Was Florida documentary stamp tax due when an individual moved property through revocable trusts into wholly owned LLCs?

Plain-English summary

Florida imposed no documentary stamp tax on the unencumbered property transfers in the proposed plan, but warned that any property still carrying mortgage debt would be taxable when moved to an LLC.

The taxpayer planned several steps:

1. transfer unencumbered parcels from five revocable trusts back to himself;
2. transfer those parcels into five newly formed LLCs, each wholly owned by him; and
3. transfer the LLC membership interests to his revocable trust, where he would be sole trustee and sole beneficiary.

Unencumbered parcels

Rule 12B-4.013(32)(i) stated that a deed from a revocable trust's grantor to the trustee, or back to the grantor on revocation, was not a taxable ownership transfer. The Department therefore found no tax on the deeds returning the unencumbered parcels from the five revocable trusts to the taxpayer.

The later deeds from the taxpayer to his sole-member LLCs were also not taxable. Citing Kuro, the TAA treated a deed of unencumbered property from an individual to an LLC in which the individual was the sole member as outside section 201.02 when the ownership percentage remained the same.

The later transfers of the wholly owned LLC membership interests to the taxpayer's revocable trust were not subject to documentary stamp tax either.

The uncertain sixth parcel

One acquisition deed stated that a sixth property had been encumbered by $90,000 of purchase-money mortgages, while the satisfaction document contained a different property description. The Department did not assume that the debt was gone.

If any mortgage remained, the deed from the taxpayer to the sixth LLC would be taxable. The ruling said the tax base would be the greater of:

• the property's fair market value; or
• the outstanding principal balance of the mortgage or other encumbrance.

What this means for you

Before moving Florida property into a wholly owned LLC, verify title and debt records parcel by parcel. The continuity-of-ownership reasoning in this TAA protected unencumbered property; unresolved debt changed the result even if the same individual owned the LLC.

Common questions

Q: Was a deed from the taxpayer's revocable trust back to him taxable?
A: No, for the unencumbered parcels and trust facts reviewed.

Q: Was a deed from the individual to his sole-member LLC taxable?
A: No, when the property was unencumbered and his ownership percentage was unchanged.

Q: Were the LLC membership interests real-property deeds subject to stamp tax?
A: No. Their transfer to the taxpayer's revocable trust produced no documentary stamp tax.

Q: What if an old mortgage had not actually been satisfied?
A: The LLC deed would be taxable based on the greater of fair market value or outstanding mortgage principal.

Citations and references

• Fla. Stat. § 201.02 — documentary stamp tax and consideration for real-property conveyances
• Fla. Admin. Code r. 12B-4.013(25) — mortgages included in consideration
• Fla. Admin. Code r. 12B-4.013(32)(i) — deeds involving revocable trusts
• Kuro, Inc. v. Department of Revenue, 713 So. 2d 1021 (Fla. 2d DCA 1998) — unencumbered transfer to a sole-member LLC

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 04B4-012

Original ruling text

SUMMARY
QUESTION: Will any of the proposed plans to transfer unencumbered real property to various LLCs be free of
documentary stamp tax?
ANSWER - Based on Facts Below: The Taxpayer plans to convey wholly owned unencumbered real property to
limited liability companies and then convey the limited liability membership interests into Taxpayer’s own revocable
trust. Where the ownership percentage of the contributor in the unencumbered real property is the same as the
ownership percentage in the LLC both before and after the conveyance to the LLC, no documentary stamp tax is due.
The conveyances of the wholly-owned LLC membership interests to his revocable trust are not subject to
documentary stamp tax.

December 2, 2004

Re: Technical Assistance Advisement No. 04B4-012
Documentary Stamp Tax
Conveyances from Individual to Limited Liability Company
Section 201.02, F.S.
Rule 12B-4.013(25),(32)(i), F.A.C.
XXX (Taxpayer)
XXX (Fifth Trust)
XXX (Sixth Trust)
Dear:
This is in response to your request for a technical assistance advisement asking for an opinion on whether the
conveyance of real property from an individual to his own limited liability company would be subject to documentary
stamp tax.
FACTS AS PRESENTED BY PETITIONER
The Taxpayer an individual, will convey certain unencumbered parcels of real property from four of his own
revocable trusts (where he is the Grantor and where he and his wife are the Beneficiaries) back to himself,
individually. The Taxpayer will form four limited liability companies (LLCs). Taxpayer will be the sole member of each
of these limited liability companies. Subsequent thereto, the Taxpayer, individually, will convey legal title to each of
these parcels of unencumbered real property; one to each of the four newly formed limited liability companies where
he is the sole member.
A fifth revocable trust (Fifth Trust) contains two parcels of property, both of which are unencumbered. One parcel
(Tract A) is owned individually by the Grantor. A second parcel of unencumbered property (Tract B) is owned jointly by

the Grantor/Beneficiary and Grantor's wife (the second Beneficiary of this trust). Per our telephone conversation of
September 30, 2004, and your fax that same date, the property presently owned jointly by Taxpayer and Taxpayer’s
wife, and the parcel owned individually by Taxpayer, will be conveyed from Fifth Trust back to Taxpayer, individually,
with the wife giving up her percentage ownership of the property to Taxpayer. Taxpayer will then convey both these
unencumbered parcels of real property (Tract A and Tract B), which he will own individually, to the fifth limited liability
company, of which Taxpayer is the sole member.
Copies of deeds for real property contained in each of the five revocable trusts discussed above were included in
the material presented for review.
According to your fax of October 11, 2004, the Sixth Trust does not contain any real property. The real property
was never transferred from Taxpayer's individual name when he acquired the property in 1974. However, item 8 in the
acquisition deed to Taxpayer stated that the property was encumbered by purchase money mortgages in the amount
of $90,000.00.
The satisfaction of mortgage received with the complete copy of the original deed of this property to Taxpayer had
a difference from the original deed. The property description Plat Book and Page Number were different on the two
documents, that is, the deed and the satisfaction of mortgage.
Your September 27, 2004, letter advises that subsequent to conveying the real property to the limited liability
companies, Taxpayer intends to transfer each limited liability company membership interest into his Revocable Trust,
of which he will be the sole trustee and sole beneficiary.
REQUESTED RULING
You request the Department's determination that the documents involved in this request are not subject to
documentary stamp tax under s. 201.02, F.S.
LAW AND DISCUSSION
Section 201.02, F.S., imposes a documentary stamp tax on documents that convey an interest in real property.
The amount of consideration is the basis for the tax. Mortgages constitute consideration as explained in s. 201.02,
F.S.:
(1)... For purposes of this section, consideration includes, but is not limited to, the money paid or agreed to be paid;
the discharge of an obligation; and the amount of any mortgage, purchase money mortgage lien, or other
encumbrance, whether or not the underlying indebtedness is assumed. If the consideration paid or given in
exchange for real property or any interest therein includes property other than money, it is presumed that the
consideration is equal to the fair market value of the real property or interest therein. (e.s.)
When consideration, or the basis for the tax, is property other than money, the consideration is presumed to equal the
fair market value of the property, and the tax is based on the fair market value of the property. However, if a mortgage

or other encumbrance exists on the property, recorded or not, and this encumbrance exceeds the fair market value of
the property, the basis for the tax is the outstanding principal balance of the encumbrance, since encumbrances are
also included in the definition of consideration shown above in s. 201.02(1), F.S.
Under Rule 12B-4.013, F.A.C.:
(32)(i) Revocable Trust: A deed to a trustee from a grantor who has the power to revoke the trust instrument, and a
deed back to the grantor from the trustee upon revocation of the trust, are not transfers of ownership subject to the
stamp tax.
A deed of unencumbered property from an individual to a limited liability company where that individual is the sole
member of the limited liability company is not subject to tax under s. 201.02, F.S. (See Kuro, Inc. v. Department of
Revenue, 713 So.2d 1021(Fla. 2nd DCA 1998). However, under Rule 12B-4.013, F.A.C.:
(25) Mortgage on Property: When computing the tax under s. 201.02, F.S., on a deed of conveyance, the total
consideration includes any mortgages encumbering the property being transferred.
At first, the Sixth Trust was thought to contain real property. It was stated in the October 11, 2004, letter that this
trust did not contain the real property. The property was still held in the name of Taxpayer, an individual. However, as
to item 8 in the acquisition deed of the real property, if these mortgages still exist in any amount, the conveyance of
the encumbered property from Taxpayer to an LLC would be subject to documentary stamp tax under s. 201.02(1),
F.S., based on the greater of the fair market value of the real property, or the outstanding principal balances of any
existing mortgage.
DETERMINATION
Under the facts as stated above, the conveyances of unencumbered real property from each of the five revocable
trusts to Taxpayer (where the Taxpayer is the Grantor and where Taxpayer and his wife are the beneficiaries in each
of the five revocable trusts involved) would not be subject to documentary stamp tax.
Also, the subsequent conveyances of each parcel of the unencumbered real property from the Taxpayer,
individually, to the five limited liability companies of which Taxpayer is the sole member, are not subject to
documentary stamp tax under the Kuro case cited above.
Therefore, the deeds conveying the unencumbered real property from Taxpayer's revocable trusts discussed
above back to the Taxpayer and the subsequent conveyances from Taxpayer to the five LLCs of which Taxpayer
would be the sole member would not be subject to documentary stamp tax.
As to the conveyance of real property directly from Taxpayer to the sixth LLC, if this property is encumbered in any
amount, the conveyance from Taxpayer to the sixth LLC would be subject to documentary stamp tax based on the
greater of the fair market value of the real property, or the outstanding principal balances of the mortgages or other
encumbrances.

There is no documentary stamp tax liability when the membership interests in the limited liability companies are
transferred to Taxpayer's Revocable Trust.
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 interpretations 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 this letter.
Sincerely,
M.E. Clemens, C.P.A.
Senior Tax Specialist
Technical Assistance and Dispute Resolution
Office of General Counsel
MEC/mh