Was a pre-1986 partnership property's unencumbered liquidating distribution stamp-taxable?

Subject

Conveyance of Property Pursuant to a Partnership Dissolution

Plain-English summary

The partnership's liquidating conveyance of the unencumbered property to its 85% corporate partner was not subject to documentary stamp tax. The partnership had acquired the property before July 1, 1986, so Florida applied the law in effect before the later partnership-conveyance provision.

Under that earlier treatment, the distribution was taxable only if the property carried a mortgage or other consideration. The property had no mortgage, and the partnership had continuously owned it despite later transfers of partnership interests.

What this means for you

The date the real property entered the partnership—and whether it remained encumbered—controlled this historical transition-rule result. A later change in partner ownership was not treated as a deed out of the partnership.

Common questions

Q: Was the dissolution deed taxable? No.

Q: Why did the pre-1986 date matter? Section 201.02(5) applied to property conveyed into a partnership after July 1, 1986.

Q: Would a mortgage have mattered? Yes; the ruling relied on the property being unencumbered.

Citations and references

• Fla. Stat. § 201.02(1), (5) — documentary stamp tax and partnership conveyances
• Chapter 86-152, Laws of Florida, § 10 — 1986 partnership-conveyance provision
• Chapter 90-132, Laws of Florida, § 7 — 1990 amendment
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00B4-013

Original ruling text

SUMMARY

QUESTION: When real property was conveyed to a partnership
prior to July 1, 1986, then conveyed back to partner (who
is a corporation) holding an 85% interest in the
partnership upon dissolution of the partnership in 1996, is
such transfer subject to documentary stamp tax if there is
no mortgage on the property?

ANSWER - BASED ON FACTS BELOW: No, the conveyance to the
partner in 1996 is not taxable for documentary stamp tax,
since the law in effect at the time the property was first
put into the partnership (prior to 1986) did not impose tax
on a transfer of real property into a partnership unless
there was a mortgage on the property or other consideration
given.

Oct 25, 2000

Re: Technical Assistance Advisement No. 00B4-013
Documentary Stamp Tax; Conveyance of Property Pursuant to a
Partnership Dissolution
Section 201.02(1) and (5), F.S
XXX (Corporation 1)
XXX (Company)
XXX (City)
XXX (Partnership or Taxpayer)
XXX (Corporation 2)

Dear :

This is in response to your recent request for a technical
assistance advisement pertaining to the applicability of
documentary stamp tax on a conveyance from a partnership formed
prior to July 1, 1986.

FACTS PRESENTED BY THE PETITIONER

In June of 1979, Corporation 1, an out-of-state
corporation, acquired certain real property in City. In the
early 1980's, Corporation 1 constructed improvements on the
property, specifically a hotel and an office building. The hotel
portion of the property has since been sold to a third party.

On July 1, 1983, Corporation 1 conveyed an undivided twothirds interest in the property to Company. On the same date,
Corporation 1 and Company formed Partnership, and conveyed their
respective one-third and two-thirds interests in the property to
Partnership.

On January 2, 1996, a new partner was brought into
Partnership. On that date, Corporation 1 sold part of its onethird interest in Partnership to Corporation 2. Later that day,
Company sold its two-thirds interest in Partnership to
Corporation 1. Following those transfers, Corporation 1 held an
85% interest in Partnership, and Corporation 2 held the other
15% interest in Partnership. The existence of Partnership
continued at all times prior to and after the transfers. There
has been no transfer of the subject property by Partnership, nor
any "deeds, instruments or writings" purporting to transfer or
convey the subject property out of Partnership's ownership.

As part of a streamlining effort, Partnership will now be
dissolved, and the property conveyed to Corporation 1 as part of
the dissolution of the partnership. There is no mortgage
encumbering the property.

Requested Ruling

The Taxpayer requests confirmation that the instrument
conveying title to the property from Partnership to Corporation
1 in connection with the dissolution of Partnership will not be
subject to documentary stamp taxes under s. 201.02, F.S.

Discussion and Law

Section 201.02(1), F.S., imposes the documentary stamp tax
on "deeds, instruments or writings whereby any lands, tenements,
or other real property, or any interest therein, shall be

granted, assigned, transferred, or otherwise conveyed to, or
vested in, the purchaser or any other person by his or her
direction...." The tax is imposed at the rate of $.70 "on each
$100 of the consideration" for the conveyance. Consideration is
defined to include "... the amount of any mortgage, purchase
money mortgage lien, or other encumbrance, whether or not the
underlying indebtedness is assumed".

Section 201.02(5), F.S., states:

All conveyances of real property to a partner from a
partnership which property was conveyed to the partnership
after July 1, 1986, are taxable if:

(a) The partner receiving the real property from the
partnership is a partner other than the partner who
conveyed the real property to the partnership; or

(b) The partner receiving the real property from the
partnership is the partner who conveyed the real
property to the partnership and there is a mortgage
debt or other debt secured by such real property for
which the partner was not personally liable prior to
conveying the real property to the partnership.

For purposes of this subsection, the value of the
consideration paid for the conveyance of the real
property to the partner from the partnership includes,
but is not limited to, the amount of any outstanding
mortgage debt or other debt which the partner pays or
agrees to pay in exchange for the real property,
regardless of whether the partner was personally
liable for the debts of the partnership prior to the
conveyance to the partner from the partnership.

Section 201.02(5), F.S., was added in 1986 (s. 10, Chapter
86-152, L.O.F.) and amended in 1990 (s. 7, Chapter 90-132,
L.O.F.). Prior to its adoption, unencumbered property could be
conveyed to another via a partnership without incurring
documentary stamp taxes. The referenced legislation applied
only to conveyances from a partnership to a partner when the

property went into the partnership after July 1, 1986.

Department Response

The instrument conveying the property from Partnership to
Corporation 1 is not subject to documentary stamp taxes, as the
property was put into the partnership prior to July 1, 1986.
The department has applied the law as it was prior to July 1,
1986, to liquidating distributions of unencumbered real property
by a partnership to its partner, if that real property was
acquired by the partnership prior to July 1, 1986. In this
case, Partnership acquired the real property prior to July 1,
1986. Since the law in effect at that time only taxed such
conveyances if the property was encumbered, and the property in
question is unencumbered, no documentary stamp tax is due on the
conveyance to Corporation I.

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. 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 from that
which is expressed in this response.

You are further advised that this response, your request
and related backup 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,

Joy B. Eldred, C.P.A.
Tax Law Specialist
Technical Assistance and Dispute Resolution
Office of the General Counsel

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