Was documentary stamp tax due when an individual transferred unencumbered property to an LLC owned by the individual's revocable trust?

Plain-English summary

An individual owned an unencumbered manufactured-housing community and proposed transferring it to a newly formed LLC. The LLC's sole member would be the individual's revocable trust, and the individual was both the trust's sole settlor and its sole beneficiary during life.

Florida concluded that no documentary stamp tax was due. Although the deed ran to the LLC rather than directly to the trust, the transaction did not change beneficial ownership: the trust owned the LLC, and the same individual remained the trust's sole lifetime beneficiary.

The ruling relied on the rule treating a deed from a grantor to the trustee of the grantor's revocable trust, and a deed back on revocation, as nontaxable transfers of ownership. Florida extended that beneficial-ownership analysis to the stated LLC structure.

What this means for you

The legal recipient's entity form did not control by itself. Florida focused on unchanged beneficial ownership, the revocable-trust relationship, and the fact that the property was unencumbered. A mortgage, other consideration, different trust beneficiary, or different ownership structure was not decided here.

Common questions

How much documentary stamp tax was due? None under the stated facts.

Why did the LLC not create a taxable ownership change? Its sole member was the individual's revocable trust, and the individual was the trust's sole settlor and sole lifetime beneficiary.

Did the deed have to run directly to the trust? No. Florida acknowledged that the transfer was indirect through the LLC but still found no change in beneficial ownership.

Did the ruling involve mortgaged property? No. The property was expressly unencumbered.

Citations and references

• Fla. Stat. § 201.02(1) (documentary stamp tax based on consideration for real-property transfers)
• Fla. Admin. Code r. 12B-4.013(32)(i) (revocable-trust deeds)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 07B4-001

Original ruling text

SUMMARY
QUESTION: In the case of a proposed conveyance of unencumbered real property owned by
an individual to a limited liability company of which the sole beneficiary is a revocable trust, are
documentary stamp taxes due if the individual is the sole settler of the revocable trust and the
sole beneficiary during his lifetime?
ANSWER – Based on Facts Below: Per Rule 12B-4.013(32)(i), F.A.C., a deed to a trustee of a
revocable trust from a grantor having the power to revoke the trust instrument and a deed back to
the grantor upon revocation of the trust are not taxable transfer of ownership. In this case, even
though the transfer is not directly from the individual to the trust, the conveyance is not taxable
as no change in beneficial ownership has occurred since the individual is the beneficiary of the
trust which in turn is the beneficiary of the limited liability company.

January 18, 2007

Re:

Technical Assistance Advisement No. 07B4-001
Documentary Stamp Tax
Conveyance of Real Property from Individual to Artificial Entity
Section 201.02(1), F.S.
Rule 12B-4.013(32)(i), F.A.C.
XXX (Taxpayer)
XXX (Trust)
XXX (Property)

Dear:
This is in response to your request for a Technical Assistance Advisement dated October
31, 2006, as to the taxability of a conveyance of Property from Taxpayer to an artificial entity
whose sole member will be the Taxpayer’s revocable trust.
Facts Presented by the Petitioner
Taxpayer, an individual, currently holds title to a manufactured housing community,
operated as Property. Taxpayer desires to convey Property to a limited liability company
(Company) to be formed, with the sole member of the Company being the Trust. The Property is
unencumbered. Taxpayer is the sole settlor of the revocable trust and the sole beneficiary during
his lifetime.
Requested Ruling
Taxpayer requests a determination that the proposed conveyance of Property shall be
exempt from documentary stamp tax.

Law and Discussion
Section 201.02(1), F.S., imposes the documentary stamp tax at the rate of $.70 per $100
on transfers of interest in real property based on the consideration given. Consideration includes
monies paid or to be paid, discharge of indebtedness, and any lien or encumbrances on the
property being transferred.
Rule 12B-4.013(32)(i), F.A.C., provides that, in the case of a revocable trust, a deed to a trustee
from a grantor who has the power to revoke the trust instrument, and a deed back to the grantor
from the trustee upon revocation of the trust, are not transfers of ownership subject to tax.
Department’s Position
In this case, the transfer is not directly from the Taxpayer to the Trust. However, since
the conveyance does not result in a change in beneficial ownership of the property, because the
sole member of the limited liability company is the Trust and the sole beneficiary of the trust is
the taxpayer, no documentary stamp tax would be due at the time of the transfer of the property
from the Taxpayer to the limited liability company.
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.
If you have any further questions with regard to this matter and wish to discuss them, you
may contact me directly at (850) 922-4844.
Sincerely,
Joy B. Eldred, C.P.A.
Tax Law Specialist
Technical Assistance & Dispute Resolution
JBE/mh
Record ID: 26500