Was an individual's transfer of an aircraft to a revocable trust taxable when the trust paid nothing and assumed no lien?

Plain-English summary

The transfer of the aircraft into the revocable trust was not subject to Florida sales tax because it was a gift with no consideration or assumed lien.

Florida taxed even occasional or isolated aircraft sales, but a transaction still required consideration to be a taxable sale. The trust paid nothing and assumed no outstanding lien, so the Department treated the title transfer as a nontaxable gift. A sworn statement was required to support that gift treatment.

The Department also explained that a later transfer from a trust was taxable only to the extent of consideration paid, including any lien assumed. It rejected the requester's analogy to a mere name change because the individual and trust were separate legal entities.

What this means for you

The bill of sale and FAA registration paperwork did not by themselves create tax. The decisive facts were the absence of payment and debt assumption, plus the required gift substantiation.

Common questions

Q: Are occasional aircraft transfers generally outside Florida sales tax?
A: No. The ruling said aircraft sales do not receive the ordinary occasional-or-isolated-sale exclusion.

Q: Why was this transfer not taxed?
A: The trust paid no consideration and assumed no lien, so it qualified as a gift under the cited rule.

Q: Was documentation required?
A: Yes. The transferor needed a sworn statement substantiating the gift.

Q: Would a transfer back out of the trust always be exempt?
A: No. Tax depended on any consideration paid or lien assumed in that later transfer.

Citations and references

• Fla. Stat. §§ 212.02(2), 212.02(16), and 212.05(1)(a)1.b — aircraft sales and consideration
• Fla. Admin. Code r. 12A-1.007(26)(a)1 and (26)(b)1-3 — aircraft transfers and trusts
• Fla. Admin. Code r. 12A-1.037 — occasional or isolated sales
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 95A-037

Original ruling text

Title:

Transfer of an Aircraft From an Individual to a
Revocable Trust

Aug 04, 1995

Re: TAA 95A-037
Sections 212.02(2) and (16), 212.05(1)(a)1.b., F.S.
Rule 12A-1.007(26)(a)1., (26)(b)1., (26)(b)2., and
(26)(b)3., 12A-1.037, F.A.C.

Dear

This is a response, styled a Technical Assistance Advisement, to
your letter dated March 11, 1995, in which you asked whether the
transfer of an aircraft, owned in your individual name, to a
revocable trust of which you, during your life, are the sole
trustee, is subject to sales tax. Upon your death, if the trust
is unrevoked, a financial institution becomes the successor
trustee. The terms of the trust name you, during your life, as
the sole beneficiary, and upon your death, if the trust is
unrevoked, your son, stepson, and two daughters are named as
beneficiaries. The trust, as an instrument revocable at the
will of yourself, as the trustee, can also be amended as you
choose.

You add that the transfer of the aircraft to the trust was
effectuated through the execution of a bill of sale, and through
the submittal of a completed aircraft registration application,
both of which were required by the Federal Aviation
Administration.

You attached to your letter, copies of the trust, bill of sale,
and application for registration of the aircraft. You also
included copies of correspondence from the Department which
notified you in a letter dated November 22, 1994, of the
requirement for the filing of a Declaration of Ownership and
Sales Tax Report for Aircraft (form DR-42), and a subsequent

notice dated February 27, 1995, alerting you that form DR-42 had
not been filed.

You contend that the transfer of the aircraft into the trust is
not subject to sales or use tax because there was neither a
purchase, nor was consideration present in the transfer. You
cite, as support, s. 212.02(16), F.S., which requires the
presence of "consideration" in the statutory definition of the
term "sale."

Lastly, you liken this transfer to one which may follow an
individual's name change, or the subsequent transfer, should it
occur, of the aircraft from the trust to you, individually,
should you either revoke the trust, or choose to withdraw the
aircraft from the corpus of the trust. You, by indirection,
contend that these two transfers would not be subject to sales
or use tax.

Department response

Section 212.05, F.S., imposes the tax on, among other
transactions, the sale of tangible personal property. Section
212.02(2), F.S., excludes from the definition of the term
"business," a sale which is characterized as "occasional or
isolated." However, the statute denies this exclusion to the
occasional or isolated sale of an aircraft. Section
212.05(1)(a)1.b., F.S., expressly imposes the tax on the
occasional or isolated sales of an aircraft.

Thus, the sale of an aircraft may not be free of the tax solely
because the sale is of an occasional or isolated character.

However, as you argue in your letter, s. 212.02(16), F.S.,
requires that the element of "consideration" be present in a
transaction if it is to be classed as a "sale." Rule 12A-1.037,
F.A.C., which interprets, in general, the occasional or isolated
sale transactions, provides that Rule 12A-1.007, F.A.C., may be
applicable in the transfer of an aircraft. A copy of the latter
administrative rule is attached to this communication.

Rule 12A-1.007(26)(a)1., F.A.C., excludes from the tax, on the

basis that no consideration is present, a transfer of a title to
an aircraft under terms of a gift. Subparagraph (26)(b)1. of
the administrative rule provides the predicate that the transfer
of title into a revocable or irrevocable trust is taxable, and
that such tax is "...computed on the cash or its equivalent paid
for the equity transferred plus the amount of any outstanding
lien(s) which is assumed by the trust." However, subparagraph
(26)(b)2. provides that a "...transfer of title as a gift into a
revocable trust is not taxable. A transfer subject to a lien(s)
will not qualify as a gift when any outstanding lien(s) is
assumed by the trust."

Thus, as to your facts, the transfer of the aircraft title into
the trust, without the payment of any consideration including
the assumption by the trust of any outstanding lien(s), is not
subject to tax. You are alerted to the requirement in
subparagraph (26)(a)1. of Rule 12A-1.007, F.A.C., that a sworn
statement is required to substantiate the claim of a transfer of
title as a gift.

Notwithstanding that the Department agrees, as it must, that
Florida law, as explained above, requires the presence of
consideration if a sale is to be taxable, the Department cannot
accede to your argument, expressed on page 3 of your letter in
paragraph 3 which appears under the legend Rationale, that the
transfer of title into a trust is the same as a transaction
involving "... a transfer based on a change of name (i.e.,
XXXX)...." A mere name change, as you posit, would not result
in the transfer of title from one entity to another. This is
not analogous to a transfer made between an individual and a
trust because such a transfer involves two separate legal
entities.

To provide a complete exposition of the applicable law and
administrative rule provisions applicable to your facts, the
Department also alerts you to the provision of Rule 12A1.007(26)(b)3., F.A.C., which establishes the predicate that a
transfer of title from a revocable or irrevocable trust is
taxable. This provision, as does the above cited Rule 12A1.007(26)(b)1., F.A.C., states that the tax shall be applied to
any consideration paid for such transfer including the

assumption of any lien(s). Should no such consideration be paid
the trust by the beneficiary for the transfer of title, no tax
may be imposed on the transfer of title from a revocable or
irrevocable trust.

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,

Robert G. Parsons
Tax Law Specialist

Attachment
Ctrl. No. 20174