What did this obsolete ruling say about deeding mortgaged property to a limited partnership owned by the transferors?

Subject

Deeds to Limited Partnership

Plain-English summary

This ruling is obsolete. In 1994, the Department concluded that a deed from spouses to a limited partnership in which they were general partners was taxable on the property's fair market value. The spouses' continuing mortgage liability and ownership through the partnership did not reduce the original tax base.

The official source now directs readers to Department of Revenue v. PMR Resorts, Inc., 868 So. 2d 621 (Fla. 2d DCA 2004). The 1994 holding is therefore historical and should not be used as current guidance.

What this means for you

Do not apply the original fair-market-value conclusion to a present partnership transfer without reviewing PMR Resorts and current law. The official obsolescence label controls the page's reliance warning.

Common questions

What was the original ruling? The deed was taxable on fair market value under the partnership-transfer rule.

Did continued mortgage liability change that result? Not under the original 1994 analysis.

Is that analysis current? No. The Department marks the ruling obsolete.

Citations and references

• Fla. Stat. §§ 201.02(1), 201.02(5), and 213.22
• Fla. Admin. Code r. 12B-4.013(9)
• Department of Revenue v. PMR Resorts, Inc., 868 So. 2d 621 (Fla. 2d DCA 2004)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94B4-018

Original ruling text

Obsolete; See Department of Revenue v. PMR Resorts, Inc., 868 So.2d 621 (Fla. 2d DCA 2004)

Nov 22, 1994

Re: Technical Assistance Advisement No. 94(B)4-018 Documentary Stamp Tax; Deeds to Limited Partnership XXX (Client) XXX (Wife)

Dear :

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

Issue

Whether a deed from your client and his wife, subject to a mortgage in their names, to a limited partnership, in which they are the general partners and will remain liable on the mortgage, is subject to tax under section 201.02, F.S.

Background

Currently your clients own real property subject to a mortgage in their own names. They desire to transfer the property to a limited partnership in which they are the general partners and will remain liable on the mortgage after the transfer. They will then make gifts of the limited partnership interest to their children. Over the years the children will own most of the property through ownership of the partnership interest.

Your position is that the deed from your clients to the limited partnership will require only the minimum documentary stamp tax since the property will be owned before and after the transfer by the same individuals. You believe that the transfer is exempt based

on the fact that although there may be a change in the form of the obligation there is no change in substance. Your clients will be no more or less liable on the mortgage after the conveyance than before and will in fact own 100 percent of the property after the transfer, only in a different form. You rely on Straughn v. Story, 334 So. 2d 337, State, Dept of Rev. v. Zuckerman-Vernon Corp., 354 So.2d 353, and Abramson v. Straughn, 348 So.2d 1172.

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. In addition, s. 201.02(5), F.S., provides that all transfers of real property from a partnership to a partner after July 1, 1986, are taxable based on the value of the real property transferred unless the partner receiving the property is the same partner that deeded the property to the partnership.

Rule 12B-4.013(9), F.A.C., provides that a conveyance of real property in exchange for an interest in a partnership, or where the value of the partnership is increased by the conveyance, is taxable based on the fair market value of the property transferred.

Since the court cases cited by you are prior to the statute change effective on July 1, 1986, taxing transfers on real property to or from a partnership and prior to the statute change effective July 1, 1990, defining consideration to include the value of the real property transferred, they are no longer applicable.

Department's Position

Therefore, the deed from your clients to the limited partnership will be taxable based on the fair market value of the property being transferred pursuant to Rule 12B-4.013(9), F.A.C.

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,
Tax Law Specialist

James E. Silvey
Technical Assistance

JES/JES