Under the Department's 2004 position, what documentary stamp tax applied when partners deeded unencumbered property to their pre-existing partnership without changing beneficial ownership?

Plain-English summary

The Department's formal 2004 position was that the deed from the partners to their existing general partnership was subject only to minimum documentary stamp tax. The transfer changed record title but not the property's long-standing beneficial ownership.

Four individuals had bought the Florida investment property in 1974 and formed an oral general partnership with equal 25% interests. They obtained a federal identification number, filed partnership returns from inception, later put the partnership in writing, and consistently reported the real estate as a partnership asset.

The individuals remained record-title nominees. They proposed deeding title to the partnership before converting the entity to a limited liability partnership or LLC.

Why the Department applied only minimum tax

The mortgage had been paid off years earlier, so the property was unencumbered. Each partner's ownership percentage in the land matched the partnership percentage, and no partner received anything in exchange for the deed.

The Department analogized the facts to Kuro, Inc. v. Department of Revenue, where unchanged beneficial ownership and no consideration supported minimum documentary stamp tax on an unencumbered transfer.

The PDF contains a wording conflict

The opening summary says documentary stamp taxes “would not be due.” The requested ruling and the Department's formal position, however, both say the deed was subject to minimum tax. This page reports the formal position rather than turning that inconsistency into a zero-tax claim.

The advisement expressly did not address the proposed later conversion of the general partnership into a limited liability partnership.

What this means for you

Partnerships and property owners

The favorable historical result relied on pre-existing beneficial ownership, identical ownership percentages, no debt, and no consideration. A newly formed entity or changed percentages would present different facts.

Title companies and real-estate attorneys

Do not quote the opening “no tax” line without the Department's minimum-tax position. Confirm current authorities before recording a present deed.

Accountants and tax professionals

Long-standing partnership returns and ownership records were important evidence that legal title, not beneficial ownership, was being aligned.

Common questions

Q: What tax did the Department's formal position require?
A: Minimum documentary stamp tax.

Q: Was the property mortgaged?
A: No. The mortgage had been paid off years earlier.

Q: Did ownership percentages change?
A: No. The partners' real-estate interests matched their partnership interests.

Q: Did the ruling cover conversion to an LLP or LLC?
A: No. It expressly declined to address that later step.

Citations and references

• Fla. Stat. § 201.02(1) — documentary stamp tax on deeds conveying real property
• Kuro, Inc. v. Department of Revenue, 713 So. 2d 1021 (Fla. 2d DCA 1998) — authority used in the 2004 analysis
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 04B4-002

Original ruling text

SUMMARY

QUESTION: Is a transfer of unencumbered real property from
partners to a general partnership subject to tax?

ANSWER - Based on Facts Below: No. With the decision in
Kuro, Inc. v. State of Florida Department of Revenue, 713
So.2nd 1021 (Fla. 2nd DCA 1998), since the owners of real
property are also the same partners of the partnership, to
which the real property is being transferred and the
property is unencumbered, Florida documentary stamp taxes
would not be due on the deed from the partners to the
partnership.

Feb 11, 2004

Re: Technical Assistance Advisement No. 04B4-002
Florida Documentary Stamp Tax
Deeds from Partners to a General Partnership
Section 201.02, F.S.
XXX (General Partnership)
XXX (Partner 1)
XXX (Partner 2A)
XXX (Partner 2B)
XXX (Partner 3)
XXX (Partner 4)

Dear:

This is in response to your request for a Technical
Assistance Advisement, in which you seek an advisement as to
whether documentary stamp tax will be due on deeds from partners
to a general partnership pursuant to s. 201.02(1), F.S.

Facts and Circumstances Presented by Petitioner

The following is the description of the transactions
outlined in your letter.

In 1974, four individuals purchased certain real property
in Florida for purposes of investment. They formed an oral
general partnership for this investment. All four original
partners had equally 25% interest in the partnership.

The parties obtained a federal identification number for
their partnership. The partnership has been filing partnership
income tax returns with the Internal Revenue Service since its
inception. The partnership (or the individuals acting as
partners) entered into a triple net lease agreement that
provided for the demolition of the existing structure on the
property and the construction of a restaurant by the tenant.
The other party to the rental agreement was, and is, unrelated
to any of the individuals or their partnership.

By agreement in 1983, the oral partnership was codified in
a written document. The individuals have continued to serve as
nominees for the partnership, as "title holders"; and they wish
to transfer legal title to the real estate from themselves to
their general partnership.

On all Federal income tax returns filed by the partnership
since its inception, the real property was listed as an asset of
the partnership.

For protection against possible future personal liability
for actions in connection with the real estate, the individuals
intend to transfer legal title of the real estate to their preexisting general partnership and then to convert the general
partnership into a limited liability partnership or into a
limited liability company. Since their percentage ownership in
the real estate is identical to the percentage ownership in the
partnership, no partner will receive anything in return for
deeding the legal title of the real estate to the partnership.
The mortgage on the real estate was paid off many years ago, so
that there is no existing mortgage on the real estate.

You attached to your letter the proposed deed conveying the
title to the real estate from the individuals to the
partnership.

Requested Ruling by the Petitioner

You seek the Department's confirmation that only minimum
tax will be due on the deed from the four Partners to the
General Partnership to make the record title conform to the
historical beneficial ownership of the property.

Law and Discussion

Section 201.02(1), F.S., imposes tax on deeds, instruments,
or writings that convey, grant, or transfer real property or
interest in real property.

The case of Kuro, Inc. v. Department of Revenue, 713 So.2nd
1021 (Fla. 2nd DCA 1998), involved a father and son who formed a
corporation so that they could avail themselves of the benefits
of incorporation. The father and son had equal shares of the
ownership interests in the corporation. The court ruled there
was no consideration for the transfer of unencumbered real
estate from the father and son to their solely owned
corporation, as the beneficial interest in the property remained
the same. The court decided that the deed was only subject to
minimal documentary stamp tax.

Department's Position

The facts in this situation are analogous to those in Kuro.
The deed effecting the described transfer of real estate from
the Partners to the partnership will only be subject to minimum
documentary stamp tax.

This advisement does not address the proposed conversion of
the general partnership into a limited liability partnership.

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 interpretation of the
statutes or rules upon which this advise 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,

Baldan E. Sulker
Senior Tax Specialist
Technical Assistance & Dispute Resolution
Office of General Counsel

BES/mh