John P. Machen: A word (but surely not the last) on IDOTs
The basis of the indemnity deed of trust (“IDOT”) recordation tax exemption (or deferral for the purists) is that, under Tax Property Article 12-105(f), the recordation tax does not apply to a deed of trust that secures a debt not yet incurred. A guaranty, unlike the direct promise to pay in a promissory note, is considered a contingent obligation. So where a deed of trust secures the grantor’s guaranty of the debt of a third party, no debt is incurred by the grantor and therefore no recordation tax is due. However, once the guaranty becomes a primary obligation, such as when the borrower under the guarantied note defaults and the lender calls the guaranty, then the debt is incurred and the deed of trust becomes subject to the recordation tax.