Were deeds recorded when a general partnership converted to a limited partnership taxed on the real estate's fair market value?

Subject

Deeds in a General-to-Limited Partnership Conversion

Plain-English summary

The conversion deeds were subject only to minimum Florida documentary stamp tax, not tax based on the real estate's fair market value. A general partnership holding real property planned to convert into a Florida limited partnership under the statutory conversion provisions.

Each partner would keep the same ownership percentage after conversion. Florida law treated the converted partnership as the same entity that existed before the conversion, while requiring deeds to place title in the converted entity's name.

Because this was a same-entity statutory conversion on the submitted facts, the Department did not treat the deeds as fair-market-value transfers under the ordinary section 201.02 rule.

What this means for you

The result depended on compliance with the partnership-conversion statutes and continuity of the entity and ownership percentages. It was not a blanket rule for every deed between related partnerships.

Section 201.02 generally taxed deeds based on consideration, which could include debt or fair market value. The specific conversion provisions controlled this transaction.

Common questions

Q: Did the converted partnership count as a new entity? No. Section 620.8902 treated it as the same entity for all purposes.

Q: Why were deeds still recorded? Section 620.8904(2)(a) required title to the converting partnership's real property to be transferred by deed to the converted entity.

Q: Was tax based on the property's fair market value? No. The Department limited tax to the minimum documentary stamp amount.

Q: Did partner ownership change? No. Each partner retained the same percentage through general and/or limited partnership interests.

Citations and references

• Fla. Stat. § 201.02(1) — documentary stamp tax on real-property transfer documents
• Fla. Stat. § 620.8902 — converted partnership remains the same entity
• Fla. Stat. § 620.8904(1), (2)(a) — conversion effect and required deeds
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98B4-005

Original ruling text

Mar 26, 1998

Re: Technical Assistance Advisement No. 98(B)4-005 Documentary Stamp Tax/Conversion of Partnership ss. 201.02 and 620.8904, F.S. XXX (General Partnership) XXX (Managing Partner of the General Partnership) XXX (Partner) XXX (Partner)

Dear :

This is in response to your recent request for a Technical Assistance Advisement in which you ask if the Florida documentary stamp taxes imposed by s. 201.02, F.S., are due on a deed upon conversion of a general partnership to a limited partnership, as provided under ss. 620.8904(1), and (2)(a), F.S.

Proposed Transaction

The partners of a general partnership with real estate holdings intend to convert it to a new Florida limited partnership in accordance with the requirements of s. 620.8902, F.S. Each partner will own, in the newly established limited partnership, a percentage of the general partnership interests and/or limited partnership interests equal to such partner's current ownership percentage in the general partnership. Further, as required by s. 620.8904(2)(a), F.S., the general partnership will execute and deliver deeds in the name of the newly created limited partnership. Such deeds will be recorded in the appropriate public records.

Requested Ruling

Taxpayer respectfully requests that the deeds from the general partnership to the limited partnership are taxable only for the minimum documentary stamp tax as provided in s. 620.8904(1), F.S., and are not taxable based on the fair market value of real property.

Discussion and Law

The tax levied by s. 201.02(1), F.S., is an excise tax on deeds, instruments, or writings transferring any interest in real property. The tax shall be 70 cents per $100 of consideration. For purposes of this section, consideration includes money paid or to be paid, the discharge of an obligation, the amount of any mortgage, purchase money mortgage, or other encumbrance. If the consideration is other than money, the consideration shall be presumed to be fair market value of the real property being transferred.

However, pursuant to the provisions of s. 620.8902, F.S., the partnership that has been converted is for all purposes the same entity that existed before the conversion.

The statute further provides in paragraph 620.8904(2)(a), F.S., that when a conversion takes effect, title to all real property owned by the converting partnership shall be transferred by deed to the converted entity.

Department's Position

Based on the foregoing authorities and the facts presented, it is the position of the Department that the deeds are taxable only for the minimum documentary stamp tax and are not taxable based on the fair market value of real property transferred from the general partnership to the limited partnership.

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
Technical Assistance and Dispute Resolution Office of General Counsel

BES/mh