Was a deed transferring bare title from one synthetic lessor to a successor subject to Florida documentary stamp tax?

Plain-English summary

Florida ruled that a deed transferring bare legal title from one synthetic lessor to a successor synthetic lessor was not subject to documentary stamp tax on real-property conveyances.

The synthetic lease was structured as a lease for financial accounting but functioned as financing for other purposes. The synthetic lessor held bare title and received payments equal to interest, while the synthetic lessee remained the true owner and borrower. Florida treated the lease and title together as a mortgage.

The business reorganization changed the entity serving as fee-title holder, synthetic lessor, and conventional mortgagor, but the customer-owner and debt remained the same. Although the assignment had to use a fee-simple deed because the mortgagee held bare title, it transferred only the mortgagee's interest and no underlying real-property interest.

What this means for you

Instrument form does not always control documentary stamp tax. Where bare title is part of a genuine security arrangement treated as a mortgage, a successor-lender transfer can differ from an ordinary deed conveyance.

Common questions

Why was a deed not taxed as a conveyance? It transferred the synthetic mortgagee's bare-title interest, not ownership of the real property.

Did the true property owner change? No.

Was the underlying synthetic financing tax-free? No. The source explains that the mortgage financing itself was subject to applicable documentary stamp and intangible taxes on the secured principal.

Citations and references

• Fla. Stat. §§ 201.02, 697.01, and 697.02, and Fla. Admin. Code rr. 12B-4.052 and 12B-4.054, as quoted and discussed in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 10B4-001

Original ruling text

QUESTION: Whether a deed of bare legal title conveying synthetically leased Florida real
property from one synthetic lessor to a successor synthetic lessor is exempt from Florida
documentary stamp taxes under section 201.02, F.S., based on the treatment of the synthetic
lease as a mortgage.
ANSWER: Since the synthetic lease together with the bare legal title held by the synthetic
lessor is deemed to be a mortgage, the documentary stamp tax imposed by section 201.02, F.S.,
does not apply to the assignment or transfer of the mortgage because no interest in real property
is transferred. This is true despite the fact the instrument of transfer must take the form of a deed
since the synthetic lessor/mortgagee holds bare legal title to the property.
January 11, 2010
Re:

Technical Assistance Advisement No. 10B4-001

Documentary Stamp Tax – Synthetic Lease Transaction
Sections 201.02, 697.01(1), 697.02, Florida Statutes (F.S.)
XXX, XXX, XXX (“Taxpayers”)
Dear XXX:
This is in response to your letter dated XXX, requesting a ruling that a deed conveying
synthetically leased Florida property from one synthetic lessor to another is exempt from
documentary stamp tax pursuant to Section 201.02, F.S. This response constitutes a Technical
Assistance Advisement under Chapter 12-11, Florida Administrative Code (F.A.C.), and is
issued to you under the authority of 213.22, Florida Statutes (F.S.)
FACTS AS PROVIDED BY TAXPAYER
XXX offers synthetic lease financing facilities to certain customers in Florida and other
states through XXX, an affiliate of the XXX. “XXX” and the XXX now desire that “XXX”
assign its synthetic lease positions to the XXX itself.
Taxpayers describe a synthetic lease facility (synthetic lease) as a financing transaction
that is structured in the form of a lease for financial accounting purposes, but is treated as a
mortgage for most other purposes. In a synthetic lease transaction, the synthetic lessor holds bare
legal title to the real property during the existence of the synthetic lease, and leases the property
to the true owner of the property, who acts as the synthetic lessee. The stream of “rent” payments
made under the synthetic lease by the synthetic lessee is equal to the interest payable on the total
amount of funds advanced by the synthetic lessor to acquire the property. For purposes other
than financial accounting, the synthetic lessor is treated as the holder of a mortgage on the
property, while the synthetic lessee, the true owner of the property, is treated as the borrower of
the funds. For Florida documentary stamp tax purposes, the synthetic lease is treated as a
mortgage and is subject to documentary stamp taxes and intangible taxes based on the principal

Technical Assistance Advisement 10B4-001
Page 2

amount secured. The deed to the lessor/lender who holds bare legal title and a synthetic lease
facility together are considered a mortgage, and therefore the deed is not subject to documentary
stamp tax under section 201.02, F.S. Likewise, at the end of the synthetic lease facility, when
the debt is repaid by the synthetic lessor, the deed of bare legal title coming back from the
synthetic lessor to the customer who is the true owner of the property is also not subject to
documentary stamp tax.
In this particular synthetic lease transaction presented by the Taxpayers, “XXX” is the
lessor/lender under the synthetic lease. “XXX” funded the amount paid for the property with a
combination of its own funds, funds borrowed from third party lenders, and the sale of a lease
participation to the XXX. As an additional security precaution, a conventional Florida mortgage
was recorded against the real property to secure the portion of the funding advanced to the
lessor/lender by the lease participant and the third party lenders. The “mortgagor” of this
precautionary conventional mortgage is “XXX”, acting as both the synthetic lessor and fee title
holder, and the mortgage runs in favor of the XXX or another XXX acting as mortgagee.
Because this conventional mortgage secures a portion of the same indebtedness as the synthetic
lease, Florida documentary stamp taxes and intangible taxes will be paid only once on the
conventional mortgage.
The XXX and “XXX” desire to reorganize their synthetic lease business and wish to
transfer to the XXX the role now fulfilled by “XXX”, which acts as fee title holder, synthetic
lessor, and conventional mortgagor. The customer that is the true owner of the property, that acts
as the synthetic lessee/borrower of the funds, and that pays the monthly debt service as “rent,”
will remain the same. In form, the required instrument of assignment will be a fee simple deed of
the bare legal title to the property from “XXX” to the XXX as successor synthetic lessor, and the
conventional mortgage will remain recorded against the property.
REQUESTED RULING
The Taxpayers request the Department issue a ruling that a deed conveying the
synthetically leased Florida real property from one synthetic lessor to a successor synthetic lessor
is exempt from Florida documentary stamp taxes under section 201.02, F.S., even if the property
is encumbered by the conventional mortgage securing a portion of the same indebtedness that is
secured by the synthetic lease.
LAW AND DISCUSSION
Section 201.02(1)(a), F.S., imposes documentary stamp tax on deeds or other
instruments that convey real property or an interest in real property. The base of
the tax is consideration given for the conveyance. Consideration includes, but is
not limited to, any mortgages, or other encumbrances on the property, whether or
not the underlying indebtedness is assumed.
Section 697.02, F.S., provides that a mortgage shall be held to be a specific lien
on the property therein described, and not a conveyance of the legal title or of the
right of possession. Rule 12B-4.052(7), F.A.C., provides: “All conveyances,

Technical Assistance Advisement 10B4-001
Page 3

obligations conditioned or defeasible, bills of sale or other instruments or writing
conveying or selling property, either real or personal for the purpose or with the
intention of securing the payment of money… shall be deemed and held
mortgages….”
Rule 12B-4.054(5), F.A.C., states that documentary stamp tax is not imposed on
an assignment or transfer of a Florida mortgage to a new lender who purchases
and becomes the holder of a note and mortgage, when the transaction does not
result in a transfer of interest in real property transferred to the assignee.
POSITION OF DEPARTMENT
For documentary stamp tax purposes, the Department takes the position that the synthetic
lessor is treated as the holder of a mortgage on the property, and the synthetic lessee, the true
owner of the property, is treated as the borrower of the funds (mortgagor). Since the synthetic
lease together with the bare legal title held by the synthetic lessor is deemed to be a mortgage,
the documentary stamp tax imposed by section 201.02, F.S., does not apply to the assignment or
transfer of the mortgage, because no interest in real property is transferred. This is true despite
the fact the instrument of transfer must take the form of a deed, since the synthetic
lessor/mortgagee holds bare legal title to the property.
Consequently, a deed of bare legal title from “XXX”, conveying synthetically leased
Florida real property to the XXX, as successor synthetic lessor, is not subject to documentary
stamp under section 201.02, F.S., because the synthetic lessor is really a mortgagee and owns no
interest in the real property. The instrument transferring that mortgagee’s interest is not a
transfer of an interest in real property.
This response constitutes a Technical Assistance Advisement under section 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 section 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 section 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.

Technical Assistance Advisement 10B4-001
Page 4

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 and Dispute Resolution
JBE/tlg
Record ID: 73574