Documentary transfer taxes are based on

• A. $1.55 per $1,000 of the purchase price.
• B. $1.10 per $500 of the purchase price.
• C. $0.55 per $500 of the cash paid and new loans obtained by the buyer.
• D. 1.25% of the sales price.

Answer: (C)

Documentary transfer taxes are based on the amount of consideration actually involved in the transfer. In California, the base is the cash paid by the buyer plus the face amount of any new loans obtained to finance the purchase. The rate is $0.55 for every $500 of that consideration (which equals $1.10 per $1,000). So you compute the tax by taking the total cash plus new financing, dividing by 500, and multiplying by 0.55. For example, if the buyer puts down 120,000 and obtains a 480,000 loan to buy a 600,000 property, the total consideration is 600,000, giving a tax of (600,000/500) × 0.55 = 660. The tax is paid to the county at recording, and while rates can vary by county, the principle remains that the tax base is cash paid plus new financing.