Was a sale of LLC membership interests subject to Florida's conduit-entity documentary stamp tax when the LLC acquired its real property before July 1, 2009?

Plain-English summary

An LLC owned multiple Florida parcels acquired before July 1, 2009, with appropriate documentary stamp tax paid on the deeds. Its members planned to move some parcels to a new, commonly owned LLC and then sell all interests in the original LLC, which would retain the remaining older parcels.

Florida ruled that selling the original LLC's membership interests was not subject to the conduit-entity documentary stamp tax. The retained properties had been acquired before July 1, 2009, so the original LLC was not a conduit entity for those properties.

The ruling separately warned that the new LLC could become a conduit entity if it received the transferred parcels after July 1, 2009, without documentary stamp tax paid on full consideration.

What this means for you

The acquisition date and tax history of property inside an entity can control whether a later equity sale falls within the conduit-entity rule. Moving property into a new affiliate can create a different result for that affiliate.

Common questions

Was the original LLC membership sale taxable under the conduit rule? No.

Why not? The LLC acquired the retained Florida property before July 1, 2009.

Could the newly formed LLC be a conduit entity? Yes, if it received property after that date without full tax on the transfer.

Citations and references

• Fla. Stat. § 201.02(1)(b) and Chapter 2009-131, § 5, Laws of Florida, as quoted and discussed in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 11B4-002

Original ruling text

Executive Director
Lisa Vickers

TAX: Documentary Stamp Tax
TAA NUMBER: 11B4-002
ISSUE: Documentary Stamp Tax – Conveyance of Real Property between Artificial Entities
STATUTE CITE(S): Sections 201.02(1)(b), F.S.

QUESTION: Is the sale of membership interests in a limited liability company (LLC) that owns Florida
real property acquired prior to July 1, 2009, subject to documentary stamp tax as imposed on “conduit
entities” under s. 201.02(1)(b), F.S.
ANSWER: If the LLC acquired the property prior to July 1, 2009, then the sale and transfer of the
membership interests in the LLC is not subject to documentary stamp tax.
January 24, 2010
XXX
XXX
XXX
Re: Technical Assistance Advisement No. 11B4-002
Documentary Stamp Tax – Conveyance of Real Property between Artificial Entities
Section 201.02(1)(b), Florida Statutes (F.S.)
XXX (“Purchaser”)
XXX (“LLC”)
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)(b), F.S., on the sale of the
membership interests in a limited liability company holding title to Florida real property. This response to
your request constitutes a Technical Assistance Advisement under Chapter 12-11, Florida Administrative
Code, and is issued to you under the authority of section 213.22, Florida Statutes.
Facts as Presented by Petitioner
LLC currently holds title to numerous parcels of Florida real property. LLC acquired all of these parcels
prior to July 1, 2009, and the appropriate documentary stamp taxes were paid on the deeds.
The members/owners (“Members”) of LLC plan to sell and convey their entire membership interests in
LLC to Purchaser.

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 11B4-002
Page 2

Prior to selling LLC to Purchaser, the Members plan to form a new limited liability company (“Newco”).
The ownership interests in LLC and Newco will be the same. LLC will then transfer a number of parcels
of Florida real property to Newco, while retaining ownership of the remaining properties.
After the transfer of properties from LLC to Newco, the Members will then transfer their membership
interests in LLC to Purchaser. The Members will retain their ownership of Newco.
Documentation was provided to the Department of Revenue for review.

Request for Advisement
You request a determination by the Department as to whether the sale and conveyance of the membership
interests in LLC to Purchaser will be subject to documentary stamp tax pursuant to s. 201.02(1)(b), F.S.
Law and Discussion
Chapter 201, F.S., imposes documentary stamp tax on certain documents. A document
that transfers an interest in an artificial entity is taxable only when the entity is a “conduit
entity.”
Section 201.02(1)(b)1., F.S., defines a “conduit entity” as a legal entity to which real
property is conveyed without full consideration by a grantor who owns a direct or indirect
interest in the entity, or a successor entity; and "full consideration" means the
consideration that would be paid in an arm's length transaction between unrelated parties.
Section 201.02(1)(b)2., F.S., provides, “When real property is conveyed to a conduit
entity and all or a portion of the grantor's direct or indirect ownership interest in the
conduit entity is subsequently transferred for consideration within 3 years of such
conveyance, tax is imposed on each such transfer of an interest in the conduit entity for
consideration at the rate of 70 cents for each $100 or fraction thereof of the consideration
paid or given in exchange for the ownership interest in the conduit entity.”
Section 5, Chapter 2009-131, Laws of Florida, provides that the above referenced
statutory provisions do not provide a basis for assessments of tax, or refunds of tax, for
periods before July 1, 2009.
Position of the Department
Since the Florida real properties remaining with LLC were acquired before July 1, 2009, documentary
stamp tax is not due on the transfer of the membership interests in LLC to Purchaser. In this case, LLC is
not a conduit entity. Therefore, documentary stamp tax will not be due on the sale and conveyance of the
membership interest in LLC to Purchaser under the facts presented.

Technical Assistance Advisement 11B4-002
Page 3

However, it should be noted that Newco would be a conduit entity, as defined by s. 201.02(1)(b)1., F.S., if
documentary stamp taxes are not paid on the full consideration on the deeds transferring the properties
from LLC to Newco after July 1, 2009.
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,

Joy B. Eldred, C.P.A.
Tax Law Specialist
Technical Assistance and Dispute Resolution
(850) 717-6488
JBE/tlg
Record ID: 89863