What documentary stamp tax applies when three equal owners deed unencumbered Florida property to an LLC they own equally?

Plain-English summary

The Florida Department of Revenue concluded that only nominal documentary stamp tax applied when three individuals deeded two unencumbered Florida parcels to an LLC they owned in the same proportions.

Each individual owned one-third of each parcel before the transfer and one-third of the LLC afterward. The parcels had no mortgage or other encumbrance, and the request represented that no other consideration would be paid. Those facts fit Florida's identical-ownership rule for a conveyance without consideration.

The Department cautioned that the LLC could become a conduit entity because it acquired the property for less than fair market value. A transfer of an interest in the LLC within three years could therefore trigger documentary stamp tax under the conduit-entity rules.

What this means for you

Owners contributing property to an LLC

Nominal treatment depends on exact ownership continuity, unencumbered property, and no additional consideration. A mortgage, unequal LLC interests, or other value exchanged can change the result.

Transaction teams

Review planned equity transfers for the three years after the deed; the initial nominal-tax result does not eliminate later conduit-entity exposure.

Common questions

Q: Was tax based on the parcels' fair market value?
A: No. Only nominal tax applied on the stated identical-ownership, no-consideration facts.

Q: Could a later LLC-interest transfer be taxable?
A: Yes, if the conduit-entity rules apply within the three-year period described in the advisement.

Citations and references

• Fla. Stat. §§ 201.02(1)(a) and (b), 201.0201(3), and 213.22
• Fla. Admin. Code r. 12B-4.060
• Crescent Miami Center, LLC v. Department of Revenue, 903 So. 2d 913 (Fla. 2005)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 14B4-001

Original ruling text

Executive Director
Marshall Stranburg

QUESTION: IS DOCUMENTARY STAMP TAX DUE ON CONTEMPLATED DEEDS THAT WILL
TRANSFER UNENCUMBERED FLORIDA REAL PROPERTIES FROM INDIVIDUALS TO AN
LLC.
ANSWER: ONLY MINIMUM TAX IS REQUIRED, PROVIDED EACH INDIVIDUAL HOLDS THE
SAME PERCENTAGE INTEREST IN THE LLC AFTER THE TRANSFER AS THEY HELD IN THE
UNENCUMBERED PROPERTIES PRIOR TO THE TRANSFER OF THE PROPERTIES.
February 11, 2014
Re:

Technical Assistance Advisement No. 14B4-001
Documentary Stamp Tax - Transfer of Florida real property from Individuals to a Limited Liability
Company
Sections 201.02(1)(a), 201.0201(3), Florida Statutes (F.S.)
XXX (Taxpayer)
XXX (Individual 1)
XXX (Individual 2)
XXX (Individual 3)

Dear XXX:
This is in response to your request dated XXX, for a Technical Assistance Advisement (TAA) pursuant to
s. 213.22, F.S., and Rule 12-11, Florida Administrative Code (F.A.C.), regarding whether documentary
stamp tax is due on proposed deeds that will transfer Florida real properties from three individuals to a
limited liability company (LLC). 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 PRACTITIONER
In XXX and XXX, Individual 1, Individual 2, and Individual 3, purchased two separate parcels of Florida
real property, and each individual held a one-third interest in each parcel. The properties are
unencumbered. On XXX, the Taxpayer filed its Articles of Organization with the Department of State,
Division of Corporations. Individual 1, Individual 2, and Individual 3 each have a one-third membership
interest in the Taxpayer.

Child Support Enforcement – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – James McAdams, Director  Information Services – Damu Kuttikrishnan, Director

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

Technical Assistance Advisement 14B4-001
Page 2

The documents presented for examination are as follows:
1.
2.
3.
4.

Florida Department of State, Division of Corporations, Information Sheet for the Taxpayer.
Articles of Organization of the Taxpayer.
Warranty Deed recorded XXX, in Official Records of XXX County Book/Page XXX.
XXX County Property Appraiser Information Sheet for the property transferred by the above
warranty deed (Parcel A).

5. Warranty Deed recorded XXX, in Official Records of XXX County Book/Page XXX.
6. XXX County Property Appraiser Information Sheet for the property transferred by the above
   warranty deed (Parcel B).
   REQUESTED RULING

You requested that the Department confirm that minimum documentary stamp tax would be due on the
proposed deeds that will transfer Parcel A and Parcel B from Individual 1, Individual 2, and Individual 3
to the Taxpayer, because ownership of the properties after the transfers is identical to the ownership of the
properties before the transfers.
LAW AND DISCUSSION
Section 201.02(1)(a), F.S., imposes documentary stamp tax on “deeds, instruments, or writings 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.” The tax
rate is 70 cents on each $100 of the consideration or portion thereof, for the property interest transferred.
“For purposes of this section, 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, purchase money mortgage lien, or
other encumbrance, whether or not the underlying indebtedness is assumed.” Where property other than
money is exchanged for interests in real property, there is the presumption that the consideration is equal
to the fair market value of the real property interest being transferred.
In Crescent Miami Center, LLC v. Dep't of Revenue, 903 So. 2d 913 (Fla. 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)."
Section 201.0201(3), F.S., states in pertinent part that the Legislature recognizes that the Supreme Court's
opinion in Crescent is limited to the facts of the case and accepts the court's interpretation of s. 201.02,
F.S., that no consideration exists when owners of real property unencumbered by a mortgage convey an
interest in such property to an artificial entity whose ownership is identical to the ownership of the real
property before conveyance. The Legislature expressly rejects any application of the court's interpretation
where the facts are not comparable to the facts in Crescent.

Technical Assistance Advisement 14B4-001
Page 3

DEPARTMENT’S POSITION
As to the requested advisement, minimal documentary stamp tax is due on the proposed deeds, as long as
the transferred properties are unencumbered at the time of the transfers, and there will be no other
consideration for either or both properties, and provided that Individual 1, Individual 2, and Individual 3
hold the same percentage interest in the Taxpayer after the transfers of the properties as each hold in the
properties prior to the transfers of the properties to the Taxpayer.
Please note that effective July 1, 2009, s. 201.02(l)(b), F.S., and rule 12B-4.060, F.A.C., provide that when
real property is transferred to an entity and the consideration for the property is less than the property’s
fair market value, the acquiring entity may become a conduit entity. Documentary stamp tax is due on
any transfer of an interest in a conduit entity that occurs within three years of the date the property is
acquired by the entity.
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,

Henry Small
Tax Law Specialist
Technical Assistance and Dispute Resolution
HJS/tlf
Record ID: 155297