SUMMARY
QUESTION: Is a deed conveying unencumbered real property from the individual to the limited liability company solely-owned by the individual subject to tax?
ANSWER – Based on Facts Below: No. The deed conveying unencumbered real property from the individual to their solely-owned limited liability is not subject to tax other than the minimum $.70.
August 28, 2007
Re:Technical Assistance Advisement No. 07B4-004
Documentary Stamp Tax-Conveyance of Real Property to Limited Liability Company
Section 201.02(1), F.S.
Rule 12B-4.012(1) and (2), F.A.C.
XXX (hereinafter Taxpayer)
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.
Facts as Presented by Petitioner
On XX, a Personal Representative’s Deed conveyed certain real property to an individual. On XX, the individual formed a limited liability company of which the individual is the Managing Member and owner of 100% of the interests in the company. The individual now desires to transfer the property into the company.
Request for Advisement
You request the Department review the supplied documents and issue a Technical Assistance Advisement ruling that no documentary stamp tax is due in connection with the proposed transfer of real estate.
Your position is that there is no documentary stamp tax due because the transfer of a 100% interest in real property is from an individual to a limited liability company, which is 100% owned by the same individual.
Provisions of Law and Discussion
Pursuant to ss. 201.02(1), F.S., and Rule 12B-4.012(1) and (2), F.A.C., tax is imposed on deeds or instruments that convey real property or any interest in real property. The base of the tax is consideration given for the conveyance. Consideration includes, but is not limited to, money paid or to be paid, any mortgages, or other encumbrances on the property, whether or not the underlying indebtedness is assumed. Where the consideration given is other than money, it is presumed that the consideration is equal to the fair market value of the real property conveyed.
In Crescent Miami Center, LLC v. Department of Revenue, 903 So. 2d 913 (Fla. 2005) unencumbered real property was transferred between related entities. The Florida Supreme Court determined that the transfer of property between a grantor and its wholly owned grantee, absent any exchange of value, was without consideration or a purchaser and was not subject to the documentary stamp tax imposed by ss. 201.02(1), F.S. This transaction merely effected a change in the form of ownership by the entities that had owned and continued to own the property. However, where the conveyed property is subject to a mortgage, Crescent Miamidoes not apply.In the case of Department of Revenue v. PMR Resorts, Inc. 868 So.2d 621(Fla.2d DCA 2004) the court ruled that property encumbered by a mortgage is taxable based on the mortgage balance at the time of conveyance.
The following questions must be answered to determine whether tax is due on this conveyance:
Question 1: Is there a conveyance of an interest in the real property?
Question 2: What is the amount of consideration, if any,given for the conveyance?
Here the same individual owns 100% of the real property and 100% of the company. Applying the Cresent Miami case, the deed from the individual to the limited liability company does not convey a beneficial interest in real property. Regarding consideration, the Petitioner has confirmed that no mortgages were attached to the property at the time of conveyance, nor was there any other consideration given at the time of conveyance.
Position of the Department
The Department has determined that there was no conveyance of beneficial interest in the real property, nor was there any consideration given for the conveyance. Therefore, only minimum tax will be due on the deed.
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, your request and related backup documents are public records under Chapter 119, F.S., and are subject to disclosure to the public under the conditions of s. 213.22, F.S. Confidential information must be deleted before public disclosure. In an effort to protect confidentiality, we request you provide the undersigned with an edited copy of your request for Technical Assistance Advisement, the backup material and this response, deleting names, addresses and any other details which might lead to identification of the taxpayer. Your response should be received by the Department within 15 days of the date of this letter.
Sincerely,
Celestine Grantham Turner
Tax Law Specialist
Technical Assistance and Dispute Resolution
CGT/kh
Record ID 33079