Did converting a general partnership into a Florida limited partnership trigger documentary stamp tax?

Subject

Conversion of Partnership to Limited Partnership

Plain-English summary

Converting the general partnership into a Florida limited partnership required only minimum documentary stamp tax on the deed. Florida law treated the converted limited partnership as the same entity that existed before conversion, even though a deed had to transfer record title to its three commercial properties.

The converted entity also remained the original obligor on the partnership's existing promissory notes and mortgages. Their renewals therefore incurred no documentary stamp tax if there were no new obligors, only the unpaid balance was renewed, tax had been paid on the original note, and the tax-paid original was attached to the renewal.

What this means for you

The result depended on a statutory conversion that preserved entity identity and obligations. It was not a general exemption for transferring real estate or replacing debt through a newly formed unrelated entity.

Common questions

Q: Was the conversion deed completely tax-free? No. The ruling required minimum documentary stamp tax.

Q: Was the limited partnership a new obligor? No. Florida treated it as the same entity and original obligor.

Q: Were all renewed notes automatically exempt? No. Every condition in section 201.09(1) still had to be satisfied.

Citations and references

• Fla. Stat. § 201.02(1) — tax on instruments transferring Florida real property
• Fla. Stat. § 201.08(1) — notes, mortgages, and renewals
• Fla. Stat. § 201.09(1) — conditions for renewal-note and mortgage exemption
• Fla. Stat. §§ 620.8902, 620.8904 — partnership conversion, entity identity, property, and obligations
• Fla. Stat. § 213.22 — Technical Assistance Advisements

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Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98B4-011

Original ruling text

Sep 16, 1998

Re: Technical Assistance Advisement No. 98(B)4-011
Documentary Stamp Tax/Conversion of Partnership to Limited
Partnership
ss. 201.02, 201.08, 201.09, 620.8902, and 620.8904, F.S.
XXX (Taxpayer)

Dear :

This is in response to your letter dated July 1, 1998,
requesting a Technical Assistance Advisement regarding the
applicability of documentary stamp tax under the facts as set

forth herein.

FACTS PRESENTED BY PETITIONER

Taxpayer is a general partnership formed under the laws of
the State of XXX. All of Taxpayer's partners are individuals.
Taxpayer was formed for the purpose of owning and operating
commercial real estate. Taxpayer presently owns three parcels
of commercial real estate, all located in Florida. Taxpayer has
executed various notes and mortgages encumbering the properties.
Documentary stamp taxes were paid in full at the time the

mortgages were recorded.

Taxpayer intends to covert to a Florida limited partnership
in accordance with s. 620.8902, F.S. The conversion will be
approved by all partners. As a result of the conversion, the
current partners will become general and limited partners of the

limited partnership.

Following the conversion, a deed will be issued to the new
limited partnership as required by s. 620.8904(2)(a), F.S.
Further, it is contemplated that Taxpayer will renew its

existing promissory notes after the conversion.

REQUESTED ADVISEMENT

1.) Provided that Taxpayer's conversion to a Florida
limited partnership complies with s. 620.8902, F.S.,
the transfer of Taxpayer's real property to the
converted entity by deed as required by s.
620.8904(2)(a), F.S., will not be subject to the
Florida documentary stamp tax imposed under s.

201.02(1), F.S.
2.) After Taxpayer's conversion, Taxpayer will be

considered the "Original Obligor" under s. 201.09(1),

F.S., when renewing its existing indebtedness.

DISCUSSION AND LAW

Section 201.02(1), F.S., imposes an excise tax on

instruments transferring an interest in Florida real property.

Section 620.8904(1), F.S., provides that a partnership that
has been converted pursuant to s. 620.8902, F.S., is for all

purposes the same entity that existed before the conversion.

Section 620.8904(2)(a), F.S., provides that title to all
real property owned by a converting partnership must be

transferred by deed to the converted partnership.

Section 201.08(1), F.S., imposes an excise tax on written
obligations to pay money, such as promissory notes, and on
mortgages recorded in Florida, and on the renewal of all such

instruments.

Section 201.09(1), F.S., exempts renewal notes and
mortgages if there are no new obligors, only the unpaid balance
is renewed, tax was paid on the original note, and the original

note evidencing tax paid is attached to the renewal.

Section 620.8904(2)(b), F.S., provides that all obligations
of the converting partnership continue as obligations of the

converted entity.

DEPARTMENT'S POSITION

The converted limited partnership is considered for all
purposes to be the same entity that existed before the
conversion. Only minimum documentary stamp tax is required on
the deed transferring Taxpayer's real property to the converted
limited partnership. The converted entity is considered the
original obligor and no documentary stamp tax is due on the
renewal of the converting partnership's notes and mortgages
executed by Taxpayer after the conversion, assuming all other

requirements of s. 201.09(1), F.S., are met.

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 upon 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 from that

which is 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 that 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,

Charles T. Phillips
Senior Tax Specialist
Technical Assistance and Dispute Resolution

Office of General Counsel

CTP/mh