Which merger and ownership-interest steps required a deed and Florida documentary stamp tax?

Subject

Mergers

Plain-English summary

A Florida corporation's direct merger into a foreign LLC required a deed and documentary stamp tax, but the other specified corporation and ownership-interest steps generally did not. Florida law required real property to be conveyed by taxable deed when a domestic corporation merged into a business entity other than a corporation.

By contrast, a Florida corporation could merge into a foreign corporation without a deed when title vested by operation of law. A later merger of the foreign LLC's corporate owner and contribution of the LLC membership interest to a foreign partnership did not themselves transfer Florida real property by deed, unless foreign law required otherwise.

What this means for you

Each step must be classified separately. A merger label does not answer whether Florida real property passes automatically, requires a recorded deed, or merely changes ownership of an entity interest.

Common questions

Q: Did a Florida corporation's direct merger into an LLC require a deed? Yes, under the Florida statute applied in the ruling.

Q: Did a Florida corporation's merger into a foreign corporation require a deed? No, when applicable law vested title by operation of law.

Q: Did transferring the foreign LLC membership interest require a Florida deed? No, unless the foreign jurisdiction required otherwise.

Citations and references

• Fla. Stat. § 201.02(1) — documentary stamp tax on real-property conveyances
• Fla. Stat. §§ 607.1101, 607.1107-607.1109, 607.11101 — mergers and title effects
• Fla. Stat. § 607.11101(2) — deed required for real property in a corporate merger into another business entity
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00B4-005

Original ruling text

SUMMARY

QUESTION 1: Is a deed required and tax imposed on transfers
of real property by operation of law through the merger of
a Florida corporation into a foreign limited liability
company (LLC) if no deed is required by the foreign
jurisdiction?

ANSWER 1 - Based on Facts Below: A merger of the Florida
corporation into a foreign corporation by operation of law
will not require a deed or tax.

QUESTION 2: Will tax be due on subsequent transfers of
interest in the LLC by operation of law, when the LLC's
sole member merges with another corporation or thereafter
by assignment from a foreign corporation to a foreign
limited partnership?

ANSWER 2 - Based on Facts Below: A merger of a Florida
corporation into an entity other than a corporation will
require a deed and payment of tax. The merger of the sole
member of the foreign LLC, which is a corporation, with
another foreign corporation by operation of law, or the
subsequent assignment from the foreign corporation to a
foreign partnership will not require a deed or tax, except
the foreign state law requires otherwise.

Apr 11, 2000

Re: Technical Assistance Advisement No. 00B4-005
Documentary Stamp Tax; Mergers
Section 201.02, F.S.
XXX (hereinafter R Corporation)
XXX (hereinafter R Partnership)
XXX (Florida) Inc. (hereinafter T)
XXX (hereinafter F-Subs)
XXX (hereinafter T-Del)
XXX (hereinafter T Merger Sub)

XXX (hereinafter LLC)
XXX (hereinafter Del-Subs)
XXX (hereinafter LLC-Subs)

Dear :

Your letter requesting a Technical Assistance Advisement
has been referred to this office for response. The specific
scenario for which advice has been requested is summarized
below.

Facts as Presented by Petitioner

T is a Florida corporation. T Corporation and its three
Florida subsidiary corporations ("F-Subs") own several parcels
of developed Florida real estate that R Corporation wishes to
acquire. R Corporation is a foreign corporation. In order to
satisfy certain undisclosed federal tax considerations, and to
effectuate the purchase in a form acceptable to R Corporation, T
will form a wholly owned foreign subsidiary corporation ("TDel"). T-Del will create a wholly owned subsidiary T Merger
Sub. T Merger Sub is a Maryland corporation. T Merger Sub will
create LLC, a foreign limited liability company. LLC will form
Del-Subs and LLC-Subs, which are three subsidiary corporations
and three subsidiary limited liability companies respectively.

After these subsidiaries are created, T will merge into the
T-Del. Then T-Del will merge into LLC. Next, F-Subs will merge
into Del-Subs under the foreign state government's law. Then
Del-Subs will merge into LLC-Subs. All entities that survive
will be wholly-owned by T Merger Sub.

Subsequent to the above mergers, T Merger Sub will merge
with and into R Corporation, under foreign law. R Corporation
will be the surviving corporation. R Corporation will then
contribute its interest in the LLC to R Partnership in exchange
for units of limited partnership interest. R Corporation owns
all its assets through R Partnership, which is its operating
subsidiary.

Request for Advisement

You request the issuance of a Technical Assistance
Advisement holding that:

1) no Florida deed is required and no Florida Documentary
Stamp taxes are due on the transfer of real property by
operation of law through the merger of Florida corporations
into a Delaware limited liability company if the laws of
Delaware permit the merger of the entities and no deed is
required under Delaware law to transfer title to the
property to the surviving entity, and

2) no Florida Documentary Stamp taxes are due on the
subsequent transfer of the interest in the limited
liability company by operation of law (when the LLC's sole
member--a Maryland corporation--merges with another
Maryland corporation) or thereafter by assignment from a
Maryland corporation to a Delaware limited partnership.

Provisions of Law

Section 201.02(1), F.S., states:

On deeds, instruments, or writings whereby any lands,
tenements, or other real property, or any interest therein,
shall be granted, assigned, transferred, or otherwise
conveyed to, or vested in, the purchaser or any other
person by his or her direction, on each $100 of the
consideration therefor the tax shall be 70 cents.... For
purposes of this section, consideration includes, but is
not limited to, the money paid or agreed to be paid; the
discharge of an obligation; and the amount of any mortgage,
purchase money mortgage lien, or other encumbrance, whether
or not the underlying indebtedness is assumed. If the
consideration paid or given in exchange for real property
or any interest therein includes property other than money,
it is presumed that the consideration is equal to the fair
market value of the real property or interest therein.

Sections 607.1101, 607.1108, 607.1109 and 607.11101, F.S.,
permit the merger of Florida corporations, partnerships and

limited liability companies. Sections 607.1101 and 607.1108,
F.S., state that pursuant to a plan of merger one or more
corporations may merge with or into one or more corporations or
other business entities. According to s. 607.11101, F.S., when
a merger becomes effective, every other corporation party to the
merger ceases to exist, except the surviving corporation.

When a Florida corporation merges with or into foreign
corporation s. 607.1107(4), F.S., provides:

The effect of such merger shall be the same as in the case
of the merger of domestic corporations if the surviving
corporation is to be governed by the laws of this state.
If the surviving corporation is to be governed by the laws
of any state other than this state, the effect of such
merger shall be the same as in the case of the merger of
domestic corporations except insofar as the laws of such
other state provide otherwise.

Section 607.1108(1), F.S., allows a domestic corporation to
merge with a business entity and provides:

As used in this section and ss. 607.1109 and 607.11101, the
term "other business entity" means a limited liability
company, a foreign corporation, a not-for-profit
corporation, a business trust or association, a real estate
investment trust, a common law trust, an unincorporated
business, a general partnership, a limited partnership, or
any other entity that is formed pursuant to the
requirements of applicable law. Notwithstanding the
provisions of chapter 617, a domestic not-for-profit
corporation acting under a plan of merger approved pursuant
to s. 617.1103 shall be governed by the provisions of ss.
607.1108, 607.1109, and 607.11101.

When a Florida corporation merges with or into an other
business entity, s. 607.11101(2), F.S., provides:

The title to all property other than real property or any
interest therein, owned by each domestic corporation and
other business entity that is a party to the merger is

vested in the surviving entity without reversion or
impairment. Title to real property or any interest therein
shall be conveyed by the recordation of a deed with payment
of applicable taxes thereon.

Position of the Department

Based on the foregoing authorities and facts presented, a
merger of the Florida corporation into the foreign corporation,
by operation of law, shall be the same as in the case of a
merger of a domestic corporation if the surviving corporation is
to be governed by the laws of this state. The result is the
same if the surviving corporation is to be governed by the laws
of another state, unless the laws of the state provide
otherwise. No deed is required, and no documentary stamp tax
will be imposed.

However, in accordance with the law of this state, where
the Florida corporation merges into a business entity other than
a corporation, the title to real property shall be conveyed by
recordation of a deed with payment of tax. In other words, if a
Florida corporation merges directly into a foreign limited
liability company, the title to real property shall be conveyed
by deed, and documentary stamp tax will be due, regardless of
whether the merger occurs under foreign state law.

Finally, the transfer of the interest in a foreign limited
liability company by operation of law (when the sole member of
the company merges with another foreign corporation by operation
of law), or thereafter by assignment from the foreign
corporation to a foreign partnership, will not require a deed
with applicable taxes paid thereon except if the laws of the
foreign jurisdiction require otherwise.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the Department only
under the facts and circumstances described in the request for
this advice as specified in s. 213.22, F.S. Our response is
predicated on those facts and the specific situation summarized
above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the

statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment than
expressed in this response.

You are further advised that this response, your request
and related backup documents are public records under Chapter
119, F.S., and are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Confidential information must be
deleted before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical Assistance Advisement,
the backup material and this response, deleting names, addresses
and any other details which might lead to identification of the
taxpayer. Your response should be received by the Department
within 15 days of the date of this letter.

Sincerely,

Celestine Grantham
Senior Tax Specialist
Technical Assistance and Dispute Resolution
Office of General Counsel

CG/mh