Did an individual owe Florida documentary stamp tax for deeding unencumbered real property to an LLC the individual wholly owned?

Plain-English summary

An individual owned real property and then formed a limited liability company in which the individual was the managing member and owned 100% of the interests. The individual proposed deeding the property to that LLC. The property had no mortgage, and no other consideration would be given.

Florida concluded that the deed did not transfer a beneficial interest because the same person owned all of the property and all of the company. With neither a mortgage nor any other consideration, the deed owed only the minimum documentary stamp tax of 70 cents.

The ruling distinguished mortgaged property. It explained that the no-consideration result from Crescent Miami Center does not apply when conveyed property is subject to a mortgage; in that situation, the mortgage balance can provide the taxable base.

What this means for you

A deed to a wholly owned LLC was not fully stamp-taxed merely because legal title changed. The result depended on complete common ownership, the absence of any transferred beneficial interest, and the absence of a mortgage or other consideration. A debt-encumbered property can produce a different result.

Common questions

How much tax did Florida require on this deed? Only the 70-cent minimum tax.

Why was the deed not taxed on the property's value? Florida found no transfer of beneficial interest and no consideration because the individual owned 100% of both the property and the LLC, the property was unencumbered, and nothing else was exchanged.

Would the same answer apply if a mortgage encumbered the property? Not under the ruling's analysis. It states that Crescent Miami Center does not apply to mortgaged property and cites a case taxing an encumbered conveyance based on the mortgage balance.

Does common ownership alone decide every transfer? No. This determination rests on the stated ownership, lack of a mortgage, and lack of other consideration.

Citations and references

• Fla. Stat. § 201.02(1) (documentary stamp tax on deeds and other instruments conveying real property)
• Fla. Admin. Code r. 12B-4.012(1), (2) (conveyances and consideration)
• Crescent Miami Center, LLC v. Department of Revenue, 903 So. 2d 913 (Fla. 2005)
• Department of Revenue v. PMR Resorts, Inc., 868 So. 2d 621 (Fla. 2d DCA 2004)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 07B4-004

Original ruling text

SUMMARY
QUESTION: Is a deed conveying unencumbered real property from the individual to the
limited liability company solely-owned by the individual subject to tax?
ANSWER – Based on Facts Below: No. The deed conveying unencumbered real property
from the individual to their solely-owned limited liability is not subject to tax other than the
minimum $.70.

August 28, 2007

Re:

Technical Assistance Advisement No. 07B4-004
Documentary Stamp Tax-Conveyance of Real Property to Limited Liability Company
Section 201.02(1), F.S.
Rule 12B-4.012(1) and (2), F.A.C.
XXX (hereinafter Taxpayer)

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
On XX, a Personal Representative’s Deed conveyed certain real property to an
individual. On XX, the individual formed a limited liability company of which the individual is
the Managing Member and owner of 100% of the interests in the company. The individual now
desires to transfer the property into the company.
Request for Advisement
You request the Department review the supplied documents and issue a Technical
Assistance Advisement ruling that no documentary stamp tax is due in connection with the
proposed transfer of real estate.
Your position is that there is no documentary stamp tax due because the transfer of a
100% interest in real property is from an individual to a limited liability company, which is
100% owned by the same individual.
Provisions of Law and Discussion
Pursuant to ss. 201.02(1), F.S., and Rule 12B-4.012(1) and (2), F.A.C., tax is imposed on

deeds or instruments that convey real property or any interest in real property. The base of the
tax is consideration given for the conveyance. Consideration includes, but is not limited to,
money paid or to be paid, any mortgages, or other encumbrances on the property, whether or not
the underlying indebtedness is assumed. Where the consideration given is other than money, it is
presumed that the consideration is equal to the fair market value of the real property conveyed.
In Crescent Miami Center, LLC v. Department of Revenue, 903 So. 2d 913 (Fla. 2005)
unencumbered real property was transferred between related entities. The Florida Supreme
Court determined that the transfer of property between a grantor and its wholly owned grantee,
absent any exchange of value, was without consideration or a purchaser and was not subject to
the documentary stamp tax imposed by ss. 201.02(1), F.S. This transaction merely effected a
change in the form of ownership by the entities that had owned and continued to own the
property. However, where the conveyed property is subject to a mortgage, Crescent Miami does
not apply. In the case of Department of Revenue v. PMR Resorts, Inc. 868 So.2d 621 (Fla. 2d
DCA 2004) the court ruled that property encumbered by a mortgage is taxable based on the
mortgage balance at the time of conveyance.
The following questions must be answered to determine whether tax is due on this
conveyance:
Question 1: Is there a conveyance of an interest in the real property?
Question 2: What is the amount of consideration, if any, given for the conveyance?
Here the same individual owns 100% of the real property and 100% of the company.
Applying the Cresent Miami case, the deed from the individual to the limited liability company
does not convey a beneficial interest in real property. Regarding consideration, the Petitioner has
confirmed that no mortgages were attached to the property at the time of conveyance, nor was
there any other consideration given at the time of conveyance.
Position of the Department
The Department has determined that there was no conveyance of beneficial interest in the
real property, nor was there any consideration given for the conveyance. Therefore, only
minimum tax will be due on the deed.
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 Turner
Tax Law Specialist
Technical Assistance and Dispute Resolution
CGT/kh
Record ID 33079