Did a no-consideration deed between identically owned entities trigger value-based documentary stamp tax on unencumbered Florida property?

Plain-English summary

Two artificial entities had the same indirect owners in the same proportions. One proposed to transfer unencumbered Florida real property to the other by special warranty deed for no or nominal consideration.

Florida ruled that only minimum documentary stamp tax applied. Because proportional beneficial ownership stayed the same and no mortgage, obligation, or other consideration was involved, the deed did not have a value-based tax base under the ruling's analysis.

The TAA warned that if the grantor's direct or indirect ownership interest in the recipient entity were transferred for consideration within three years, the conduit-entity provision could impose tax on that later transfer.

What this means for you

Common ownership alone is not enough: the property must be unencumbered, ownership proportions must remain identical, and no other consideration may pass. Near-term equity transfers require a second review.

Common questions

Did fair market value determine tax on the deed? No, under the stated no-consideration facts.

What tax applied? Only minimum documentary stamp tax.

What later event could create tax? A compensated ownership-interest transfer within three years.

Citations and references

• Fla. Stat. §§ 201.02 and 201.0201, as quoted or discussed in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 10B4-004

Original ruling text

Executive Director
Lisa Vickers

QUESTION: Is a deed that transfers unencumbered Florida real property, for no consideration, between
artificial entities with identical (direct or indirect) ownership subject to documentary stamp tax imposed
under s. 201.02(1)(a), F.S.
ANSWER: A deed that transfers unencumbered Florida real property, absent any other consideration,
between artificial entities with identical (direct or indirect) ownership would be subject to only minimum
documentary stamp tax.
November 18, 2010
XXX
XXX
XXX
Re: Technical Assistance Advisement No. 10B4-004
Documentary Stamp Tax – Conveyance of Real Property between Artificial Entities
Section 201.02(1)(a), Florida Statutes (F.S.)
XXX (“Taxpayer”)
XXX (“Grantor”)
Dear XXX:
This is in response to your letter dated XXX, requesting a Technical Assistance Advisement regarding
application of Florida’s documentary stamp tax as imposed under s. 201.02(1)(a), F.S., on a deed
transferring unencumbered Florida real property, for no consideration, between artificial entities with
identical direct or indirect ownership.
Facts as Presented by Petitioner
Taxpayer and Grantor are artificial entities, each owned indirectly by the same parent companies. “LLC
1” indirectly owns XXX f both Taxpayer and Grantor. “LLC 2” indirectly owns XXX of both Taxpayer
and Grantor.
Grantor currently holds title to unencumbered real property in XXX, and real property in XXX. Taxpayer
currently owns real property in XXX. The management of Taxpayer and Grantor has determined that all
the properties should be owned by Taxpayer. To accomplish this, Grantor will execute and deliver a
special warranty deed (the “Deed”) that transfers the XXX, property to Taxpayer for no (or nominal)
consideration.
A copy of the Deed and an organizational chart were included in the documentation provided to the
Department of Revenue for review.
Child Support Enforcement – Ann Coffin, Director z General Tax Administration – Jim Evers, Director
Property Tax Oversight – James McAdams, Director z Information Services – Tony Powell, Director

www.myflorida.com/dor
Tallahassee, Florida 32399-0100

Technical Assistance Advisement 10B4-004
Page 2
Request for Advisement
You request a determination by the Department as to whether the Deed will be subject to documentary
stamp tax pursuant to s. 201.02(1)(a), F.S.

Law and Discussion
Section 201.02(1)(a), F.S., imposes documentary stamp tax on deeds and other instruments that transfer
Florida real property or any interest therein. The tax is assessed on the consideration given for the interest
transferred. 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 or other encumbrance, whether or not the
underlying indebtedness is assumed. If the consideration given in exchange for real property 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.
In Crescent Miami Center, LLC v. Department of Revenue, 903 So. 2d 913 (Fla. 2005), May 19, 2005, the
Florida Supreme Court stated that “… the transfer of property between a grantor and its wholly owned
grantee, absent any exchange of value, is without consideration or a purchaser and thus not subject to
documentary stamp tax in section 201.02(1).” Because of this ruling, only minimum documentary stamp
tax is due on a deed that transfers unencumbered real property, without consideration, between artificial
entities when the direct or indirect ownership of the entities is held in the same percentages. See s.
201.0201, F.S.
Conclusion
Since the Florida real property transferred from Grantor to Taxpayer is unencumbered, and LLC 1 and
LLC 2 continue to directly or indirectly own the property in the same proportion after the transfer as
before, then, absent any other consideration, the Deed would be subject to only minimum documentary
stamp tax.
Please note that s. 201.02(1)(b)2., F.S., provides, in part, that when real property is conveyed to an entity,
and all or a portion of the grantor's direct or indirect ownership interest in the entity is subsequently
transferred for consideration within three (3) years of such conveyance, tax is imposed on each such
transfer.

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.

Technical Assistance Advisement 10B4-004
Page 3
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,

Roger L. Beasley
Senior Tax Specialist
Technical Assistance and Dispute Resolution
Record ID: 87130