Can the 2000 trustee-to-LLC documentary stamp ruling still be relied on?

Subject

Conveyance of Real Property from a Trustee to a Limited Liability Company

Plain-English summary

This ruling is obsolete. The official document directs readers to Crescent Miami Center, LLC v. Department of Revenue, 903 So. 2d 913 (Fla. 2005), rather than relying on the 2000 analysis.

Historically, the ruling said the trustee's deed of a shopping-center leasehold and improvements to a new LLC was taxable. It viewed the transfer as changing beneficial ownership and treated the increased value of the limited partnership's LLC interest as consideration presumed equal to the real property's fair market value.

What this means for you

The historical holding should not be used to determine current tax on a trustee-to-LLC conveyance. Review the cited Crescent Miami Center decision and current documentary stamp law for any similar transaction.

Common questions

Q: Is TAA 00B4-006 current guidance? No. The Department labels it obsolete.

Q: What did the 2000 ruling originally say? It treated the deed as taxable based on presumed fair-market-value consideration.

Q: What authority does the Department identify instead? Crescent Miami Center, LLC v. Department of Revenue, 903 So. 2d 913 (Fla. 2005).

Citations and references

• Fla. Stat. § 201.02(1), (5) — documentary stamp tax and land-trust interests cited in the historical ruling
• Fla. Admin. Code r. 12B-4.013(33)(a), (e) — trustee deeds and beneficial ownership
• Department of Revenue v. DeMaria, 338 So. 2d 838 (Fla. 1976) — consideration analysis cited in the historical ruling
• Crescent Miami Center, LLC v. Department of Revenue, 903 So. 2d 913 (Fla. 2005) — authority identified by the Department's obsolete notice
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00B4-006

Original ruling text

Obsolete: See Crescent Miami Center, LLC v. Department of Revenue,
903 So.2d 913 (Fla. 2005)

SUMMARY

QUESTION: Will the deed from the Trustee Bank to limited
liability company require payment of documentary stamp tax?

ANSWER - BASED ON FACTS BELOW: The contribution of real
property to the limited liability company increases the
value of the ownership interests in the limited liability
company. Therefore, the deed will be subject to tax based
on the consideration, which is presumed to be equal to the
fair market value of the real property transferred.

Apr 19, 2000

Re: Technical Assistance Advisement No. 00B4-006
Documentary Stamp Tax; Conveyance of Real Property from a
Trustee to a Limited Liability Company
Section 201.02(1), (4), F.S.
Rule 12B-4.013(7) & (33)(a), (e), F.A.C.
XXX (Limited Partnership)
XXX (Trustee Bank)

Dear :

You have petitioned for a technical assistance advisement
pursuant to s. 213.22, F.S., and Rule 12-11.003, F.A.C.

Statement of Fact Presented by Petitioner

Limited Partnership, an out-of state limited partnership,
is the sole beneficiary of a land trust created pursuant to s.
689.071, F.S. The sole asset of the land trust is ground
leasehold and improvements constituting a small shopping center
in Florida. Under s. 689.071, F.S., the limited partnership's

beneficial interest under the trust is personal property.

Due to an increase by the Trustee Bank of its fee schedule,
Limited Partnership proposes to have the Trustee Bank convey the
leasehold estate and improvements to a Florida limited liability
company to be created. Limited Partnership would be the sole
member of the limited liability company. The limited liability
company would make no payment nor pay any consideration to the
Trustee Bank. Under Florida's limited liability company act,
Limited Partnership's interest would be personal property.

The leasehold estate and improvements are encumbered by a
non-recourse mortgage. The Trustee Bank has no liability or
obligation under the mortgage or the note it secures. Limited
Partnership makes the mortgage payments as the beneficial owner.
The limited liability company would not be obligated under the
mortgage and Limited Partnership would continue to be obligated
to make the payments.

Requested Ruling

The petitioner's opinion is that the grantor of the
conveyance, that is, the Trustee Bank, will receive nothing in
exchange for the conveyance. Although the value of Limited
Partnership's ownership interest in the limited liability
company will be increased as a result of the Trustee Bank's
conveyance, Limited Partnership is not making any conveyance.
The petitioner feels that the deed from the Trustee Bank to
limited liability company as trust beneficiary would not be
taxable.

Applicable Law

Section 201.02(1), F.S., imposes tax on deeds which convey
real property. The amount of tax is based on the amount of
consideration given for the conveyance. Consideration is not
limited to money paid, mortgages or other encumbrances. When
there is consideration other than money, it is presumed that the
consideration is equal to the fair market value of the real
property or interest therein.

Section 201.02(5), F.S., provides that the tax is also
payable upon documents which convey or transfer, pursuant to s.
689.071, F.S., any beneficial interest in lands, tenements, or
other real property, or any interest therein, even though such
interest may be designated as personal property, notwithstanding
the provisions of s. 689.071(4), F.S. The tax is to be paid
upon execution of any such document.

Rule 12B-4.013(33)(a), (e), F.A.C., states that a deed to
or from a trustee conveying real property is taxable to the
extent that the deed transfers the beneficial ownership of the
real property and to the extent that there is consideration for
the transfer. A deed from a trustee is exempt from the stamp
tax if beneficial ownership is not changed. If the beneficial
ownership is changed, the stamp tax is based on any cash, note,
release or other consideration, including the amount of any
mortgage encumbering the real property.

Department's Position

The conveyance of the leasehold estate and improvements to
the Florida limited liability company to be created effects a
change in the beneficial ownership of the real property.
Property contributed to a limited liability company is the
property of the company. The members have no rights in the real
property after the transfer, but instead have an interest in the
limited liability company, which is an interest in personal
property. The contribution of real property to the limited
liability company increases the value of the ownership interests
in the limited liability company. The grantors are giving up
their interest in the real property, and in exchange receive an
increase in the value of their interest in the company. This
constitutes consideration. The Florida Supreme Court has held
that when there is consideration there is, of necessity, a
purchaser. Department of Revenue v. DeMaria, 338 So.2d 838
(Fla. 1976). The deed will be subject to tax based on the
consideration, which is presumed to be equal to the fair market
value of the real property transferred.

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 advise 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.

Baldan E. Sulker
Senior Tax Specialist
Technical Assistance & Dispute Resolution
Office of General Counsel

BES/mh