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