What deed tax applied when unencumbered property moved from a partnership through its wholly owned LLC partner to an individual and then a revocable trust?

Plain-English summary

The individual owned 99% of a partnership directly and the remaining 1% through a wholly owned LLC. The partnership proposed deeding unencumbered property to those partners in the same proportions, followed by the LLC deeding its 1% interest to the individual.

Neither deed changed beneficial ownership, and no consideration or encumbrance existed. Only minimum documentary stamp tax applied to each.

The individual then proposed deeding the entire property to a revocable trust. That deed also qualified for minimum tax only if the trust was a land trust under section 689.071, the individual was its sole current income beneficiary, and the individual retained full power to revoke it.

What this means for you

Related-party status alone does not control. Trace beneficial ownership, exact proportions, liens, consideration, trust type, beneficiary rights, and revocation powers through every deed.

Common questions

Did the partnership deed change beneficial ownership? No.

What tax applied to the first two deeds? Minimum documentary stamp tax.

Did every revocable trust qualify? No. The final result required the specific Florida land-trust and beneficiary conditions.

Citations and references

• Fla. Stat. §§ 201.02(1) and 689.071, Fla. Admin. Code rr. 12B-4.014(2) and 12B-4.013(29), and Crescent Miami Center, LLC v. Department of Revenue, 903 So. 2d 913 (Fla. 2005), as cited in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 11B4-009

Original ruling text

Executive Director
Lisa Vickers

TAX: Documentary Stamp Tax
TAA NUMBER: 11B4-009
ISSUE: Related Party Transfer
STATUTE CITE(S) 201.02(1), F.S.
RULE CITE(S): 12B-4.014(2), F.A.C.
QUESTION: A partnership is owned by an individual and limited liability company (LLC).
The individual owns all of the membership interest in the LLC. Will a deed from the partnership
to transfer unencumbered real property to the partners, a deed from the LLC transferring its
interest in the property to the individual, and a subsequent deed from the individual transferring
100 percent (100%) of her interest in the property to her revocable trust be subject to tax.

ANSWER: The deed that will transfer unencumbered property from the partnership to its
partners and the subsequent deed to transfer the LLC’s interest in the property to the individual
will not change the beneficial ownership in the property since the individual indirectly owned all
of the partnership interest and directly owned all of the interest in the LLC. As such, only
minimum tax is required on each deed. The subsequent deed transferring 100 percent (100%) of
the interest in the property to the trust will only require minimum tax provided the trust is a land
trust as provided under s.689.071, F.S., since the individual is the sole current income
beneficiary of the trust with full right of revocation.
July 14, 2011
XXX
XXX
XXX

Re:

Technical Assistance Advisement No. 11B4-009
Documentary Stamp Tax-Related party transfer
Section 201.02(1), F.S.
Rules 12B-4.014(2), F.A.C.
XXX ( hereinafter Taxpayer)

Dear XXX:
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 11B4-009
Page 2

Your letter dated XXX requests a Technical Assistance Advisement concerning documentary stamp
tax on deeds that transfer unencumbered real property between related parties. This response to your
request constitutes a Technical Assistance Advisement under Chapter 12-11, Florida Administrative
Codes, and is issued to your under the authority of section 213.22, Florida Statutes.
Request for Advisement
You request the Department provide a binding legal opinion confirming that no documentary stamp
tax is due under the following facts:
A partnership (“Partnership”) is owned 99 percent (99%) by the Taxpayer and 1percent (1%) by the
Taxpayer’s wholly-owned limited liability company (“LLC”).
A deed will transfer unencumbered Florida real property from the Partnership to the Taxpayer and
the LLC in the same proportion as their ownership interest in the Partnership. A second deed will
transfer the LLC’s 1 percent (1%) interest in the unencumbered property to the Taxpayer, thereby
giving the Taxpayer a direct ownership of 100 percent (100%) of the unencumbered property
interest. There is no change in beneficial interest, nor is there any consideration involved in the
transfer of the property interests.
Upon receipt, the Taxpayer will convey 100 percent (100%) of her interest in the unencumbered
real estate to a revocable trust created by and for the Taxpayer’s sole benefit during her lifetime.

Provisions of Law and Discussion
Section 201.02(1), F.S., imposes tax on deeds that convey real property or any interest in real
property at $.70 per $100 or portion thereof of the consideration given or received in exchange
for the property. For purposes of this section, consideration includes but is not limited to: money
paid or to be paid and the amount of any mortgage or other encumbrance on the property
conveyed, whether or not the underlying indebtedness is assumed.
In Crescent Miami Center, LLC v. Department of Revenue, 903 So. 2d 913 (Fla. 2005), the
Florida Supreme Court determined that the transfer of the unencumbered property between the
grantor and its wholly owned grantee, absent any exchange of value, was without consideration
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. In other words, where there was no consideration and no transfer
of beneficial interest in the property as a result of the transfer, no documentary stamp tax would
apply.

Technical Assistance Advisement 11B4-009
Page 3

Rule 12B-4.013(29)(a), F.A.C., provides that a deed from X to a trustee is exempt from tax to the
extent X is the beneficial owner of the trust as described in s. 689.071, F.S., whether or not a
mortgage encumbers the real property. Rule 12B-4.013(29)(i), F.A.C., provides that a deed
transferring property to a trustee from a grantor who has the power to revoke the trust, and a
deed transferring property back to the grantor upon revocation of the trust are not transfers of
ownership subject to the tax.
Position of the Department
The deed that will transfer the unencumbered property from the Partnership to its partners and
the subsequent deed that will transfer the LLC’s interest in the property to the Taxpayer will not
change the beneficial ownership in the property since the Taxpayer indirectly owned all of the
partnership interests and directly owned all of the interest in the LLC. Only minimum tax will
be required on each deed since the property is unencumbered and there is no other consideration
given for the property transfers. The subsequent deed that will transfer the property from the
Taxpayer to the revocable trust will also require only minimum tax provided the trust is a land
trust as provided under s. 689.071, F.S., since the Taxpayer is the sole current income
beneficiary of the trust and she has full rights of revocation.
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

Technical Assistance Advisement 11B4-009
Page 4

CG/tlf
Record ID#: 93075