Was documentary stamp tax due when an individual transferred unencumbered Florida property to a newly formed wholly owned corporation?

Plain-English summary

No Florida documentary stamp tax was due on the proposed deed. An individual owned unencumbered Florida commercial property and planned to deed it to a new Florida corporation. He would be the corporation's sole shareholder, the corporation would give him no consideration for the transfer, and it would assume no mortgage.

The Department applied the Kuro decision and treated the individual as retaining sole beneficial ownership through his 100% corporate interest.

What this means for you

Every limiting fact mattered: sole ownership on both sides, no consideration, and no encumbrance. The ruling does not say that all deeds to a wholly owned entity are tax-free.

Common questions

Q: Was the deed taxable? No.

Q: Was there a mortgage to count as consideration? No.

Q: Did the owner receive stock or another payment for the deed? The ruling states no consideration was given; the sole-owner stock certificate would be issued after the transfer.

Citations and references

• Fla. Stat. § 201.02(1) — documentary stamp tax on real-property conveyances
• Kuro, Inc. v. Department of Revenue, 713 So. 2d 1021 (Fla. 2d DCA 1998)
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 02B4-003

Original ruling text

SUMMARY

QUESTION: Is a transfer of unencumbered real property from
an individual to corporation which the individual is sole
owner of the corporation subject to tax?

ANSWER - Based on facts Below: No. With the decision in
Kuro, Inc. v. State of Florida Department of Revenue, 713
So.2nd 1021 (Fla. 2nd DCA 1998), since the owner of real
property is also the sole owner of the business entity to
which the real property is being transferred, and the
property transferred is unencumbered, Florida documentary
stamp taxes would not be due on the deed from the Taxpayer
to the corporation.

May 03, 2002

Re: Technical Assistance Advisement No. 02B4-003
Documentary Stamp Tax/Transfer of Real Property
Section 201.02(1), F.S.
XXX (hereinafter Taxpayer)

Dear :

This is in response to your letter of March 19, 2002,
requesting an opinion from this office whether or not
documentary stamp taxes imposed by s. 201.02(1), F.S., are due
on a transfer of unencumbered real property from an individual
to a corporation.

Facts as Presented by Petitioner

Taxpayer owns, in his name alone, certain commercial real
property in the state of Florida, which was acquired a number of
years ago. There are no mortgages currently on the property.
Because of liability concerns, Taxpayer desires to transfer
title of the property to a Florida corporation.

To accomplish this, Taxpayer will form a new Florida
corporation of which he will be the sole shareholder. However,
a stock certificate to the Taxpayer will not be issued until
after the transfer of the property to the corporation.

Request for Advisement

Taxpayer requests that the Department confirm that the
transfer of the property to the corporation should not be
subject to documentary stamp taxes for the following reasons:

1. The corporation is not a purchaser and no
   consideration is being given to the taxpayer as a
   result of the transfer. The taxpayer currently is the
   sole owner of the property and, after the transfer of
   the property to the corporation and the issuance of
   the stock in the corporation to the taxpayer, the
   taxpayer would be the sole beneficial owner through
   his 100% stock interest in the corporation.

2. There are no mortgages on the property that the
   corporation would be assuming or taking subject to as
   a result of the transfer.

3. The facts in this situation are the same as those in
   Kuro, Inc. v. State of Florida Department of Revenue,
   713 So.2d 1021 (Fla. 2nd DCA 1998), in which the
   Second District Court of Appeal ruled in favor of the
   taxpayer.

Law and Position of the Department

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

In accordance, however, with the decision in Kuro, since
the sole owner of the real property is also the sole owner of
the business entity to which the real property is being
transferred, and the property transferred is unencumbered,
Florida documentary stamp taxes would not be due on the deed

from the Taxpayer to the corporation.

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 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 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