Was additional Florida documentary stamp tax or surtax due when a reverse-1031 accommodator deeded replacement property to the exchanger?

Plain-English summary

An exchange accommodation titleholder took title to replacement real property and executed mortgages on behalf of an exchanger in a reverse section 1031 exchange. Applicable 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 deeded the property to the exchanger, which assumed the mortgage and completed the exchange. Florida found no additional documentary stamp tax or surtax on that deed.

The exchange documents established an agency-principal relationship: the accommodator had originally acquired and held the property for the exchanger's benefit. Florida's cited rule treated a deed from an agent to its principal, conveying real estate purchased with the principal's funds, as nontaxable.

What this means for you

The ruling did not announce that every reverse-1031 transfer is tax-free. Its result depended on the documented agency relationship, the accommodator's acquisition for the exchanger's benefit, and the taxes already paid when title and financing were first placed with the accommodator.

Common questions

Was the deed from the accommodator to the exchanger taxed again? No. No additional documentary stamp tax or surtax applied.

Why did Florida treat the deed as nontaxable? The agreements established that the accommodator acted as the exchanger's agent and held the property for the exchanger's benefit.

Had taxes already been paid? Yes. The ruling states that applicable deed and mortgage documentary stamp taxes and note-and-mortgage intangible tax were paid when the accommodator took title.

Did mortgage assumption change the result? Not on the stated documents and agency facts. The exchanger assumed the mortgage when the accommodator conveyed the property.

Citations and references

• Fla. Stat. § 201.02(1) (documentary stamp tax on real-property conveyances)
• Fla. Admin. Code r. 12B-4.014(5) (deed from agent to principal)
• 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 07M-001

Original ruling text

SUMMARY
QUESTION: Whether documentary stamp tax or surtax will be due on the deed from the
Accommodator to place title to the property in the name of the Exchanger.
ANSWER – Based on Facts Below: No additional documentary stamp tax or surtax will be
applicable on the deed to place the real property into the name of the Exchanger.
Cross ref. TAA 06M-005

January 11, 2007

Re:

Technical Assistance Advisement No. 07M-001
Documentary stamp Tax and Surtax - Reverse 1031 Exchange
Sections 201.02 (1), F.S.
Rule 12B-4.014(5), 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. This request relates to your earlier request for technical advice that was responded
to by this office in Technical Assistance Advisement 06M-005. The documents presented with
the earlier request for technical advice pertain to this request and the scenario 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 no additional documentary stamp tax or surtax will be
due on the deed from the Accommodator to place title to the property in the name of the
Exchanger.
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 his principal conveying
real estate purchased with the funds of the principal is not taxable.
The Qualified Exchange Accommodation Arrangements and Exchange Agreement state
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 § 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 taxdeferred 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 establish an agency/principal relationship for
documentary stamp tax and surtax purposes, in that the Accommodator originally acquired the
property for the benefit of Exchanger, no additional documentary stamp tax or surtax will be
applicable on the deed to place the real property into 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: 26821