Did quitclaim deeds transferring unencumbered land from an individual to her already wholly owned Florida LLC owe more than minimum documentary stamp tax?

Plain-English summary

The Florida Department of Revenue concluded that the quitclaim deeds were subject only to minimum documentary stamp tax. The taxpayer transferred unencumbered land to her wholly owned LLC without receiving any new units, money, debt relief, or other consideration.

The Florida LLC had been formed before the land transfer. The taxpayer had already made a separate cash contribution and received 1,000 units representing a 100% ownership interest.

She then planned to deed several parcels to the LLC for asset-protection and estate-planning purposes. The number of LLC units would not change, and the property had no mortgages or other liens.

Beneficial ownership stayed the same

Before the deeds, the taxpayer directly owned all of the real property. Afterward, the LLC would own the property and the taxpayer would own all of the LLC.

The ruling found that this left her economic ownership and net worth unchanged. The transaction changed the legal form of ownership without introducing a purchaser or exchange of value.

Kuro controlled the result

Section 201.02 taxed deeds based on consideration, including money, discharged obligations, mortgages, liens, and other property exchanged.

In Kuro, two individuals conveyed unencumbered property to their wholly owned corporation without payment. Because beneficial ownership did not change and there was no purchaser, the court found no value-based documentary stamp tax due.

The Department found the LLC transfers within the same rule and imposed only minimum tax on the instruments.

What this means for you

Property owners forming a single-member LLC

Minimum-tax treatment may apply when you fully own the LLC before the deed, the property is free of debt, and you receive no added units, cash, debt relief, or other value.

Estate-planning and asset-protection advisers

The stated purpose did not create consideration. The decisive facts were unchanged beneficial ownership and the absence of encumbrances or value exchanged.

Closing and tax professionals

Confirm the formation date, existing ownership, prior capital contribution, mortgages, liens, units issued, and all side agreements before relying on the ruling.

Common questions

Q: Did the taxpayer own the LLC before transferring the land?
A: Yes. She already held 100%, represented by 1,000 units.

Q: Did she receive additional units for the property?
A: No.

Q: Was the property mortgaged or subject to liens?
A: No. It was unencumbered.

Q: Why did she make the transfer?
A: The ruling states asset-protection and estate-planning purposes.

Q: What tax applied?
A: Only minimum documentary stamp tax on the deeds.

Citations and references

• Fla. Stat. § 201.02(1) — documentary stamp tax and forms of consideration
• Kuro, Inc. v. Department of Revenue, 713 So. 2d 1021 (Fla. 2d DCA 1998) — unchanged beneficial ownership and no consideration
• Crescent Miami Center, LLC v. Department of Revenue, 857 So. 2d 904 (Fla. 3d DCA 2003) — identified in the ruling as then pending before the Florida Supreme Court

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 05B4-002

Original ruling text

SUMMARY
QUESTION: Is a transfer of unencumbered real property from an individual to a Florida Limited Liability Company,
wholly owned by the taxpayer be subject to tax?
ANSWER - Based on Facts Below: In light of the ruling of Kuro, the transfer will only be subject to minimum
documentary stamp tax.

March 18, 2005

Re: Technical Assistance Advisement No. 05B4-002
Documentary Stamp Tax
Transfer of Real Property to a Limited Liability Company
Section 201.02(1), F.S.
XXX (Taxpayer)
XXX (LLC)
Dear:
This is in response to your request for a Technical Assistance Advisement regarding the documentary stamp tax
issues involving transferring unencumbered several parcels of land to a Florida limited liability company, wholly-owned
by the Taxpayer.
Facts as Presented by Petitioner
The LLC was formed in January 2005, upon the filing of the Articles of Organization with the Florida Department of
State. Pursuant to the terms of the Operating Agreement of the LLC, the Taxpayer has made a contribution of XXX
($XX) for her percentage interest in the LLC, being one hundred percent (100%), which percentage interest is
represented by one thousand (1,000) units.
Following the exchange of consideration for units in the LLC, for asset protection and estate planning purposes,
the Taxpayer desires to transfer all of her interest in the real property to the LLC by means of a quit claim deed. There
will be no consideration given by the LLC to the Taxpayer for the real property, and the number of units owned by the
Taxpayer in the LLC will remain unchanged. The real property is unencumbered and not subject to any mortgages or
other liens.
Once the real property is conveyed by the Taxpayer to the LLC, the LLC will own one hundred percent (100%) of
the unencumbered real property and the Taxpayer will own one hundred percent (100%) of the percentage interest in
the LLC. Thus, the resulting ownership in the LLC will be identical to the pre-transfer ownership interest of Taxpayer in
the real property, without having any effect on Taxpayer's net worth.

In Kuro Inc. v. Department of Revenue, 713 So.2d 1021 (Fla 2nd 1998), the court rendered a decision regarding
the application of documentary stamp tax as imposed under s. 201.02(1), F.S., upon an instrument conveying Florida
real property from two individuals into their wholly-owned corporation. In Kuro, the property conveyed was
unencumbered and there was no money paid or to be paid. The court opined that the beneficial ownership of the real
property was unchanged and that there was no "purchaser" within the meaning of s. 201.02(1), F.S., and that,
therefore, no tax was due.
The undersigned representative of the Taxpayer is not aware of any legislation, court decisions or regulations that
have been determined that are contrary to the position advanced herein. (Although not directly on point, Crescent
Miami Center, LLC v. Department of Revenue, 857 So.2d 904 (Fla.3rd DCA 2003), is currently on appeal before the
Florida Supreme Court.) Further, to the best of the representative's knowledge, the identical issue is not involved in a
return of the Taxpayer.
Requested Ruling by the Petitioner
The Taxpayer is requesting the Department's advisement that the imposition of documentary stamp taxes on the
instrument conveying the real property to the LLC will be subject to only the minimum documentary stamp tax as
imposed under section 201.02, F.S.
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. If the consideration paid or given in exchange for real
property or 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.
Conveyances of real property are generally taxable per s. 201.02(1), F.S. The above described transfers of
properties into the LLC fall within the parameters of the decision in Kuro, supra.
Conclusion
Based on the foregoing, Kuro, supra, will apply and the documentary stamp tax imposed on the instruments
conveying real property to the LLC will only be subject to the minimum tax. The properties are unencumbered and,
once the conveyances from the Taxpayer to the LLC occur, the Taxpayer's ownership in the LLC will be identical to
the pre-transfer ownership interest of Taxpayer in the real property.

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 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
BES/mh