Was full documentary stamp tax due when the company deeded encumbered property to its trust?

Subject

Deed of Encumbered Real Property to a Trust

Plain-English summary

Only the minimum Florida documentary stamp tax was due on the deed to the real estate trust, even though the property was encumbered. The company transferred the property under a court-approved rehabilitation plan and remained the trust's sole beneficiary.

The Department applied Rule 12B-4.014(2), which the ruling described as providing minimum-tax treatment for a trustee conveyance not made pursuant to a sale.

What this means for you

The result was tied to the specific trust structure and rehabilitation facts. It should not be read as a general rule that every deed of mortgaged property to a trust avoids tax measured by the encumbrance.

Common questions

Did the property's encumbrance produce full documentary stamp tax? No. The ruling required only the minimum tax.

Who benefited from the trust after the transfer? The transferring company remained the sole beneficiary.

Was the transfer part of an ordinary sale? The facts described it as part of a court-approved rehabilitation plan, not a sale to another beneficial owner.

Citations and references

• Fla. Stat. §§ 201.02(1) and 213.22
• Fla. Admin. Code r. 12B-4.014(2)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94B4-013

Original ruling text

Sep 13, 1994

Re: Technical Assistance Advisement No. 94(B)4-013 Documentary Stamp Tax; Deed of Encumbered Real Property to a Trust XXX (Company)

Dear :

You have petitioned for a Technical Assistance Advisement pursuant to s. 213.22, F.S., and Rule 12-11.003, F.A.C.

Issue

Whether a deed of encumbered real property from the Company to a real estate trust, where the Company is the sole beneficiary, is subject to tax under s. 201.02, F.S.

Background

The Company is a California domiciled life insurance company which owns encumbered real property in Florida. The Company was placed into conservation by the California Insurance Commissioner in 1991. After a court approved sale of certain assets, the court approved a modified plan of rehabilitation. Part of the plan provided that the real property would be transferred into the Company's real estate trust with the company being the sole beneficiary.

Your position is that the deed from the Company to the Trust will require only the minimum documentary stamp tax.

Discussion and Law

The tax levied by s. 201.02(1), F.S., is an excise tax on deeds, instruments, or writings transferring any interest in real property. The tax shall be 70 cents per each $100 of consideration. For purposes of this section, consideration includes money paid or to be paid, the discharge of any

obligation, the amount of any mortgage, purchased money mortgage, or other encumbrance. If the consideration is other than money, the consideration shall be presumed to be the fair market value of the real property being transferred.

Rule 12B-4.014(2), F.A.C., provides that a conveyance of unencumbered property as a gift is not taxable and that a conveyance to or by a trustee not pursuant to a sale is not taxable.

Department's Position

Therefore, the deed from the Company to the trust will require only the minimum documentary stamp tax pursuant to Rule 12B-4.014(2), F.A.C., even though the property is encumbered.

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,

James E. Silvey
Tax Law Specialist

Technical Assistance

JES/jes