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Last Updated: 4/6/2018

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Mortgages from Chapter 7, 9, and 13 Bankruptcy – Taxable

Mortgage Registration Tax (MRT) is due on a mortgage executed as part of a bankruptcy estate in all bankruptcy cases, unless the mortgage is explicitly exempt under the federal Bankruptcy Code.

There are no special provisions in the federal Bankruptcy Code exempting mortgages in connection with bankruptcy estates under Chapter 7, Chapter 9, or Chapter 13 bankruptcy cases. These mortgages are subject to the MRT.

Mortgages from Chapter 11 and 12 Bankruptcy – Exempt

No tax is due on the execution of a mortgage from the bankruptcy estate in a Chapter 11 (business reorganization) or Chapter 12 (family farm reorganization) bankruptcy case. The exemption are based on special tax provision in the Federal Bankruptcy Code.

  • Exemption for Chapter 11 Mortgages
    • According to Section 1146(a) of the federal Bankruptcy Code: “The issuance, transfer, or exchange of a security, or the making or delivery of an instrument of transfer under a plan confirmed under Section 1129 of this title, may not be taxed under any law imposing a stamp tax or similar tax.”
  • Exemption for Chapter 12 Mortgages
    • According to Section 1231(a) of the federal Bankruptcy Code: “The issuance, transfer, or exchange of a security, or the making or delivery of an instrument of transfer under a plan confirmed under Section 1225 of this title, may not be taxed under any law imposing a stamp tax or similar tax.”