Was Florida documentary stamp tax due when spouses transferred a newly purchased residence to their qualified personal residence trusts?

Plain-English summary

Florida exempted the spouses' transfers of a residence to their separate qualified personal residence trusts because they retained beneficial ownership and received no consideration.

Each spouse had previously created a separate residence trust and retained a 20-year interest in the trust property, with the remainder going to surviving children if they survived the term. The spouses then bought a second Florida property, each taking an undivided one-half interest, and planned to deed those interests to their respective trusts after sale proceeds from the first property were paid to the bank that financed the new purchase.

The trust-transfer rule

Section 201.02(1) generally taxed deeds based on consideration and defined consideration to include money, discharged obligations, and mortgages or other encumbrances.

Rule 12B-4.013(32)(a), however, provided that a transfer to or from a trust was taxable only to the extent that:

1. the deed transferred beneficial ownership of the real property; and
2. consideration existed for the transfer.

No documentary stamp tax was due to the extent the grantor retained beneficial ownership.

Why the QPRT transfers qualified

The TAA described a qualified personal residence trust as allowing a donor to transfer a remainder interest while retaining exclusive, rent-free possession and enjoyment for a selected term. When that term ends, the named remainder beneficiaries become the beneficial owners.

Here, the husband and wife retained beneficial ownership after the deeds to their trusts, and the Department found no consideration for the transfers. It therefore concluded that the transfers were exempt.

What this means for you

The exemption depended on the actual trust and deed terms, not merely the “QPRT” label. A transfer that shifts current beneficial ownership, discharges debt, or provides other consideration may not match this ruling.

Common questions

Q: Did legal title move to the trusts?
A: Yes, but the grantors retained beneficial ownership during their specified trust terms.

Q: Did the children immediately receive current possession?
A: No. They held remainder interests that would become beneficial ownership after the retained term under the described arrangement.

Q: Was consideration paid for the deeds?
A: No. The Department expressly relied on the absence of consideration.

Q: Did the ruling impose minimum documentary stamp tax?
A: No. It concluded that these transfers were exempt from documentary stamp tax.

Citations and references

• Fla. Stat. § 201.02(1) — tax and consideration rules for real-property deeds
• Fla. Admin. Code r. 12B-4.013(32)(a) — transfers of real property to or from a trust

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 04B4-011

Original ruling text

SUMMARY
QUESTION: Is a transfer of encumbered real property from Husband and Wife to their respective Qualified Personal
Residence Trust will be subject to documentary stamp tax?
ANSWER - Based on Facts Below: Since Husband and Wife, as grantors retained beneficial ownership of the real
property and there is no consideration for the transfers, these transfers are exempt from documentary stamp tax.

December 2, 2004

Re: Technical Assistance Advisement No. 04B4-011
Documentary Stamp Tax
Transfer of Real Property to a Qualified Personal Residence Trust
Section 201.02(1), F.S.; Rule 12B-4.013(32) (a), F.A.C.
XXX (hereinafter Husband)
XXX (hereinafter Wife)
XXX (hereinafter First Florida Property)
XXX (hereinafter Second Florida Property)
XXX (hereinafter Bank)
Dear:
This is in response to your request for a Technical Assistance Advisement regarding the documentary stamp tax
issues involved transferring of a condominium to the respective Qualified Personal Residence Trusts. The specific fact
for which advice has been requested is presented below. You also enclosed with your letter, the Sale and Purchase
Agreement, Closing Statement, and copy of the Deed and Trust Agreement for our review.
Facts Presented by Petitioner
In 1999, Husband and Wife each created a separate Residence Trust to which they transferred an undivided onehalf interest in the First Florida Property. Each retained a 20-year interest in the Trust property, with the remainder
interest going to their surviving children, if they survived that 20-year term. Neither the Husband nor the Wife has an
interest in the other's Residence Trust.
Husband and Wife recently purchased Second Florida Property. They will be transferring this Second Property to
their respective Qualified Personal Residence Trusts. As Trustees of their respective trusts, Husband and Wife signed
an agreement to sell the First Florida Property, with the closing date in October 2004. Husband and Wife closed on
the Second Florida Property in September 2004. Bank agreed to loan Husband and Wife the entire purchase price,
because the proceeds from First Florida Property were not available to Husband and Wife at the time they closed on
Second Property. When First Property sale proceeds are received, Husband and Wife will deliver them immediately to

the Bank to reduce the loan, and they will concurrently sign deeds transferring their undivided one-half interests in
Second Property to their respective Residence Trusts.
Husband and Wife will initially take ownership of Second Florida Property in their separate names; each will own
an undivided one-half interest. Then, when the First Florida Property sale is completed and the funds are delivered to
Bank, both will sign a warranty deed to Trustee, transferring their interests in Second Florida Property to their
Residence Trusts.
Requested Ruling by the Petitioner
Husband and Wife would like a binding opinion on whether these transfers to their Residence Trusts are subject to
documentary stamp taxes.
Law and Discussion
Pursuant to s. 201.02(1), F.S., a tax is imposed 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. The
amount of the tax is $.70 on each $100.00 of consideration paid therefor. When the full amount of the consideration
for the execution, assignment, transfer, or conveyance is not shown in the face of such deed, instrument, document,
or writing, the tax shall be at the rate of $.70 for each $100.00 or fractional part thereof of the consideration therefor.
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.
As Rule 12B-4.013(32) (a), F.A.C., states, a transfer of real property to or from a trust is taxable only to the extent
that the deed transfers the beneficial ownership of the real property and to the extent that there is consideration for the
transfer. No stamp taxes are due upon a transfer of real property to a trust to the extent the grantor retains beneficial
ownership of the real property.
Conclusion
A Qualified Personal Residence Trust is an estate planning device that enables a donor to transfer his or her
interest in a personal residence to a trust in order to reduce its value for federal gift and estate tax purposes. It allows
a donor to make a current gift of his or her residence to remainder beneficiaries of the trust, typically the donor's
children; eliminate the value of the residence from the donor's gross estate for federal estate tax purposes; and retain
the right to reside in the residence. The donor retains beneficial ownership of the residence and trust for a specified
number of years selected by the donor, during which time he or she is entitled to the exclusive, rent-free possession
and enjoyment of the residence. Upon the expiration of the donor's term of beneficial ownership, the designated
remainder beneficiaries of the trust then become the beneficial owners of the residence. Depending upon the terms of
the particular trust agreement, legal title to the residence will either pass directly to the remainder beneficiaries or
remain in further trust.

Husband and Wife, as grantors, upon the transfer of the real property to the Qualified Personal Residence Trust,
retained beneficial ownership of the real property. Since the grantors retained beneficial ownership of the real property
and there is no consideration for the transfers, these transfers are exempt from documentary stamp tax.
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
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 199, 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
BES/mh