Were three deeds issued during a confirmed Chapter 11 reorganization subject to Florida documentary stamp tax?

Plain-English summary

Florida concluded that three deeds recorded during a confirmed Chapter 11 reorganization were not subject to documentary stamp tax.

The partnership's confirmed plan order allowed it to dispose of property and stated that transfers made to consummate the plan would not be taxed under stamp-tax or similar-tax laws. The partnership sold properties to two holding companies, recorded three deeds without paying documentary stamp tax, and used the sale proceeds to satisfy debts identified in the reorganization materials.

Florida's bankruptcy-transfer rule said a sale by a debtor in federal bankruptcy remained taxable unless it was made under a plan confirmed under 11 U.S.C. § 1129, was essential to confirmation, or was necessary to consummate or implement a confirmed plan. Applying that rule and 11 U.S.C. § 1146(c), as then cited, the Department found the deeds exempt.

What this means for you

• A bankruptcy filing alone did not create the exemption; the confirmed plan and its implementation mattered.
• The debtor partnership was a party to the transfers.
• The Department relied on the plan order's transfer-tax language and the use of proceeds to satisfy restructured debts.

Common questions

Q: Was documentary stamp tax due on the three deeds?
A: No.

Q: Did the reorganization plan name each property sale specifically?
A: The ruling's heading says it did not, but the confirmed order broadly covered transfers made to consummate the plan.

Q: Does every bankruptcy property transfer receive this result?
A: No. The cited Florida rule required a qualifying connection to a plan confirmed under section 1129.

Citations and references

• Fla. Stat. § 201.02 — documentary stamp tax on realty conveyances
• Fla. Admin. Code r. 12B-4.014(16) — bankruptcy transfers
• 11 U.S.C. § 1129 — plan confirmation
• 11 U.S.C. § 1146(c) — confirmed-plan transfer exemption, as cited in 1996
• In re Jacoby-Bender, Inc., 758 F.2d 840 (2d Cir. 1985)
• In re Smoss Enterprises Corp., 54 B.R. 950 (E.D.N.Y. 1985)
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96B4-008

Original ruling text

May 13, 1996

Re: Technical Assistance Advisement No. 96(B)4-008
Documentary Stamp Tax/Bankruptcy Reorganization Plan did
not specifically call for the sale of certain realty
XXX (Partnership)
XXX (Holding Co. #1)
XXX (Holding Co. #2)
XXX (Corporation)

Dear :

This is in response to your recent request for a Technical
Assistance Advisement in which you ask if the Florida
documentary stamp tax imposed by s. 201.02, F.S., is due upon
conveyances made by Partnership to Holding Co. #1 and Holding
Co. #2 while under a Bankruptcy Order under Section 1129 of the
United States Code.

Transaction

Partnership filed a petition on XXX for voluntary relief
under Chapter 11 of title 11, of the U.S. Bankruptcy Code. The
Court confirmed (XXX) a Third Amended and Restated Plan of
Partnership dated XX as amended by the Modification to Third
Amended and Restated Plan of Reorganization of Partnership.

A Florida limited partnership, Partnership's managing
general partner has a sole shareholder: Corporation. On XX,
Partnership entered into a purchase and sale agreement to sell
property in one county to Holding Co. #1. The purchase and sale
agreement was partially assigned to Holding Co. #2 in another
county.

According to the request for the technical assistance
advisement, the proceeds of the sale of Partnership properties
to Holding Co. #1 and Holding Co. #2 were used to satisfy debts
of Partnership.

On the Official Record Books, the Order Confirming Third
Amended and Restated Plan of Reorganization of Partnership
states that Reorganized Partnership:

... may operate its businesses and use, acquire and dispose
of property, including any Post-Petition Cash Collateral
(other than as respects such Post-Petition Cash Collateral
attributable to Class 1A-10-28 Claims as required by
Section 4.04(a)(ii) of the Modified Plan as a result of the
Holder's timely election to receive a return of collateral
therefor).... (e.s.)

On Official Record Books, the Order Confirming the above
named plan of reorganization states that:

pursuant to Section 1146(c) of the Bankruptcy Code, until
the Modified Plan has been fully consummated and all
Claims... have been paid in full, the issuance, transfer,
or exchange of a security, or the making or delivery of an
instrument of transfer,... and/or the sale of any real or
person[al] property or..., any transfers hereafter made in
consummation of, or heretofore made in anticipation of the
confirmation and consummation of, the Modified Plan,... or
the transfer of any interest in any real or personal
property in satisfaction thereof,... shall not be taxed
under any law imposing a stamp tax or similar tax,
including but not limited to transfer taxes, mortgage
recording taxes and intangible taxes, including, without
limitation, Florida documentary stamp taxes .... (e.s.)

According to the technical assistance advisement request
letter, on XX, Partnership entered into a purchase and sale
agreement with Holding Co. #1 for some properties in one county.
Further, the letter states that the agreement was partially
assigned to Holding Co. #2 in another county.

Three deeds were recorded shortly after execution in 1995
transferring properties from Partnership (on each deed) to
purchasers Holding Co. #1 and Holding Co. #2.

The letter states that the proceeds of the sale of

Partnership's property were used to satisfy debts of Partnership
which had been made into restructured mortgage notes,
reorganization notes, converted notes, tax notes, etc.,
specifically referenced in the Order. The deeds representing
the sales of real property were recorded without payment of
documentary stamp tax because of the exemption in the Order with
regard to documentary stamp and other transfer taxes.

Requested Ruling

Petitioner requests issuance of a technical assistance
advisement confirming that no documentary stamp tax or surtax
was due on recordation of the three deeds without payment of
documentary stamp and intangible taxes in connection with the
transfers of real property from Partnership to the purchasers
occurring during the Chapter 11 Bankruptcy proceedings under
Section 1129.

Department's Position

Rule 12B-4.014 (16), F.A.C., states:

Transfer in Bankruptcy: Sale of real property by trustees,
debtors or receivers in federal bankruptcy proceedings is
subject to tax unless the transfer is made pursuant to a
plan confirmed under s. 1129 of the Bankruptcy Code, is a
precondition or essential to the confirmation of the plan,
or is necessary to consummate or implement a confirmed
plan. The debtor must be a party to the transfer. If the
bankruptcy court does not ultimately confirm the plan under
11 U.S.C. 1129,the transfer would not be exempt pursuant to
11 U.S.C. 1146(c), and would be subject to tax. (11 U.S.C.
1146(c); In re Jacoby-Bender, Inc. 758 F.2d 840 (2d.Cir.
1985); In re Smoss Enterprises Corp., 54 Bankr. 950
(E.D.N.Y. 1985))....

Section 1146(c) of the United States Bankruptcy Code
provides:

The issuance, transfer, or exchange of a security, or the
making or delivery of an instrument of transfer under a

plan confirmed under Section 1129 of this title, may not be
taxed under any law imposing a stamp tax or similar tax.

Therefore, the deeds referenced above are not subject to
imposition of documentary stamp tax.

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 treatment different from that
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,

M.E. Clemens, C.P.A.
Senior Tax Specialist
Tax Policy and Dispute Resolution
Office of General Counsel

MEC/mh