Was documentary stamp tax due when a partnership deeded pre-July 1986 unencumbered land to current partners for no payment?

Subject

Deed - Partnership to Partner

Plain-English summary

No documentary stamp tax was due on the proposed deed because the partnership land was unencumbered and the partners paid no consideration. The property had been acquired by the partnership before July 1, 1986, and none of the original partners remained.

The Department focused on whether the transfer shifted an economic mortgage burden to the receiving partners. With no mortgage or other encumbrance, there was no such consideration.

If the property had remained encumbered, the result would have changed: the outstanding principal balance would have been treated as consideration subject to documentary stamp tax, whether or not the mortgage was recorded.

What this means for you

The absence of a cash payment was not the only issue. For the pre-July 1986 property addressed here, an assumed or shifted mortgage balance could itself create taxable consideration.

Common questions

Q: Did the current partners have to be the people who originally contributed the land? The ruling approved the transfer even though none of the original partners remained, on the other stated facts.

Q: Was an unrecorded mortgage irrelevant? No. The ruling said an encumbrance would create tax on the outstanding balance whether recorded or not.

Q: What was the tax base if the property was encumbered? The outstanding principal balance of the mortgage.

Citations and references

• Fla. Stat. § 201.02(1), (2) — documentary stamp tax and mortgage consideration
• Devore v. Gay, 39 So. 2d 796 (Fla. 1949)
• Rasberry v. Dickinson, 243 So. 2d 236 (Fla. App. 1971)
• Kendall House Apartments, Inc. v. Department of Revenue, 245 So. 2d 221 (Fla. 1971)
• Straughn v. Story, 334 So. 2d 337 (Fla. 1st DCA 1976)
• 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 93B4-011

Original ruling text

Apr 20, 1993

Re: Technical Assistance Advisement No. 93(B)4-011
Documentary Stamp Tax; Deed - Partnership to Partner
Section 201.02, F.S.
XXX (hereinafter Partnership)
XXX (hereinafter Original General Partner I)
XXX (hereinafter Original General Partner II)
XXX (hereinafter New General Partner I)
XXX (New General Partner II)
XXX (hereinafter New Partnership Name)

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, and
where the unencumbered land was acquired by the partnership
prior to July 1, 1986 by a former partner and where the
property is presently unencumbered?

BACKGROUND

The property was acquired by the partnership prior to July
1, 1986 and is currently held in the partnership name.
Interests currently held in the partnership:

Percent:

New General Partner I

99.00

New General Partner II

1.00

100.00

The property is unencumbered by mortgages or other

encumbrances.

The new partner(s) are receiving the property which is held
in the partnership name, having been acquired by the general
partnership prior to July 1, 1986. None of the original
partners is present in the current partnership. A Notice Under
Fictitious Name was filed on April 7, 1992 authorizing it to
transact business in Florida under a new partnership name.

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 there
was 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).

Where property was encumbered by mortgages when 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).

DEPARTMENTS 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. The
mortgage represents consideration under s. 201.02(2), F.S., and
is the basis for imposition of the tax.

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