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