Can a husband and wife rely on TAA 04B4-007 to avoid documentary stamp tax when transferring unencumbered property to their corporation?

Plain-English summary

Do not rely on the original tax result in this TAA. The Florida Department of Revenue placed an express notice at the beginning of the official PDF: “Obsolete: See Crescent Miami Center, LLC v. Department of Revenue, 903 So.2d 913 (Fla. 2005).”

The remainder of the document preserves the Department's superseded 2004 position on a husband and wife's proposed transfer of a debt-free apartment building to a newly formed corporation.

What the 2004 ruling originally said

The owners held the apartment building free and clear and wanted to transfer it by warranty deed to a corporation to reduce their personal-liability exposure. They proposed three ownership structures:

1. Equal shares represented by separate stock certificates issued to each spouse.
2. One stock certificate issued jointly to “Husband and Wife.”
3. No stock issued in exchange for the property.

The TAA originally said only the third scenario was exempt, assuming the property remained unencumbered. It treated stock issued under the first two scenarios as consideration and said documentary stamp tax applied based on the property's fair market value.

The original reasoning relied on Kuro

The Department discussed Kuro, Inc. v. Department of Revenue, 713 So. 2d 1021 (Fla. 2d DCA 1998). As described in the TAA, the father and son in Kuro transferred unencumbered property to their corporation without stock ever being literally issued in exchange.

The 2004 TAA drew a line between that no-stock fact pattern and the proposed issuance of individual or joint stock certificates. The Department's later obsolete notice means that line should not be presented as current guidance.

The ruling did not cover commercial rent

The original response addressed only documentary stamp tax under Chapter 201. It separately warned that consideration for use of the property could indicate a taxable commercial rental.

What the obsolete notice does—and does not—say

The notice identifies the 2005 Crescent Miami Center decision but does not rewrite the TAA's analysis or provide a replacement rule in the PDF. Current treatment must be determined from current law and later authority, not from the original answer preserved below.

What this means for you

Property owners transferring real estate to an entity

Do not structure a transfer around this TAA's former distinction between issuing stock and issuing no stock. The Department itself marks that analysis obsolete.

Closely held corporations and advisers

Document every form of consideration, debt, beneficial ownership, entity interest, and continuing use arrangement. Obtain current documentary-stamp advice before recording the deed.

Researchers

The document is useful only as a record of the Department's pre-Crescent Miami Center position. Any description of its original holding should carry the obsolete warning.

Common questions

Q: What did TAA 04B4-007 originally conclude?
A: It said no stock issued for unencumbered property was exempt, while individual or joint stock issued in exchange made fair market value taxable.

Q: Is that conclusion current?
A: No. The official PDF labels the TAA obsolete.

Q: Which later case does Florida identify?
A: Crescent Miami Center, LLC v. Department of Revenue, 903 So. 2d 913 (Fla. 2005).

Q: Did the TAA decide tax on later use of the apartment building?
A: No. It addressed Chapter 201 documentary stamp tax and warned separately that consideration for use could create a taxable commercial rental.

Citations and references

• Fla. Stat. § 201.02(1) — documentary stamp tax on deeds and other instruments transferring real property
• Fla. Stat. ch. 201 — scope of the original requested advice
• Kuro, Inc. v. Department of Revenue, 713 So. 2d 1021 (Fla. 2d DCA 1998) — case used in the original, now-obsolete analysis
• Crescent Miami Center, LLC v. Department of Revenue, 903 So. 2d 913 (Fla. 2005) — later authority identified by the Department's obsolete notice

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 04B4-007

Original ruling text

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

SUMMARY
QUESTION: Is a transfer of unencumbered real property from Husband and Wife to a corporation under the following
fashions will be subject to tax?

1. Two stock certificates will be issued, one stock certificate to each person, in their individual names; and each stock
   certificate would be for the same number of shares.
2. One stock certificate will be issued jointly to the husband and wife and use the same language as on their warranty
   deed as: "Husband and Wife".
3. No stock issued.
   ANSWER - Based On Facts Below: Only scenario 3 will be exempt from taxation with the understanding that the
   property transferred is unencumbered at the time of transfer. Scenarios 1 and 2 will be subject to documentary stamp
   tax based on the fair market value of the property transferred to the corporation, if stock certificates are issued in
   exchange for the transfer of property.
   This response relates only to the obligation under Ch. 201, F.S. If there is anticipation that any consideration for use
   of the property may be involved, such transaction may indicate the existence of a taxable commercial rental.

July 21, 2004

Re: Technical Assistance Advisement No. 04B4-007
Documentary Stamp Tax/Transfer of Real Property
Section 201.02(1), F.S.
XXX (Husband)
XXX (Wife)
XXX (Corporation)
Dear :
This is in response to your request for a Technical Assistance Advisement, in which you seek an advisement as to
whether documentary stamp tax will be due on a deed from husband and wife to a corporation pursuant to s.
201.02(1), F.S.

Facts and Circumstances Presented by Petitioner
Your clients, a Husband and Wife, own a small apartment building. They do not reside in the apartment building.
Your clients are concerned that continuing to own this apartment building as individuals creates an unacceptable
degree of personal liability risk. They are desirous of transferring their apartment building to a Corporation.
They are also aware of the decision in Kuro, Inc. v. Department of Revenue, 713 So.2d 1021, (Fla. 2nd DCA
1998), and they wish to comply with the holding in that decision.
Your clients plan to form a corporation and transfer the apartment building to the corporation via a warranty deed.
The apartment building has no mortgage; i.e., Husband and Wife own it free and clear. The ownership in the
corporation will be held in one of the following fashions:

1. Two stock certificates could be issued, one stock certificate to each person, in their individual names; and each
   stock certificate would be for the same (equal) number of shares.
2. One stock certificate could be issued jointly to the husband and wife and use the same language as on their
   warranty deed as: "Husband and Wife".
3. No stock issued.
   Requested Ruling by the Petitioner
   You are requesting a Technical Assistance Advisement as to which of the three (3) stock ownership scenarios
   would be most acceptable to the Department of Revenue in light of the decision in Kuro, supra.
   Law and Discussion
   Section 201.02(1), F.S., imposes tax on deeds, instruments, or writings that convey, grant, or transfer real property
   or interest in real property.
   In the case of Kuro, the grantors, a father and son, owned unencumbered real property together on a 50% basis.
   According to Kuro, their "beneficial" ownership of the real property after the transfer remained the same. Additionally,
   in Kuro, Footnote 1 stated: "The sequence of events was this: [Father and son] bought the real estate in question.
   [They] then formed a corporation which the two of them owned. [They] then transferred their interests in the real
   estate to the corporation. These facts do not support the hearing officer's recommended findings that 'the Kuro, Inc.
   stock was issued in exchange for the contribution of the [real estate] to the corporation.' It was conceded at oral
   argument that the stock had never been literally 'issued.' Thus, we need not address the applicability of the
   presumption of consideration if the stock had, in fact, been issued in exchange for real estate."
   Department's Position
   Therefore, based on the above explanation, only scenario 3 will be exempt from taxation, with the understanding

that the property transferred is unencumbered at the time of transfer. Scenarios 1 and 2 will be subject to
documentary stamp tax based on the fair market value of the property transferred to the corporation, if stock
certificates are issued in exchange for the transfer of property.
Please note that this response relates only to your tax obligations under Ch. 201, F.S. If you anticipate that any
consideration for use of the property may be involved, such transaction may indicate the existence of a taxable
commercial rental.
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 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
BES/mh