Did spouses owe more than minimum documentary stamp tax when they deeded unencumbered Florida property to their wholly owned LLC?

Plain-English summary

The Florida Department of Revenue concluded that the deed was subject only to minimum documentary stamp tax. A husband and wife planned to transfer an improved, unencumbered Florida parcel to a Florida LLC they owned entirely as tenants by the entireties.

The LLC would not pay money, issue additional membership interests, assume debt, or give any other consideration for the property. After the deed, the spouses would still own 100% of the LLC, matching their 100% ownership of the property before the transfer.

The tax normally follows consideration

Section 201.02(1) imposes documentary stamp tax on deeds conveying Florida real property. The tax is measured by consideration, which includes money, a discharged obligation, and a mortgage or other encumbrance. When noncash property is exchanged, the statute presumes consideration equals the conveyed property's fair market value.

Unchanged beneficial ownership overcame that presumption

The Department applied Kuro, Inc. v. Department of Revenue. In that case, two individuals transferred unencumbered property to their wholly owned corporation without payment. The court found that beneficial ownership remained unchanged and there was no purchaser within section 201.02(1).

Here, the spouses' ownership before and after the deed was likewise identical, the property had no mortgage or lien, and the LLC gave no consideration. The Department therefore found Kuro applicable and required only minimum tax on the deed.

What this means for you

Married property owners using an LLC

Minimum-tax treatment may be possible when spouses own the LLC in exactly the same interests as they own the property, the real estate is unencumbered, and the LLC gives nothing for the deed.

Real-estate and closing professionals

Confirm the ownership percentages, mortgages, liens, debt relief, cash, added membership interests, and any side consideration. The ruling's result rests on all of those facts lining up.

Accountants and tax professionals

The ruling treats unchanged beneficial ownership and the absence of consideration as the basis for applying Kuro. It also warns that Kuro has limited application because other courts have held transfers to artificial entities taxable.

Common questions

Q: Did the LLC pay the spouses or issue them more membership interests?
A: No. The ruling says the LLC would give no money, property, or additional membership interests for the parcel.

Q: Was the property subject to a mortgage or lien?
A: No. It was unencumbered at the time of the planned transfer.

Q: Did ownership change economically?
A: No. The spouses owned 100% of the property before the deed and would own 100% of the LLC afterward.

Q: What tax did the Department require?
A: Only minimum documentary stamp tax on the deed.

Citations and references

• Fla. Stat. § 201.02(1) — documentary stamp tax on real-property conveyances and consideration
• Kuro, Inc. v. Department of Revenue, 713 So. 2d 1021 (Fla. 2d DCA 1998) — unchanged beneficial ownership and no purchaser

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 04B4-013

Original ruling text

SUMMARY
QUESTION: Is Florida's documentary stamp tax, as imposed under section 201.02(1), F.S., due on an instrument
conveying interest in Florida real property from spouses into a limited liability company of which the husband and wife
are the sole members?
ANSWER - Based on Facts Below: Section 201.02(1), F.S., imposes documentary stamp tax on instruments that
convey an interest in Florida real property. The tax is based on the consideration given or to be given for the
conveyance. Where consideration is other than money the consideration is deemed to be equal to the fair market
value of the property conveyed. In Kuro Inc. v. Department of Revenue, 713 So.2nd 1021 (Fla. 2nd DCA 1998), the
court rendered a decision regarding taxability of an instrument conveying Florida real property from two individuals
into their wholly owned corporation. The court stated that the beneficial ownership of the real property was unchanged
and that there was no "purchaser" within the meaning of s. 201.02(1), F.S., and therefore, no tax due. Essentially, the
presumption that the consideration was equal to the fair market value of the property conveyed was overcome. The
Department applies the Kuro decision to certain conveyances between individuals and artificial entities such as limited
liability companies. An instrument conveying unencumbered Florida real property from a husband and wife to a limited
liability company, where the interest held by the husband and the interest held by the wife in the limited liability
company are identical to the interest that each held in the Florida real property at the time of the conveyance, is not
subject to tax, so long as there is no other consideration.
A review of the request concludes that the conveyance in question, based upon the facts as presented, would fall
under the Department’s application of the Kuro decision and therefore be subject to only the minimum documentary
stamp tax as imposed under s. 201.02(1), F.S.

December 30, 2004

Re: Technical Assistance Advisement No. 04B4-013
Documentary Stamp Tax - Conveyance of Florida real property from husband and wife to a limited liability company.
Section 201.02(1), F.S.
XXX ("Taxpayers")
Dear:
This is in response to your letter dated October 6, 2004, requesting a Technical Assistance Advisement regarding
application of Florida's documentary stamp tax as imposed under s. 201.02(1), F.S., upon an instrument to be
delivered in the future that will convey interest in Florida real property from Taxpayers to a limited liability company.
Facts as Presented by Petitioner
In the month of XX, Taxpayers purchased, as husband and wife, an improved and unencumbered parcel of real

estate located in XXX County, Florida (the "Property").
Taxpayers formed a Florida limited liability company (the "Company"), in which they own 100% of the membership
interests, as tenants by the entireties. Taxpayers contributed nominal consideration to the Company in exchange for
their membership interests. Now that (a) the Company is formed, (b) nominal consideration was contributed by
Taxpayers for their membership interests, and (c) the membership interests have been issued, Taxpayers intend to
transfer the Property to the Company. The deed will reflect consideration of $XX. No consideration of any kind
(whether in the form of money, tangible property, or additional membership interests in the Company) will be given by
the Company to Taxpayers in exchange for the Property. The Property will not be subject to any mortgages or other
liens at the time of the transfer from Taxpayers to the Company.
Once the transfer of the Property to the Company is complete, the Company will own one hundred percent (100%)
fee title interest in the Property, the Property will be unencumbered, and Taxpayers will own one hundred percent
(100%) of the membership interests in the Company. Thus, the resulting ownership in the Company, 100%, will be
identical to the pre-transfer ownership interest of Taxpayers in the Property, 100%. As such, the transfer of the
Property by Taxpayers to the Company will have no effect upon the net worth of Taxpayers.
Request for Advisement
Taxpayers are requesting a Technical Assistance Advisement that provides that the instruments conveying the
Property to the LLC will be subject to only minimum documentary stamp tax as imposed under Chapter 201.02, F.S.
Law and Discussion
Section 201.02(1), F.S., imposes documentary stamp tax on deeds or other instruments that convey an interest in
Florida real property. The tax is based on the consideration for the conveyance and is at the rate of 70 cents for each
$100 or fractional part thereof of the consideration for the conveyance. 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 on the property. If the consideration paid or given in exchange for the
real property 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.
In Kuro Inc. v. Department of Revenue, 713 So.2nd 1021 (Fla. 2nd DCA 1998), the court rendered a decision
regarding the application of documentary stamp tax as imposed under s. 201.02(1), F.S., upon an instrument
conveying Florida real property from two individuals into their wholly owned corporation. In Kuro, the property
conveyed was unencumbered and there was no money paid or to be paid. The court opined that the beneficial
ownership of the real property was unchanged and that there was no "purchaser" within the meaning of s. 201.02(1),
F.S., and that, therefore, no tax was due. The Kuro decision has limited application, since other courts have held that
transfers to artificial entities are taxable.
The Kuro decision is applied to certain conveyances between individuals and artificial entities such as
corporations, partnerships, and limited liability companies. An instrument conveying unencumbered Florida real

property from a husband and his wife to a limited liability company, where the interest held by the husband and the
interest held by the wife in the limited liability company are identical to the interest that each held in the Florida real
property at the time of the conveyance, is treated as not subject to tax, so long as there is no other consideration.
Position of the Department
Based upon the facts as presented, we conclude that the Kuro decision applies, and only minimum documentary
stamp tax is due on the deed.
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 the date of this letter.
Sincerely,
Charles T. Phillips
Tax Law Specialist
Technical Assistance and Dispute Resolution
CTP/mh