Could owners change their land-trust beneficial interests by transferring stock in the corporate trustee without Florida documentary stamp tax?

Plain-English summary

Florida concluded that later transfers of stock in the corporate trustee would be taxable when those transfers changed the owners' beneficial interests in the land trust. A stock transaction could not be used to shift land-trust ownership without documentary stamp tax merely because no formal assignment of the trust interest was executed.

Several owners proposed contributing separate unencumbered parcels. Each would initially receive a beneficial percentage and corporate-trustee stock proportional to the appraised value contributed. The trustee would make distributions according to the stock holdings.

Because the stock controlled both ownership proportions and distributions, selling or reallocating the shares would effectively increase, decrease, or transfer beneficial ownership of the underlying land trust. Rule 12B-4.013(29) taxed documents conveying a land-trust beneficial interest, and the Department applied section 201.02 to those later stock transfers.

The ruling focused its final determination on transfers after the initial proportional stock issuance. It did not separately state a final tax amount for each initial deed contributing the parcels, so this page does not infer one.

What this means for you

Land-trust participants

Look beyond the document label. If shares in a trustee corporation determine beneficial ownership of the trust's real property, transferring the shares may be treated as transferring the land-trust interest itself.

Corporate trustees

Maintain records connecting stock ownership, beneficial percentages, and distributions. A change in shares can carry documentary-stamp consequences even without a separately titled trust assignment.

Accountants and tax professionals

Analyze initial contributions and later ownership changes separately. This ruling clearly addressed the later stock-transfer mechanism but did not publish a separate final computation for the initial deeds.

Common questions

Q: What did the owners contribute? A: Separate unencumbered real-property parcels owned by several trusts and individuals.

Q: How were initial interests determined? A: Each contributor's beneficial percentage and trustee-corporation stock matched the appraised value of the property contributed.

Q: Why did a stock transfer affect the land trust? A: Stock ownership controlled the trust's beneficial ownership proportions and distributions.

Q: Did a formal trust-interest assignment have to be executed? A: No. The Department said the stock transfer itself could effectively convey the beneficial interest.

Q: Were later stock transfers taxable? A: Yes when they changed beneficial ownership in the land trust.

Q: Did the ruling expressly fix the tax on the initial parcel contributions? A: No. Its operative conclusion addressed post-contribution stock transfers that shifted beneficial interests.

Q: Can another land trust rely on this TAA? A: Not automatically. The advisement states that it binds the Department only on the stock, ownership, distribution, trustee, and property facts described.

Citations and references

• Fla. Stat. § 201.02 — documentary stamp tax on transfers of Florida real-property interests
• Fla. Admin. Code r. 12B-4.013(29) — assignment of a beneficial interest in a land trust
• Fla. Admin. Code r. 12B-4.014(2)(b) — deeds to or from trustees without beneficial-ownership transfer or consideration
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96B4-013

Original ruling text

Nov 13, 1996

Re: Technical Assistance Advisement No. 96(B)4-013 Documentary Stamp Tax; Conveyance to a Land Trust by Multiple Parties Section 201.02, F.S. XXX (Grantors)

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 on transfers to a land trust of multiple parcels by several owners.

Proposed Transaction

Separate unencumbered parcels of property are owned individually by several trusts and several individuals. The Grantors would transfer these unencumbered parcels to a land trust wherein each contributor would be given the percentage ownership interest in the land trust in proportion to the appraised value of the property contributed by each of the Grantors.

The single trustee will be a corporation in which each Grantor will initially hold a stock ownership equal to their respective original beneficial interest percentage. The trustee would subsequently make disbursements from the trust in proportion to the shares of stock held in the corporate trustee by the Grantors.

Requested Ruling

Taxpayer believes the transaction is not taxable (other than nominal $.70).

Department's Position

Distributions from the corporate trustee in proportion to the shares of stock held in the corporate trustee would mean that a further transfer of shares in the corporate trustee would cause the beneficial interests in the land trust to change. To precipitate imposition of documentary stamp tax, this would not necessitate a formal conveyance of a beneficial interest in the land trust.

This means that a further transfer of stock certificates between shareholders (Grantors) would allow the corporate trustee to transfer beneficial interests in the land trust between owners of the land trust or to outside parties who purchased the stock. If the ownership of the stock in the trustee dictates distribution of the trust assets, each Grantor could then (by sale of their shares of stock in the trustee corporation) convey their interests to others in the event they wish to increase or decrease their amount of ownership in the land trust.

By increasing or decreasing the number of shares held in the corporate trustee, the Grantor is taking a percentage ownership in the land trust greater or less than that which their contributed property was assigned on original contribution. This results in a transfer of a beneficial interest in the land trust. An assignment of a beneficial interest in a land trust is subject to documentary stamp tax under s. 201.02, F.S.

Pursuant to Rule 12B-4.013(29), F.A.C.:

(29) Assignment of Beneficial Interest in Land Trust: Effective July 3, 1979, any document which conveys any beneficial interest in a land trust agreement is subject to tax, and the tax is to be paid upon execution of the document...." (e.s.)

Rule 12B-4.014(2)(b), F.A.C. states:

(2)(b) A deed to or from a trustee, conveying real property is exempt from the stamp tax to the extent that the deed does not transfer the beneficial ownership of the real

property or to the extent that there is no consideration for the transfer....

The trustee of the trust does not own the trust assets. The trustee cannot exercise ownership of the assets, nor can ownership of the shares of stock in the trustee be allowed to transfer interests in a land trust and thereby escape documentary stamp tax on transfers or assignments of interests in the trust assets.

Therefore, where a trust allows the ownership of stock in the trustee corporation to determine the amount of beneficial interest or ownership in the land trust, or the amount of distributions from the trust, this document effectively allows assignment of the beneficial interests in that trust. After the initial issue of stock equal to each Grantor's property contribution, any further transfer of their corporate stock (which effectively conveys a beneficial interest in the land trust) would be subject to documentary stamp tax under s. 201.02, F.S.

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
Enclosure