Was the purchase of all interests in a real-estate LLC subject to documentary stamp tax under Florida's conduit-entity rules?

Plain-English summary

The Florida Department of Revenue concluded that a corporation's purchase of all membership interests in a Florida real-estate LLC was not subject to documentary stamp tax under the conduit-entity rules.

Most of the LLC's properties had been acquired before the conduit law's July 1, 2009 effective date, with tax paid on the deeds. The one later property also had documentary stamp tax paid on full consideration when deeded to the LLC.

Because the later deed did not transfer property into the LLC for less than fair-market-value consideration without full deed tax, the LLC was not a conduit entity. The equity purchase therefore did not trigger the conduit-interest tax.

What this means for you

Buyers of property-owning entities

Review each property's acquisition date and deed-tax history before treating an entity-interest sale as a conduit transaction.

Transaction teams

A post-2009 property contribution can matter, but full documentary stamp tax on the deed prevented conduit status here.

Common questions

Q: Was the 100 percent LLC-interest purchase taxable?
A: No.

Q: Why wasn't the LLC a conduit entity?
A: Its older properties predated the law, and the later acquisition paid deed tax on full consideration.

Citations and references

• Fla. Stat. §§ 201.02(1)(a) and (b)1., and 213.22
• Fla. Admin. Code r. 12B-4.060(1)(b)2.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 13B4-002

Original ruling text

Interim
Executive Director
Marshall Stranburg

QUESTION: Will any documentary stamp tax be due on the consideration paid by a corporation
(“Taxpayer”) to acquire 100% of all membership interests in a limited liability company (“LLC”)
whose sole assets consist of properties, where all but the last property were purchased by the LLC
prior to the July 1, 2009, effective date of the conduit entity law? The last property was purchased
by the LLC on July 29, 2011. The deed which transferred the last property to the LLC had
documentary stamp tax paid based on the full consideration.
ANSWER: The first properties were acquired prior to the effective date of the conduit entity law, and
documentary stamp tax was paid on each deed at the rate prescribed in s. 201.02(1)(a), F.S., based on
consideration equal to or greater than the fair market value of each property. The deed which transferred
the last property to the LLC occurred after the effective date of the conduit entity law. As provided in s.
201.02(1)(b)1., F.S., a legal entity is considered to be a conduit entity when a grantor conveys real
property to the legal entity in which the grantor has a direct or indirect ownership interest without payment
of documentary stamp tax on the deed based on full consideration, (i.e., an amount not less than the
property’s fair market value). The deed which transferred the last property to the LLC had documentary
stamp tax paid based on the full consideration; thus, the LLC is not a conduit entity. Therefore, the
consideration paid by the Taxpayer to acquire 100% of the membership interests in the LLC will not be
subject to documentary stamp tax under s. 201.02(1)(a), F.S.
February 08, 2013

XXX
XXX
XXX
Re:

Technical Assistance Advisement No. 13B4-002
Documentary Stamp Tax – Conduit Entity
XXX (hereinafter referred to as “Taxpayer”)
XXX (hereinafter referred to as “LLC”)
Section 201.02(1)(a) and (b)1., F.S.
Rule 12B-4.060(1)(b)2., F.A.C

Dear XXX:
This is in response to your request dated XXX, for a Technical Assistance Advisement (TAA) pursuant to
section 213.22, F.S., and Rule Chapter 12-11, Florida Administrative Code (F.A.C.), regarding the
imposition of documentary stamp tax on certain membership interests to be acquired by the Taxpayer in
Child Support Enforcement – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – James McAdams, Director  Information Services – Tony Powell, Director

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

Technical Assistance Advisement 13B4-002
Page 2

another entity. An examination of your letter has established that you have complied with the statutory and
regulatory requirements for issuance of a TAA. Therefore, the Department is hereby granting your request
for a TAA.
FACTS AS PRESENTED BY PRACTIONER
The Taxpayer intends to acquire 100% of all membership interests in LLC. At the time of acquisition,
LLC’s sole assets will be XXX medical office properties and XXX facility, all located in Florida
(collectively, the “Properties”). With the exception of the XXX facility, which was acquired on XXX, the
land and improvements for all of the Properties were purchased by LLC in arm’s length transactions from
XXX parties prior to XXX. LLC paid documentary stamp tax on each deed based on consideration equal
to or greater than the fair market value of the Properties.

REQUESTED RULING
The Taxpayer requests that the Department issue a ruling that LLC is not a conduit entity pursuant to s.
201.02(1)(b)1., F.S., and that no documentary stamp tax will be due based on the purchase price to be paid
by the Taxpayer to acquire the membership interests in LLC.
LAW AND DISCUSSION
Documentary stamp tax is imposed on certain deeds and other instruments whereby any lands, tenements,
or other real property, or any interest therein, shall be granted, assigned, transferred, or otherwise
conveyed to, or vested in, the purchaser or any other person by his or her direction at the rate of $.70 per
$100 (or fraction thereof) when such deeds are given in exchange for “consideration.”
Under s. 201.02, Florida Statutes (F.S.), consideration includes, but is not limited to:
(1)(a) . . . the money paid or agreed to be paid; the discharge of an obligation; and the
amount of any mortgage, purchase money mortgage lien, or other encumbrance, whether
or not the underlying indebtedness is assumed. If the consideration paid or given in
exchange for real property or any interest therein includes property other than money, it
is presumed that the consideration is equal to the fair market value of the property or
interest therein.
Section 201.02(1)(b), F.S. (effective July 1, 2009), provides that where property is conveyed to a legal
entity without full consideration by a grantor who owns a direct or indirect ownership interest in the
entity, or a successor entity, the legal entity is a “conduit entity.” Then, if all or a portion of the grantor’s
direct or indirect ownership in the conduit entity is transferred for consideration within three years of the
conveyance, documentary stamp tax is due on the consideration paid or given in exchange for the

Technical Assistance Advisement 13B4-002
Page 3

ownership interest in the conduit entity. The statute defines, “consideration” as “that which would be paid
in an arm’s length transaction between unrelated parties.” Rule 12B-4.060(1)(b)2., F.A.C., provides that
full consideration is an amount not less than the fair market value of the property.
RESPONSE
LLC is not a conduit entity, because the first XXX properties were acquired prior to the effective date of
the conduit entity law, and the deed which transferred the XXX property to LLC had documentary stamp
tax paid based on the full consideration. Because LLC is not a conduit entity, the consideration paid by
the Taxpayer to acquire 100% of the membership interests in LLC will not be subject to documentary
stamp tax under s. 201.02(1)(a), F.S.
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 documents are public records under
Chapter 119, F.S., which are subject to disclosure to the public under the conditions of s. 213.22, F.S.
Your name, address, and any other details, which might lead to identification of the taxpayer, must be
deleted before disclosure. In an effort to protect the confidentiality of such information, we request you
provide the undersigned with an edited copy of your request for Technical Assistance Advisement, backup
material, and response within fifteen days of the date of this advisement.

Sincerely,

Joy. B. Eldred, CPA
Tax Law Specialist
Technical Assistance and Dispute Resolution

Record ID: 136236