Was a deed taxable when a partnership transferred pre-July 1986 land, free of debt, to current partners who had not contributed it?

Subject

Deed - Partner to Partnership

Plain-English summary

The deed was not subject to Florida documentary stamp tax because the partnership had acquired the land before July 1, 1986 and the land was no longer encumbered. The current partners had not contributed the property, the original partners were gone, and no consideration was being paid, but the ruling focused on the absence of a shifted mortgage burden.

If the property had remained encumbered, the outstanding principal balance would have been taxable consideration even if the mortgage was not recorded.

What this means for you

This was a narrow historical rule for property acquired by a partnership before July 1, 1986. The Department distinguished an unencumbered distribution from one that shifts the economic burden of debt to the receiving partner.

Common questions

Q: Did it matter that the receiving partners had not originally contributed the land? The ruling still found no tax because the pre-July 1986 property was unencumbered.

Q: Would an unrecorded mortgage have mattered? Yes. The Department said an encumbrance triggered tax on the outstanding principal whether recorded or not.

Q: What amount would have been taxed if debt remained? The outstanding principal balance of the mortgage.

Citations and references

• Fla. Stat. § 201.02(1) — real-property conveyances
• Devore v. Gay, 39 So. 2d 796 (Fla. 1949)
• Culbreath v. Reid, 65 So. 2d 556 (Fla. 1953)
• Rasberry v. Dickinson, 243 So. 2d 236 (Fla. 1971)
• Department of Revenue v. Zuckerman-Vernon Corp., 354 So. 2d 353 (Fla. 1977)
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93B4-010

Original ruling text

Apr 01, 1993

Re: Technical Assistance Advisement No. 93(B)4-010
Documentary Stamp Tax; Deed - Partner to Partnership
Section 201.02, F.S.
XXX (hereinafter Partnership)
XXX (hereinafter New General Partner I)
XXX (New General Partner II)

Dear :

This is in answer to your request for a Technical
Assistance Advisement on substantially the following question:

Does the documentary stamp tax under s. 201.02, F.S., apply
to a deed from a general partnership to New General Partner
I and/or New General Partner II neither of whom conveyed it
in to the partnership, and who are not paying any person or
entity any type of consideration for the transfer, where
the original partners are no longer in the partnership, and
where the encumbered land was contributed to the
partnership prior to July 1, 1986 by a former partner but
where there will be no mortgage of record on the date of
conveyance?

BACKGROUND

The land was contributed prior to July 1, 1986 by one of
the original partners in exchange for a partnership interest and
is currently held in the partnership name. Neither of the
original partners remain in the partnership today. Interests
currently held in the partnership:

Percent:

New General Partner I

99.75

New General Partner II

.25

100.00

New General Partner II is a wholly owned subsidiary of New
General Partner I.

The land is unencumbered by mortgages or other
encumbrances.

The new partner(s) are receiving several thousand acres of
land in Florida which is held in the partnership name, having
been contributed to the general partnership prior to July 1,
1986 by another partner who is no longer in the partnership.
None of the original partners is present in the current
partnership. There is no apparent relationship between the
partner who contributed the property to the partnership and the
partner who is receiving the land from the partnership.

DISCUSSION AND LAW

Prior to July 1, 1986 a conveyance of mortgaged property
from a partnership to a partner who did not contribute the
property to the partnership was subject to tax if there was a
shifting of economic burden from the partnership to the partner
receiving the property. Where the property was unencumbered,
and therefore no shifting of economic burden from the
partnership to the grantee/ partner, the deed was not subject to
documentary stamp tax. Section 201.02(1), F.S.; Devore v. Gay,
39 So.2d 796 (Fla. 1949); Culbreath v. Reid, 65 So.2d 556 (Fla.
1953).

Where property was encumbered by mortgages and it was
conveyed from the partnership to a partner who did not convey
the property to the partnership, there was a shifting of
economic burden from the partnership to the partner receiving
the real property. Section 201.02(1), F.S., Rasberry v.
Dickinson, App., 243 So.2d 236 (Fla. 1971), Kendall House
Apartments, Inc. v. Department of Revenue, 245 So.2d 221 (Fla.
1971), Cert. den. 404 U.S. 832, 30 L.Ed. 2d 62, 92 S.Ct. 74;
[1961-1962] Atty. Gen. Rep. 124; Straughn v. Story, App., 334
So.2d 337 (Fla. 1 DCA 1976), cert. den. 348 So.2d 954 (Fla.);
Department of Revenue v. Zuckerman-Vernon Corp., 354 So.2d 353
(Fla. 1977).

DEPARTMENT'S POSITION

Where property (which was acquired by the partnership prior
to July 1, 1986 and which is no longer encumbered by any
mortgages or other encumbrances) is conveyed from the
partnership to a partner the conveyance is not subject to
documentary stamp tax. If the property acquired prior to July
1, 1986 is encumbered, whether the mortgage is recorded or not,
tax is due on the outstanding principal balance of the mortgage
under s. 201.02, F.S., under the doctrine of the shifting of
economic burden from the partnership to the partner.

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,

M.E. Clemens
Technical Assistant
Technical Assistance

MEC/mh