Did a reverse-1031 mortgage assumption owe additional documentary stamp or nonrecurring intangible tax after tax was paid at acquisition?

Plain-English summary

An exchange accommodator took title to replacement property and executed mortgages on behalf of an exchanger in a reverse section 1031 exchange. Documentary stamp tax was paid on the deed and mortgage, and intangible tax was paid on the note and mortgage when the accommodator acquired title.

The accommodator later conveyed the property to the exchanger, which assumed the mortgage to complete the exchange. Florida found no additional documentary stamp or nonrecurring intangible tax on the note or mortgage-assumption agreement.

The exchange agreement established an agency-principal relationship because the accommodator acquired and held the property for the exchanger's benefit. The earlier tax payments therefore were not duplicated when the real property and lien moved into the exchanger's name.

What this means for you

The result depended on the documented agency relationship and taxes already paid in the same exchange structure. It did not state that every mortgage assumption or reverse-1031 closing is exempt.

Common questions

Were documentary stamp and intangible tax paid at the first acquisition? Yes, on the deed, mortgage, and note as described in the ruling.

Did the later mortgage assumption owe those taxes again? No, under the stated agency arrangement.

Why did agency matter? The accommodator held the replacement property for the exchanger's benefit rather than as an independent beneficial owner.

What documents did this ruling decide? It focused on the note and mortgage-assumption documents used to place the lien and property in the exchanger's name.

Citations and references

• Fla. Stat. § 201.02(1) (documentary stamp tax on real-property conveyances)
• Fla. Stat. § 199.133(1) (nonrecurring intangible tax)
• Fla. Admin. Code rr. 12B-4.014(5), 12C-2.004(2) (agent-principal transfer and intangible-tax treatment)
• I.R.C. § 1031 and Rev. Proc. 2000-37 (reverse-exchange authorities quoted in the agreement)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

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

Original ruling text

SUMMARY
QUESTION: Will documentary stamp tax and intangible tax be due only once in a series of related transaction in
which the Accommodator/Intermediary acted as an agent of the Exchanger? Also will documentary stamp tax and
intangible tax be due on the mortgage assumption agreement?
ANSWER - Based on Facts Below: Since the terms of the Agreement constitute an agency/principal relationship
between the Accommodator and Exchanger, no additional documentary stamp tax or intangible tax will be due on the
note or mortgage assumption to place the real property and lien in the name of the exchanger.

October 31, 2006

Re: Technical Assistance Advisement No. 06M-005
Documentary Stamp Tax and Intangible Tax-Reverse 1031 Exchange
Sections 201.02 (1) and 199.133(1), F.S.
Rules 12B-4.014(5) and 12C-2.004(2), F.A.C.
XXX (hereinafter Exchanger)
XXX (hereinafter Accommodator)
XXX (LLC)
Dear:
Your letter requesting a Technical Assistance Advisement has been referred to this office for response. The
specific scenario for which advice has been requested is summarized below.
Facts as Presented by Petitioner
The Accommodator took title to the real property in 2005 and executed mortgages on behalf of the Exchanger. The
Accommodator was acting as a pass through entity in a Reverse 1031 Exchange of real property under the Internal
Revenue Code.
Applicable documentary stamp tax was paid on the deed and the mortgage, and intangible tax was paid on the
note and mortgage when Accommodator took title as grantee.
In 2006, the Accommodator conveyed the property to the Exchanger by Warranty Deed, and the parties executed
appropriate documents to enable the Exchanger to assume the mortgage previously executed by the Accommodator,
which concluded the Reverse 1031 Exchange.
Request for Advisement

You request a confirmation that documentary stamp tax and intangible tax on the note are payable only once in
this series of related transactions in which the Accommodator/Intermediary acted as an agent of the Exchanger. Thus,
no additional intangible tax or documentary stamp tax is due on the mortgage assumption agreement.
Provisions of Law and Discussion
Section 201.02(1), F.S., imposes the documentary stamp tax on deeds, instruments, or writings conveying,
granting, or transferring real property or an interest in real property.
Rule 12B-4.014(5), F.A.C., states that a deed from an agent to its principal conveying real estate purchased with
the funds of the principal is not taxable.
The Qualified Exchange Accommodation Arrangements and Exchange Agreement states in part:

WHEREAS Exchanger desires to exchange the Relinquished Property for the Replacement Property in such a way as
to qualify for tax-deferred treatment under Internal Revenue Code Section 1031....
WHEREAS Exchange Accommodation Titleholder is willing to assist Exchanger and [LLC] to complete a tax-deferred
exchange by acquiring the Replacement Property from Seller through an assignment of Exchanger's rights in and to
the Purchase Agreement, and holding the Replacement Property under the conditions specified in this Exchange
Agreement;

WHEREAS Exchanger, [LLC] and [Accommodator] intend and agree that [Accommodator] shall hold the Replacement
Property for the benefit of the [Exchanger] in order to facilitate an exchange under Internal Revenue Code Section
1031 and Rev. Proc. 2000-37....
WHEREAS [LLC] is willing to act as a qualified intermediary within the meaning of Treasury Regulations s. 1.1031(k)1(g)(4) and to hold the proceeds from the sale of the Relinquished Property, and to utilize the same in securing,
acquiring, and transferring to Exchanger suitable Replacement Property to complete a tax-deferred exchange
according to the terms and conditions set forth in this Exchange Agreement.

Section 2.3 of the Agreement also provides:
In order to finance the acquisition of the Replacement Property, Exchange Accommodation Titleholder may enter into
financing arrangements (the "Loan") with a third party lender (the "Lender") under terms agreeable to the Lender,
Exchange Accommodation Titleholder, and Exchanger....

The Promissory Note for acquisition of the Replacement property was made by the Accommodator and the
Exchanger.
Position of the Department
Since the terms of the Agreement constitute an agency/principal relationship for documentary stamp tax and
intangible tax purposes, in that the Accommodator originally acquired the property for the benefit of Exchanger, no
additional documentary stamp tax or intangibles tax will be applicable on the note or mortgage assumption agreement
to place the real property and mortgage lien in the name of the Exchanger.
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 Exchanger. Your
response should be received by the Department within 15 days of the date of this letter.
Sincerely,
Celestine Grantham Turner
Senior Tax Specialist
Technical Assistance and Dispute Resolution
CG/mh
Record ID: 23754