Was a deed from a Canadian corporation acting only as bare trustee back to the beneficial owners subject to Florida documentary stamp tax?

Subject

Real Property Held by Canadian Corporation as Bare Trustee

Plain-English summary

The deed from the bare-trustee corporation to the individual owners was not subject to Florida documentary stamp tax. The nonresident owners had purchased the Florida real estate with their personal funds and used their foreign corporation solely to hold legal title for their benefit. They needed title returned to their own names for insurance purposes.

The declaration of trust existed before the property was acquired and clearly stated the parties' intent. The corporation had no meaningful independent powers, could act only on the owners' instructions, and served only as titleholder. The owners were the beneficiaries and could require the property to be returned.

Florida treated that arrangement as an agent-to-principal relationship. Because the corporation bought and held the property for the owners with the owners' funds, its deed back to them was not treated as a taxable transfer of ownership.

What this means for you

The result depended on evidence that beneficial ownership never left the principals. A corporation's bare assertion that it was a nominee or trustee would not establish the same facts; the advisement emphasized an agreement or declaration stating that intent before acquisition and proof that the principals funded the purchase.

A trustee with significant discretion, a later-created trust declaration, different purchase funds, or a transfer involving consideration could present a different transaction from the narrow agent-to-principal deed approved here.

Common questions

Q: Why was the property being retitled? The owners said insurance requirements called for title in their own names.

Q: Did the corporation own the property beneficially? No on the stated facts. It held legal title only as bare trustee for the owners.

Q: What documents supported the tax result? A declaration of trust made before acquisition showed the intended bare-trust relationship and that the owners' funds bought the property.

Q: Are all deeds from a corporation to its shareholders tax-free? No. The ruling was limited to a corporation acting as agent or bare trustee for principals who already held the beneficial interest.

Citations and references

• Fla. Stat. § 201.02(1) — documentary stamp tax on deeds transferring Florida real property interests
• Fla. Admin. Code r. 12B-4.013(33)(i) — deeds involving a revocable trust and return to the grantor
• Fla. Admin. Code r. 12B-4.014(5) — deed from an agent to the principal for property bought with the principal's funds
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98B4-008

Original ruling text

Jun 18, 1998

Re: Technical Assistance Advisement No. 98(B)4-008 Documentary Stamp Tax - Real Property Held by Canadian Corporation as Bare Trustee s. 201.02(2), F.S.; Rules 12B-4.013(33)(i) and 12B-4.014(5), F.A.C. XXX (hereinafter taxpayers) XXX (hereinafter corporation or bare trustee)

Dear :

Your letter requesting a Technical Assistance Advisement has been referred to this office for response. The specific scenario for which advice has been requested is summarized below.

Statement of the Facts

The taxpayers purchased Florida real property using their personal funds. The taxpayers are non-residents of Florida and own a foreign corporation. The corporation was created for the sole purpose of holding the real property as bare trustee for the benefit of the taxpayers.

The jurisdiction of incorporation generally views a trust under common law to be a bare trust when: the trustee has no significant powers and can take no action without instruction from the settlor; the trustee's sole function is to hold legal title to the property; and the settlor is the beneficiary and can have property reverted to him or her at any time.

For a corporation to hold real property in trust, as agent for a shareholder, the property must be acquired specifically to be held in that manner. The parties must also enter into an agreement or have a declaration of trust which clearly states the intention of the parties before the property is acquired.

Request for Advisement

For insurance purposes, the property must be titled in the name of the taxpayers. You request advice whether the conveyance from the corporation, as bare trustee, to the taxpayers will be subject to documentary stamp tax.

Provisions of the Law

Section 201.02(1), F.S., imposes tax on deeds which convey real property or an interest in real property. However, as it relates to trusts, Rule 12B-4.013(33)(i), F.A.C., provides:

A deed to a trustee from a grantor who has the power to revoke the trust instrument, and a deed back to the grantor from the trustee upon revocation of the trust, are not transfers of ownership subject to the stamp tax.

Rule 12B-4.014(5), F.A.C., provides:

A deed from an agent to his principal conveying real estate purchased for and with funds of the principal is not taxable.

Conclusion

The Declaration of Trust clearly provides that the intention of the parties is to have the bare trustee hold title for the benefit of the taxpayers. It also reflects that the acquisition of the property was made with the taxpayers' funds. This evidences the apparent creation of an "agent to principal" relationship between the parties. In this case, the deed from the bare trustee to the taxpayer will not be subject to 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 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,

Celestine Grantham
Senior Tax Specialist
Technical Assistance and Dispute Resolution Office of General Counsel

CG/mh