Was Florida documentary stamp tax due more than once when one joint venturer borrowed against property legally titled in another venturer's name?

Plain-English summary

Florida concluded that documentary stamp tax was due only once on the joint venture's mortgage.

The joint venturers had agreed that one partner would hold legal title to the real property while the other borrowed funds to improve it. The borrower held an equitable interest; the title-holding partner had legal and equitable title; and both executed the mortgage. The mortgage did not secure a third-party guarantee.

The Department applied partnership law to the joint venture and treated the venturers as agents for each other in holding property used for the venture. On those facts, the mortgage did not create a second taxable obligation merely because legal title and borrowing responsibility were split between the two venturers.

What this means for you

• Legal title in one joint venturer's name did not by itself produce a second documentary stamp tax.
• The result depended on the borrower's equitable ownership and both relevant parties signing the mortgage.
• The ruling expressly excluded a mortgage securing a third-party guarantee from its facts.

Common questions

Q: How many times was documentary stamp tax due on the mortgage? A: Once.

Q: Did the borrower hold legal title? A: No. The borrower held equitable title, while the other joint venturer held legal title.

Q: Did both parties sign the mortgage? A: Yes.

Citations and references

• Fla. Stat. § 201.08(1) — documentary stamp tax on mortgages
• Fla. Stat. § 620.595(1), (2) — partnership property
• Fla. Stat. § 620.605(2) — partner-held title to partnership real property
• Fla. Stat. § 620.60(1) — partner authority
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96B4-005

Original ruling text

Apr 01, 1996

Re: Technical Assistance Advisement No. 96(B)4-005 Documentary Stamp Tax; Equitable Title XXX (Borrower/Partnership) XXX (Mortgagor/Joint Venture Partner) XXX (Joint Venture Partner) XXX (Lender)

Dear :

This is in response to your request for a Technical Assistance Advisement concerning the applicability of Florida Documentary Stamp Tax on the note and the mortgage where:

1. The borrower is the owner of an equitable interest in
   real property, the legal title to which property is held by another;
2. The borrower and the legal title holder both execute
   the mortgage; and
3. The mortgage does not secure a third party guarantee.

The borrower has equitable title to the property described in the mortgage. The mortgagor has both equitable and legal title to the property described in the mortgage.

In the instant case, the joint venturers have agreed (prior to making the subject loan) that only one of them will hold legal title to the property. The other joint venturer will borrow the funds which will be used to improve the property.

You have also enclosed with your letter a copy of Joint Venture and Mortgage and Security Agreement.

Discussion and Law

As stated in Section 620.595(1) and (2), F.S., all property

brought into the partnership or subsequently acquired by purchase or otherwise on account of the partnership is partnership property. Unless a contrary intention appears, property acquired with partnership funds is partnership property.

As stated in Section 620.605(2), F.S., when title to real property is in the name of one or more, but not all, of the partners, and the public records do not disclose the right of the partnership, the partners in whose name the title stands may convey title to the property, but the partnership may recover the property if the partners' act does not bind the partnership under the provisions of s. 620.60(1) unless the purchaser or his assignee is a holder for value without knowledge that the partners have exceeded their authority in making the conveyance.

Laws applicable to partnership govern joint ventures. The only distinction is that a joint venture is limited to a specific enterprise or object and terminates when that object has been completed. In the instant case, joint venturers act as agents for each other in holding title to real property when that real property is utilized for joint venture purposes.

Department's Position

Documentary stamp taxes under s. 201.08(1), F.S., would be due only one time on the mortgage where the borrower holds equitable title and the mortgagor has both equitable and legal title to the property as described in the mortgage.

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,

Baldan E. Sulker
Senior Tax Specialist
Tax Policy and Dispute Resolution
Office of General Counsel

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