Did a 1993 Florida ruling tax a quitclaim deed from an individual buyer to a family corporation formed after the purchase?

Subject

Individual to Closely Held Corporation

Plain-English summary

The 1993 ruling imposed documentary stamp tax and Dade County discretionary surtax on the quitclaim deed, using the property's fair market value—but the official source now marks this ruling obsolete. It points readers to Crescent Miami Center, LLC v. Department of Revenue, 903 So. 2d 913 (Fla. 2005).

The original analysis rejected the claimed agent-to-principal exemption because the family corporation did not exist when the individual bid on and purchased the office building. It also rejected a resulting-trust theory because the purchase money came from another family-owned corporation rather than from the later-formed transferee corporation.

What this means for you

This page records the historical reasoning, not current Department policy. The obsolescence notice is controlling for reliance purposes.

Common questions

Q: What did the original ruling hold? The quitclaim deed from the individual to the newly formed corporation was taxable, including the Dade County surtax, based on fair market value.

Q: Why did the claimed agency exemption fail in the ruling? The corporation did not exist when the individual purchased the property, so the Department found no principal-agent relationship with that corporation at the time.

Q: Can this ruling be relied on today? No. The official source expressly labels it obsolete and cites the later Crescent Miami Center decision.

Citations and references

• Fla. Stat. § 201.02(1) — real-property conveyances
• Fla. Admin. Code rr. 12B-4.012, 12B-4.013(7), 12B-4.014(5) — deed tax, corporate contributions, and agent-to-principal deeds
• Fla. Stat. §§ 607.0203 and 607.0204 — corporate existence and preincorporation transactions
• Crescent Miami Center, LLC v. Department of Revenue, 903 So. 2d 913 (Fla. 2005) — official obsolescence reference
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93B4-006

Original ruling text

Obsolete: See Crescent Miami Center, LLC v. Department of Revenue,
903 So.2d 913 (Fla. 2005)

Apr 01, 1993

Re: Technical Assistance Advisement No. 93(B)4-006
Documentary Stamp Tax; Individual to Closely Held
Corporation
XXX (hereinafter Individual)
XXX (hereinafter Corporation)

Dear :

Pursuant to s. 213.22, F.S., and Florida Administrative
Code Chapter 12-11, you have petitioned for a Technical
Assistance Advisement concerning documentary stamp tax under s.
201.02 (1), F.S., and discretionary surtax imposed by Dade
County on commercial real property as they apply to
substantially the following issue:

Whether a quitclaim deed transferring Florida real property
from Individual to Corporation is exempt from documentary
stamp tax and discretionary surtax pursuant to Florida
Administrative Code Rule 12B-4.014(5).

Background

The subject property is an office building located in Dade
County, Florida and was owned by a debtor under bankruptcy
procedures. The Bankruptcy Court ordered the sale of the
property by public auction to be held on March 17, 1992.

Individual representing himself and other members of his
family desired to acquire the Property. To that effect and
prior to the date of the auction Individual:

a) Retained the services of C.P.A.'s. Individual
discussed with said certified public accountants the

acquisition and operation of the Property under the
laws of the United States of America. The accounting
firm recommended Individual to acquire and operate the
building under a Florida corporation.
b) Retained the services of the law offices of an
attorney who is a member of The Florida Bar. The use
of a Florida corporation for the acquisition and
operation of the building was ratified by the
attorney.
c) Retained the services of real estate brokers to study
the office building market in the area and to manage
the building and to negotiate leases in the event of
acquisition of said building.

On March 17, 1992, 1992, Individual attended the auction
and submitted the highest bid.

After the bidding, the attorney for the buyer and the
seller prepared a Contract for Purchase and Sale of the
Property. The name of the buyer appeared as Individual and/or
assigns. A court appointed Examiner refused to accept the
contract based on certain policies of the Bankruptcy Court to
approve the sale of properties only after an investigation of
the background and financial ability of the buyer who had to be
an individual. No corporations, trusts or any other business
enterprise are to be considered by the court as buyer.

Individual then had to execute the Contract for Purchase
and Sale in his own name and not under the name of a corporation
which was to be organized by him and the other members of his
immediate family. Corporation was organized June 4, 1992.

The Bankruptcy Court, after the proper investigation of
Individual, approved the sale of the Property to Individual by
Order dated April 14, 1992.

On July 8th, 1992 the closing of the transaction was made.
According to the Court Order and after several refusals of the
Examiner to allow the assignment of the Contract for Purchase
and Sale to corporation, the Florida corporation that was
organized by Individual and his immediate family for the

acquisition and operation of the property, a Warranty Deed was
executed conveying the Property to Individual and recorded in
the Public Records of Dade County, Florida. On the same date a
Quit Claim Deed was prepared in order to transfer the title of
the Property from Individual to Corporation.

Individual purchased the property with funds belonging to
another corporation which is also owned by Individual and his
immediate family.

Discussion and Law

Florida Administrative Code Rule 12B-4.014(5) states that:

"(5) Agent to Principal: A deed from an agent to his
principal conveying real estate purchased for and with
funds of the principal is not taxable."

The creation of an agency relationship as between principal
and agent arises from consent or agreement of the parties to the
existence of such relation; an agency is created authority is
actually conferred very much as any other contract is made, by
an agreement between the principal and agent that such a
relation shall exist. But it is not necessary that there be an
express contract of appointment; agency may be inferred from the
related facts of the case, or implied from a prior course of
dealings. 2 Fla. Jur 2d, s. 6; Quinn v. Phipps, (1927) 93 Fla.
805, 113 So. 419, 54 ALR 1173, concurring op. of Whitfield, J.
Also, see Busby v. Walker, 84 So.2d 304.

A "resulting trust" arises where one party pays the
consideration for the purchase of realty, but title is taken in
the name of another. State Dept. of Rev. v. Zuckerman-Vernon
Corp., Fla. 354 So.2d 353. Also, numerous other Florida cases.

Florida levies a documentary stamp tax on deeds or other
writings which convey land or any interest in land to a
purchaser or any other person at the direction of the purchaser.
Section 201.02(1), F.S.; Fla. Admin. Code Rule 12B-4.012(1).
There is a discretionary surtax in Dade County on the same
documents taxed under s. 201.02, F.S., except discretionary

surtax is not due on the transfer of only a single family
residence. Fla. Admin. Code Rule 12B-4.012(3). On documents
recorded in Dade County the rate of documentary stamp tax is 60
cents on each $100 or any part of $100 based upon the
consideration paid or to be paid. The discretionary surtax rate
is 45 cents for each $100 or any part of $100 of the
consideration paid or to be paid. See s. 34, Ch. 92-317, Laws
of Florida.

Florida Admin. Code Rule 12B-4.013(7), provides that a
conveyance of realty to a corporation in exchange for shares of
its capital stock, or as a contribution to the capital of the
corporation, is subject to tax based upon the fair market value
of the property interest being transferred.

Citing Nichols v. Bodenwein, 107 Fla. 25, 146 So. 86 and
Katz v. Kenholtz, Fla. 147 So.2d 342, petitioner urges that
individuals can act as "agent" in behalf of corporations not yet
legally organized. Each of these cases deals with liability of
a so called "agent" or "promoter" who purports to be acting on
behalf of a named corporation prior to its existence or
incorporation. In each case the courts determined that the
"agent" or "promoters" were personally liable. Also see s.
607.0204, F.S., providing liability for preincorporation
transactions. In Bodenwein, supra, the court equated those
interested in the nonexistent corporation as joint adventurers,
or as promoters of a corporation, or as members of a general
partnership. In denying the corporate existence the court, on
rehearing said:

"We are unable to agree with the earnest contention of
counsel for appellees Marsh and Dashiell that, inasmuch as
the contract was signed by the parties in a corporate name
and the contract accepted by appellant, that she dealt with
them as a de facto corporation, she is estopped to deny the
corporate existence. First, it is against public policy of
this state, as expressed in the statute, for individuals to
do business as a corporation without complying with the
corporation laws; the statute imposes a penalty of
partnership liability upon the directors, and officers for
so doing, and the contracts so entered into are not

enforceable either by or against the corporation. SummerMay Hardware Co., v. Seally et al, 66 Fla. 93, 62 So. 900."

Section 607.0203, F.S., provides that unless a delayed
effective date is specified, the corporate existence begins when
the articles of incorporation are filed or on a date specified
in the articles of incorporation and the Department of State's
filing of incorporation is conclusive proof that the
incorporators satisfied all conditions precedent to
incorporation.

Department's Position

Florida Admin. Code Rule 12B-4.014(5), is not applicable to
this transaction. There could not have been an agent/principal
relationship, either by contract or implied from a prior course
of dealings because Corporation was nonexistent when Individual
bid and purchased the property. The cases cited by petitioner
support the above. Nor could there be a "resulting trust" since
Individual borrowed the acquisition price from another separate
corporation in which he and his immediate family held stock.
Therefore, the Quitclaim Deed from Individual to Corporation
would be subject to documentary stamp tax and discretionary
surtax based upon the fair market value of the property in
accordance with Fla. Admin. Code Rule 12B-4.013(7).

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 and your request
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 by the Department
before disclosure. In an effort to protect the confidentiality
of such information, we request you notify the undersigned in
writing within 15 days of any deletions you wish made to the
request or the response.

Sincerely,

W.E. Webb
Technical Assistant
Technical Assistance

WEW/mh