Was a deed from nominee partners to their converted limited partnership stamp-taxable?

Subject

Deeds to Partnerships and Conversion of General Partnership to Limited Partnership

Plain-English summary

The deed from the four record-title partners to the converted limited partnership did not require documentary stamp tax. The documents and decades of conduct showed that the partnership—not the individual titleholders—had always beneficially owned the property: it reported the income, paid expenses and taxes, reinvested condemnation proceeds, and accounted for the property at partnership level.

Florida's conversion law treated the new limited partnership as the same entity as the general partnership. The deed therefore aligned record title with unchanged beneficial ownership rather than transferring the property to a new owner.

What this means for you

The result depended on extensive proof of continuous partnership ownership and a statutory same-entity conversion. Record title alone did not control.

Common questions

Q: Did the deed change beneficial ownership? No.

Q: Did converting to a limited partnership create a new owner? No; the statute treated it as the same entity.

Q: Was documentary stamp tax due? No.

Citations and references

• Fla. Stat. § 201.02 — documentary stamp tax on deeds
• Fla. Stat. § 620.8204(3) — presumption of partnership property
• Fla. Stat. § 620.8902 — partnership conversion
• Fla. Stat. § 620.8904(1) — converted partnership is the same entity
• Fla. Admin. Code r. 12B-4.013(33) — trustee and beneficial ownership deeds
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00B4-011

Original ruling text

SUMMARY

QUESTION: Will the deed from the four partners to new
limited partnership require only minimum tax?

ANSWER - BASED ON FACTS BELOW: Since the property held by
four partners is determined to be the partnership property,
the deed from the four partners to the new limited
partnership with a deed pursuant to s. 620.8904, F.S., will
not require documentary stamp tax.

Sep 20, 2000

Re: Technical Assistance Advisement No. 00B4-011
Florida Documentary Stamp Tax; Deeds to Partnerships and
Conversion of General Partnership to Limited Partnership
Sections 201.02, 620.8904(1),F.S.
XXX (Limited Partnership)
XXX (General Partnership)
XXX (New Limited Partnership)
XXX (S Corporation)
XXX (Partner 1)
XXX (Partner 2)
XXX (Partner 3)
XXX (Partner 4)
XXX (Brother 1)
XXX (Brother 2)

Dear :

This is in response to your request for a Technical
Assistance Advisement pursuant to s. 213.22, F.S., and Rule 1211.003, F.A.C.

Facts and Circumstances as Presented by Petitioner

The following is the description of the transactions
outlined in your letter. You have also sent the following

documents supporting your client's position.

1. Estate Tax Return Information

2. Fictitious Name Affidavit

3. Valuation of Partnership Interests

4. Fictitious Name Affidavits,

5. Partition Deed

6. Closing Memorandum

7. Modified and Restated Partnership Agreement

8. Second Modified and Restated Partnership Agreement

9. Agreement of Limited Partnership

The proposed action is to record deeds of certain property
now titled in the names of Partner 1, Partner 2, Partner 3 and
Partner 4 to the beneficial owner of such real property, the
Limited Partnership. The four Partners have held record title
to the real property in their names as agents for Limited
Partnership.

The four Partners are individuals who have held certain
parcels of real estate in Florida for over fifty years. Prior
to XXX, record title to the real estate was in the names of
Brother 1 and 2. Although the real estate was titled in this
manner, Brother 1 and Brother 2 regarded and treated themselves
as partners, and regarded and treated the subject real estate as
partnership property, pursuant to partnership agreements entered
into from time to time. Brother 1 and Brother 2 accordingly
held partnership interests in a general partnership owning the
real estate.

Prior to XXX, it was normal in Florida for a partnership to
hold title to real estate in the names of its partners. After
Florida adopted the Uniform Partnership Act in 1972, it was then

possible, but not mandatory, for a partnership to hold title to
real estate in the partnership's name.

The treatment of the assets for federal tax purposes was
consistent with the characterization of the property as
partnership property. On the death of Brother 1 in XXX,
included in his estate for federal estate tax purposes was a
partnership interest in Limited Partnership, which held the real
estate.

After the death of Brother 1, record title to the real
estate was changed to the following:

1. as to a XX% interest, Brother 2;

2. as to the XX% interest formerly held by Brother 1,
   this interest was titled in the Estate of Brother 1,
   then later changed to Brother i's surviving spouse,
   Partner 1 (as to a XX% interest), and three children
   Partner 2, Partner 3 and Partner 4 (each as to an XX%
   interest).

Throughout the events described in your letter, Partner 1's
Trust has owned the partnership interest for the benefit of
Partner 1. Also, the name on the record title to real estate
has always been Partner 1's Trust. In some cases for periods of
time, the interest in the partnerships described hereafter were
in the name of trusts for the benefit of the other individuals.

The parties - first Brother 2 and the Estate of Brother 1,
and later Brother 2 and the partners, continued to treat the
real property as partnership property. From time to time over
the course of years, there were partnership agreements entered
into or modified among the parties. These partnership
agreements, while differing in some respects, consistently
described the real property in question as being owned by the
partnership while acknowledging that title to the real property
was in the name of the individuals.

After the death of Brother 2 in XXX, title to the real
property was changed to the following:

as to a XX% interest formerly held by Brother 2, the Estate
of Brother 2;

the other XX% remained titled in the Partners in the
percentage interests set forth above.

On the death of Brother 2, in the same way as had occurred
with the death of Brother 1, the personal representative of
Brother 2's estate included in his estate for federal estate tax
purposes a partnership interest, not an undivided interest in
real estate.

Throughout the period between XXX and XXX, as before and
after, the real property in question was consistently treated as
a partnership asset. Partnership agreements were entered into
or modified from time to time which described such real estate
as partnership property. All expenses related to the real
property were paid by the partnership. Accounting was performed
at the partnership level. Income, gains, losses and other items
were reported for federal income tax purposes as partnership
items.

In XXX, pursuant to a settlement and division of family
assets, record title to certain of the real property formerly
held as tenants in common by Brother 2 and the partners was
transferred by partition deed to the personal representative of
Brother 2's estate for the.benefit of the heirs of Brother 2.
Record title to certain other property, the property at issue in
this ruling request, was transferred by partition deed to the
following as tenants in common:

Partner 1 an undivided XX interest;
Partner 2 an undivided XX interest;
Partner 3 an undivided XX interest;
Partner 4 an undivided XX interest.

Immediately following this division, the beneficial
ownership of the real property continued to be held in the
Limited Partnership.

Finally, in a series of partnership agreements between XXX
and XXX, it was agreed that the beneficial ownership of the real
estate at issue was changed from the prior owner, Limited
Partnership, to General Partnership, in which all four partners
were the same. Title did not change as a result of these
transactions.

In XX, General Partnership became the beneficial owner of
the real property. The General Partnership has treated the
property as partnership property for federal income tax purposes
and for financial reporting purposes. The parties reported
income from the real estate for tax purposes on partnership tax
returns, and commingled revenue and gains and losses as part of
the partnership structure. A number of transactions were
entered into involving condemnation of some of the real estate
and tax-free reinvestment of the proceeds pursuant to the
federal income tax law. Real property taxes and all other
expenses associated with the property have been paid by General
Partnership.

In XXX, a XX% interest in General Partnership was assigned
by Partner 1 to a trust for the benefit of Partner 1's spouse.
In XXX, a XX% interest in General Partnership was assigned by
Partner 1 to the S corporation. Neither of these assignments
had any effect on the manner in which the subject real estate
was consistently treated as an asset of the General Partnership.

Later, in XXX, the parties converted from General
Partnership to a limited partnership (New Limited Partnership)
pursuant to the provisions of s. 620.8902, F.S. The limited
partnership agreement recited that the subject real property is
owned by the partnership. The partners in New Limited
Partnership are the same as the partners in General Partnership
before the conversion.

To this date, record title to the real property remains in
the names of the four Partners as agents for the partnership.
The four Partners desire to transfer record title to the name of
New Limited Partnership consistent with current beneficial
ownership.

Requested Ruling by the Petitioner

You seek the Department's confirmation that only minimum
tax will be due on the deed from the four Partners to New
Limited Partnership to make the record title conform to the
historical beneficial ownership of the property.

You believe that your requested ruling is based from three
established principles applicable to the documentary stamp tax:

*

A partner may, as an agent, hold record title to real
estate beneficially owned by a partnership. In this
case, New Limited Partnership is the beneficial owner
of real estate titled in the name of the four
Partners.

*

The conversion of a general partnership to a limited
partnership, after which beneficial ownership of the
real estate remains in the limited partnership, is not
a taxable event.

*

Title of record may be converted from a trustee or
agent holding title to real property to the beneficial
owner of the real property.

Law and Discussion

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.

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, as 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.

Section 620.8904(1), F.S., provides that a partnership
resulting from a conversion pursuant to s. 620.8902, F.S., is
for all purposes the same entity that existed before the
conversion.

The Revised Uniform Partnership Act of 1995, as currently
in effect in Florida, sets forth provisions with this principle
that real property held in the name of partners may in fact be
partnership property. For example:

(3) Property is presumed to be partnership property if
purchased with partnership assets, even if not acquired in
the name of the partnership or of one or more partners with
an indication in the instrument transferring title to the
property of the person's capacity as a partner or of the
existence of a partnership. [s. 620.8204(3), F.S.]

Conclusion

The documentation accompanying the technical assistance
advisement request evidences that the parties have treated this
property as General Partnership (now New Limited Partnership)
property for many years. The parties reported income,
commingled income and gains and losses and otherwise dealt with
the property as partnership property. The treatment of the
receipt and reinvestment of condemnation proceeds for federal
tax purposes, all reported at the partnership level, was
consistent with the property being treated as partnership
property. Property taxes and all other expenses related to the
property were paid by the partnership. Accounting was done at
the partnership level. Written agreements acknowledge the
beneficial ownership of the subject real estate in the New
Limited Partnership.

The intention of the parties was to treat the property as
partnership property, and the demonstrated intent of the parties
has been consistent with the treatment of the property as

partnership property.

Since we determined that the property was General
Partnership property, the conversion of the General Partnership
to New Limited Partnership with a deed pursuant to s. 620.8904,
F.S., will not require documentary stamp tax. The converted New
Limited Partnership is treated, for all purposes, as the same
entity that existed before the conversion.

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 interpretation 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
199, 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