in 

1 above, to the 

individuals who made the 

initial transfer to that entity, 

if the ownership 

interests and extent of control which those individuals have in the entity at 

the time of the retransfer are identical to the ownership interests and extent 

of control which each of the individuals had 

in the 

property prior to the initial 

transfer and those interests have not changed the between 

the time of the 

initial transfer and the time of the retransfer. 

In Sebastian J. Mancuso Family Trust v City of Charlevoix, 300 Mich App 1, 831 NW2d 

907 (2013), the Court held that Trustees between trusts do not equate to the trusts being 

commonly controlled. The Court stated: “property is transferred from one owner to 

a 

wholly new owner. Exceptions are made for transfers from 

a trust settlor where the 

settlor is the sole 

present beneficiary 

because 

ownership 

in 

such 

a 

situation 

does 

not 

change. 

See MCL 211.27a(6)(c). Exceptions are also made for transfers of property 

that substitute the transferor for 

the transferor’'s spouse. See MCL 211.27a(6)(d), (e), and 

(f). The exceptions in § 7 are similar in 

nature; they are triggered when property is 

transferred from one owner to a wholly new owner. 

Reading the statute as 

a whole, 

it 

is apparent that petitioner simply does not fall within the 

definition of “commonly 

controlled” by virtue of having the same trustees for both the 

transferring trust and the 

receiving trust.” 

Tax-Free 

R 

os 

If a transfer of real property (or other ownership interest) results from a 

transaction that qualifies as a tax-free reorganization under section 368 of the 

Internal Revenue Code, 26 USC 368, is that transfer a transfer of ownership? 

No. 

See MCL 211.27a(7)(n). 

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