Was Florida documentary stamp tax due on both deeds in a reverse section 1031 exchange using an accommodation titleholder?

Subject

1031 Exchange under IRS Code

Plain-English summary

Florida documentary stamp tax was due only once on the two-deed reverse exchange. The seller first deeded the Florida replacement property to a qualified exchange accommodation titleholder, which held and leased it for the exchanger's benefit before a qualified intermediary completed the exchange and transferred it to the exchanger.

Because the accommodation titleholder acted only as the exchanger's agent, Rule 12B-4.014(5) prevented a second deed-tax charge on the agent-to-principal transfer. Tax could be paid on Deed A or Deed B, but not both. The ruling expressly did not address documentary stamp tax on mortgages or written obligations under section 201.08.

What this means for you

The single-tax result depended on a qualifying reverse-exchange structure and a genuine agency relationship. Merely routing title through another entity would not establish the same result.

Common questions

Q: Was deed tax due twice? No.

Q: Why was the second transfer not separately taxed? The accommodation titleholder acted as the exchanger's agent.

Q: Did the ruling decide mortgage tax? No.

Citations and references

• Fla. Stat. § 201.02(1) — documentary stamp tax on deeds
• Fla. Admin. Code r. 12B-4.014(5) — agent-to-principal deed
• IRS Rev. Proc. 2000-37 — qualified exchange accommodation arrangements
• Fla. Stat. § 201.08 — written obligations and mortgages expressly not addressed
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01B4-001

Original ruling text

SUMMARY

QUESTION: Is the documentary stamp tax on the deed due only
once on a transaction complying with the regulatory
provisions for a reverse exchange?

ANSWER - BASED ON FACTS BELOW: The Florida property is
conveyed by a deed to a qualified exchange accommodation
titleholder. The accommodator is only acting as an agent
of the exchangor in the transaction. The transaction is
structured to qualify as a 1031 exchange of real properties
under the Internal Revenue Code. Therefore, the
documentary stamp tax imposed by s. 201.02, F.S., is due
only once, on one of the deeds, but is not due on both
deeds. This advisement does not address s. 201.08, F.S.,
which imposes tax on written obligations to pay money, and
on mortgages.

Jan 02, 2001

Re: Technical Assistance Advisement No. 01B4-001
Florida Documentary Stamp Tax
1031 Exchange under IRS Code
Section 201.02, F.S.; Rule 12B-4.014(5), F.A.C.
XXX (Collectively referred as Exchangor)
XXX (Buyer)
XXX (Seller)

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 Presented by Petitioner

The following is the description of the transactions
outlined in your letter. You have also enclosed a flow chart

illustrating your transactions.

Several business entities, collectively referred to as the
Exchangor, own real property in another state, which Exchangor
wishes to exchange for real property in Florida. The purchaser
of the other state property will be one or more entities yet to
be formed by the Buyer. The Buyer is willing to participate in
a 1031 exchange. The Exchangor has identified property in
Florida which is currently owned by the Seller. The anticipated
purchase price of the Florida property (notwithstanding the
exchange) is $XX. The Seller requires that the closing on the
Florida property occur prior to the closing date on the transfer
of the other state property.

The Exchangor, or one or more of them, or an affiliate,
will provide a loan to an entity yet to be formed. This entity
will be the qualified exchange accommodation titleholder (such
entity, is hereinafter referred to as the Accommodator). The
Accommodator will purchase the Florida property in the name of
the Accommodator and pay the loan proceeds to the Seller as the
purchase price for the Florida property. The Seller will
transfer the Florida property by deed (Deed A) to the
Accommodator, which then will hold the Florida property, pending
completion of the exchange. The Accommodator will hold the
Florida property for the benefit of the Exchangor, under the
terms of a Qualified Exchange Accommodation Agreement and
related documents and agreements which collectively provide,
among other things, that the Accommodator must convey the
Florida property to the Exchangor, upon the Exchangor's request.

During the period that the Accommodator is holding the
Florida property prior to completion of the exchange, the
Accommodator will lease the property to the Exchangor.

Within the period permitted by the Internal Revenue Code
and IRS regulations, and specifically IRS Rev. Proc. 2000-37,
the Exchangor will assign to a qualified intermediary the other
state property and the Buyer will purchase the other state
properties from the intermediary. The intermediary will acquire
the Florida property from the Accommodator, and then complete
the exchange, giving a deed (Deed B) to the Exchangor, conveying

the Florida property.

Requested Ruling by the Petitioner

You seek the Department's confirmation that documentary
stamp tax would be payable only once either on Deed A or Deed B,
but it is not due on both deeds, provided the transaction
otherwise complies with the regulatory provisions for a reverse
exchange, because the Accommodator is only acting as a pass
through entity.

Law and Discussion

Section 201.02(1), F.S., imposes tax on deeds, instruments,
or writings that convey, grant, or transfer real property or an
interest in real property.

Rule 12B-4.014(5), F.A.C., states that a deed from an agent
to its principal conveying real estate purchased for and with
funds of the principal is not taxable.

Conclusion

This transaction is structured to qualify as a 1031
exchange of real properties under the Internal Revenue Code.
The Florida property is conveyed by a deed to a qualified
exchange accommodation titleholder. The Accommodator is only
acting as an agent of the Exchangor in this transaction.
Therefore, the documentary stamp tax imposed by s. 201.02, F.S.,
is due only once, on Deed A or Deed B, but it is not due on both
deeds. This advisement does not address s. 201.08, F.S., which
imposes tax on written obligations to pay money, and on
mortgages.

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
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