When were real-estate transfers between commonly owned entities taxable based on consideration?

Plain-English summary

Florida considered two transfers of unencumbered real estate between subsidiaries of the same parent. Ownership percentages remained identical before and after each transfer.

The first deed reflected a dividend of the property to the parent followed by a capital contribution to the transferee. With no other consideration and proper accounting entries, the transfer fit the no-consideration rule and was not subject to documentary stamp tax beyond the minimum treatment described in the ruling.

The second deed created an account receivable for the transferor and an equal payable for the transferee. That exchange was consideration even though the balances were consolidated and not immediately paid, so tax was based on the property's fair market value.

What this means for you

Common ownership alone does not decide deed tax. Encumbrances, unchanged ownership percentages, accounting treatment, and any exchange of value must be examined.

Common questions

What supported the nontaxable transfer? Identical direct or indirect ownership, unchanged percentages, unencumbered property, no other consideration, and proper dividend and capital-contribution entries.

Why was the second transfer taxable? The newly created receivable and payable constituted an exchange of value.

How was noncash consideration measured? Florida presumed consideration equal to the fair market value of the real-property interest conveyed.

Citations and references

• Fla. Stat. § 201.02(1) (documentary stamp tax on real-property conveyances)
• Fla. Admin. Code r. 12B-4.012(2)(a) (consideration and fair-market-value presumption)
• Crescent Miami Center, LLC v. Department of Revenue, No. SC03-2063 (Fla. May 19, 2005)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 06B4-005

Original ruling text

SUMMARY
QUESTION: Is Florida's documentary stamp tax, as imposed under section 201.02(1), F.S., due on instruments
conveying Florida real property under the following fact patterns.
Fact pattern 1 has an instrument conveying Florida real property from one artificial entity to another artificial entity
where each artificial entity is a subsidiary of the same parent entity. The property will be unencumbered at the time of
the conveyance. The books of the transferor entity will reflect that it has dividended the property up to its parent. The
books of the parent entity will reflect that it has contributed the property to the transferee entity. The books of the
transferee entity and the public records will reflect the deed of the property to the transferee entity.
Fact pattern 2 has an instrument conveying Florida real property from one artificial entity to another artificial entity
where each artificial entity is a subsidiary of the same parent entity. The property will be unencumbered at the time of
the conveyance. The books of the transferor entity will reflect a debit in the form of an account receivable from the
transferee entity in the amount of the value of the property and the books of the transferee entity will reflect a credit in
the form of a payable in equal amount owed to the transferor entity. This debit and credit will be consolidated on the
books of Taxpayer and will not be paid. It is contemplated to be ultimately settled at the appropriate time by a
dividending up to Taxpayer of the account receivable by the transferor entity and the payable by the transferee entity.
ANSWER - Based on Facts Below: An instrument conveying interest in Florida real property between artificial
entities fits the parameters of Crescent Miami and is not subject to tax so long as; the owner(s) of the real property are
also the owner(s) of the entity to whom the real property is being transferred (this ownership may be direct or indirect
through a chain of ownership), the percentage of ownership in the real property being transferred and the percentage
of ownership in the entity or entities must be identical before and after the transfer of the real property, there are no
encumbrances or liens on/against the real property at the time of transfer, and there is no other consideration given
for the property interest being conveyed.
It is determined that the deed in fact pattern 1 fits the parameters of the Crescent Miami ruling and is therefore not
currently subject to documentary stamp tax so long as there is no other consideration for the conveyance and the
book entries meet the generally accepted accounting principles for entries of dividends and capital contributions.
It is determined that the deed in fact pattern 2 is subject to documentary stamp tax. The consideration for the
conveyance is the resulting account receivable. The created account receivable is an exchange of something of value
for the property. Where the consideration is other than money the consideration is deemed to be equal to the fair
market value of the property conveyed. The consideration for the deed in fact pattern 2, and the basis for taxation, is
the fair market value of the property conveyed.

June 2, 2006

Re: Technical Assistance Advisement No. 06B4-005

Documentary Stamp Tax - Florida real estate conveyance
Section 201.02(1), F.S., and Rule 12B-4.012(2)(a), F.A.C
XXX ("Taxpayer")
Dear:
This is in response to your letter dated February 1, 2006, requesting a Technical Assistance Advisement regarding
the application of Florida's documentary stamp tax as imposed under s. 201.02(1), F.S., on deeds conveying interest
in Florida real property between related entities.
Facts as Presented by Petitioner
Your letter poses two fact patterns for which you request a determination of whether documentary stamp tax as
imposed under s. 201.02(1), F.S., is due.
Fact Pattern 1:
Florida real property will be conveyed from one of Taxpayer's wholly owned subsidiaries to another of Taxpayer's
wholly owned subsidiaries. The property will be unencumbered at the time of the conveyance. The books of the
transferor entity will reflect that it has dividended the property up to its parent, Taxpayer. The books of Taxpayer will
reflect that it has contributed the property to the transferee entity. The books of the transferee entity and the public
records will reflect the deed of the property to the transferee entity.
Fact Pattern 2:
Florida real property will be conveyed from one of Taxpayer's wholly owned subsidiaries to another of Taxpayer's
wholly owned subsidiaries. The property will be unencumbered at the time of the conveyance. the books of the
transferor entity will reflect a debit in the form of an account receivable from the transferee entity in the amount of the
value of the property, and the books of the transferee entity will reflect a credit in the form of a payable in equal
amount owed to the transferor entity. This debit and credit will be consolidated on the books of Taxpayer and will not
be paid. It is contemplated to be ultimately settled at the appropriate time by a dividending up to Taxpayer of the
account receivable by the transferor entity and of the payable by the transferee entity.
Request for Advisement
You are requesting a determination by the Department of Revenue as to whether the deed, as provided in fact
pattern 1, and the deed, as provided in fact pattern 2, are subject to documentary stamp tax as imposed under
subsection 201.02(1), F.S.
Law and Discussion
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 total consideration given or to be given for the property interest conveyed.

Rule 12B-4.012(2)(a), F.A.C., provides that consideration "... includes, but shall not be limited to, money paid or to
be paid, the amount of any indebtedness discharged by a transfer of any interest in real property, mortgage
indebtedness and other encumbrance which the real property interest being transferred is subject to, notwithstanding
the transferee may be liable for such indebtedness. Where property other than money is exchanged for interests in
real property, there is the presumption that the consideration is equal to the fair market value of the real property
interest being transferred."
In Crescent Miami Center, LLC v. Dep't of Revenue, SC03-2063, May 19, 2005, the Florida Supreme Court stated
that "... the transfer of property between a grantor and its wholly owned grantee, absent any exchange of value, is
without consideration or a purchaser and thus not subject to documentary stamp tax in section 201.02(1)." This ruling
allows entities that own directly or indirectly 100% of another entity to transfer unencumbered property without
consideration to the other entity and pay only the minimum documentary stamp tax.
Position of the Department
An instrument conveying interest in Florida real property between artificial entities fits the parameters of Crescent
Miami and is not subject to tax, so long as the owner(s) of the real property are also the owner(s) of the entity to whom
the real property is being transferred (this ownership may be direct or indirect through a chain of ownership); the
percentage of ownership in the real property being transferred and the percentage of ownership in the entity or entities
must be identical before and after the transfer of the real property; there are no encumbrances or liens on/against the
real property at the time of transfer; and there is no other consideration given for the property interest being conveyed.
It is determined that the deed in fact pattern 1 fits the parameters of the Crescent Miami ruling and is therefore not
currently subject to documentary stamp tax, so long as there is no other consideration for the conveyance and the
book entries meet the generally accepted accounting principles for entries of dividends and capital contributions.
It is determined that the deed in fact pattern 2 is subject to documentary stamp tax. The consideration for the
conveyance is the resulting account receivable. The created account receivable is an exchange of something of value
for the property. Where the consideration is other than money, the consideration is deemed to be equal to the fair
market value of the property conveyed. The consideration for the deed in fact pattern 2, and the basis for taxation, is
the fair market value of the property conveyed.
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
Record ID: 19136