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

BES/mh