Did transferring unencumbered Florida real property from a trust to an LLC with identical proportional owners trigger value-based documentary stamp tax?

Plain-English summary

A common-law trust proposed to deed unencumbered Florida real property to a newly formed LLC. The trust beneficiaries would own all LLC membership interests in exactly the same proportions as their existing beneficial interests in the trust.

Florida ruled that only the $0.70 minimum documentary stamp tax applied, provided there was no other consideration. The property's ultimate beneficial ownership did not change, no mortgage or lien was discharged or assumed, and the transfer therefore fit the no-consideration analysis described in the ruling.

Because the LLC acquired Florida property without tax paid on fair market value, it became a conduit entity. A transfer of its membership interests within three years of the property transfer could trigger documentary stamp tax based on the consideration for that later transfer.

What this means for you

Matching ownership percentages and unencumbered property can prevent a value-based tax at the deed stage, but the conduit-entity rule can preserve tax exposure for a near-term equity transfer.

Common questions

How much tax applied to the deed? The $0.70 minimum, under the stated facts.

Why was there no value-based consideration? Beneficial ownership stayed proportionally identical and the property was unencumbered with no other consideration.

What later transaction could trigger tax? A transfer of LLC membership interests within three years.

Citations and references

• Fla. Stat. § 201.02(1)(a) and (b), as quoted and discussed in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 11B4-005

Original ruling text

Executive Director
Lisa Vickers

TAX: Documentary Stamp Tax
TAA NUMBER: 11B4-005
ISSUE: Transfer of Real Property from Trust to Limited Liability Company
STATUTE CITE(S): Section 201.02(1)(a), F.S.
QUESTION: When a deed transfers unencumbered real property from a trustee of a trust to a newly formed limited
liability, resulting in the current beneficiaries of the trust owning all of the membership interests in the limited liability
company in the same proportion as they currently hold beneficial interests in the trust, are any documentary stamp
taxes due on the conveyance?
ANSWER: Since the current beneficiaries of the trust will own all of the membership interests in the limited liability company
in the same proportion as their beneficial interest held in the trust, the ultimate beneficial ownership of the property will remain
unchanged before and after the transfer. Provided there is no other consideration, the deed transferring the property will be
subject to minimum documentary stamp tax of $.70.

February 2, 2011
XXX
XXX
XXX
Re:

Technical Assistance Advisement No. 11B4-005
Documentary Stamp Tax – Consideration for Transfer of Real Property
Section 201.02(1)(a), F.S.
XXX (“Taxpayer”)

Dear XXX:
This is in response to your letter dated XXX, requesting a determination whether a proposed transfer of
real property will be subject to documentary stamp tax. This response constitutes a Technical Assistance
Advisement under Chapter 12-11, Florida Administrative Code (F.A.C.), and is issued to you under the
authority of Section 213.22, Florida Statutes (F.S.).
FACTS PRESENTED BY PRACTIONER
The Taxpayer is a common law trust formed in XXX by three individuals, XXX, XXX, and XXX, as
equal trust beneficiaries, and XXX, as sole trustee. The initial trust corpus was comprised of encumbered
real estate located in XXX, (the “Property”) and other assets primarily consisting of receivables. The
Taxpayer was created for the purpose of holding the Property and the receivables. The Property has been
held by the Taxpayer for long term investment purposes only, and there has never been any active trade or
business conducted since the formation of the Taxpayer. The Property has been held in trust form for
XXX. As a result of the death of certain original beneficiaries, beneficial interests in the Taxpayer have

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Tallahassee, Florida 32399-0100

Technical Assistance Advisement 11B4-005
Page 2

been transferred by will or laws of descent and distribution. Presently, the Property held by the Taxpayer
is unencumbered and is subject to multiple long term leases.
Currently, the beneficial interests of the Taxpayer are broken down as listed below:
•
•
•
•

XXX beneficiaries each hold a XXX interest;
XXX beneficiaries each hold a XXX interest;
XXX beneficiaries each hold a XXX interest; and
XXX beneficiary holds a XXX interest.

To provide additional flexibility in the management and operations of the Property, the sole trustee of the
Taxpayer intends to transfer the Property to a newly formed Florida limited liability company (the
“Company”), resulting in the current beneficiaries of the Taxpayer owning all of the membership interest
in the Company in the same proportion as they currently hold beneficial interests in the Taxpayer. The
Property will remain unencumbered at the time it is transferred to the Company, and no subsequent
transfers of membership interests in the Company are contemplated.
REQUESTED RULING
Whether the transfer of the Property by the Taxpayer to the Company will result in only minimum
documentary stamp tax of $.70.
LAW AND DISCUSSION
In order to have the documentary stamp tax apply to a deed conveying real property, two tests must be
passed:

1. There must be a conveyance of real property; and
2. There must be consideration for that conveyance.
   Under s. 201.02, F.S., the definition of “consideration” is:
   (1)(a) . . . 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
   property or interest therein. (e.s.)
   In the case of Crescent Miami Center, LLC v. Department of Revenue, 903 So.2d 913 (Fla. 2005), the
   court ruled there was no consideration and thus no purchaser in the case where a transfer of interest in
   unencumbered real property resulted in no change in beneficial ownership of the property.

Technical Assistance Advisement 11B4-005
Page 3

Generally, the court’s ruling means that documentary stamp tax is not due on a deed involving transfers to
or from artificial business entities when:
•
•
•

The grantors directly or indirectly owned the same proportionate interests in the real
property and the grantee both before and after the transfer;
The property is not encumbered by mortgage or other lien; and
There is no other consideration.

As a result of Crescent, a deed transferring Florida real property into or out of an artificial business entity
is taxable based on the portion of the property’s fair market value equal to the percentage of the beneficial
ownership transferred, provided the property is unencumbered and there is no other consideration.
DEPARTMENT’S POSITION
Through their beneficial ownership in the Taxpayer, the trust beneficiaries are the current beneficial
owners of the Property. After the transfer of the Property by deed from the Taxpayer to the Company, the
beneficial ownership of the property will remain unchanged. The current beneficiaries of the Taxpayer
will own all of the membership interests in the Company in the same proportion as their beneficial
interests held in the Taxpayer. Providing there is no other consideration, the transfer falls under the
parameters of the Crescent ruling, since the ultimate beneficial ownership of the Property before and after
the transfer will not change. Therefore, the deed transferring the Property will be subject to minimum
documentary stamp tax of $.70, provided there is no other consideration.
A business entity that takes title to Florida real property on or after July 2, 2009, without documentary
stamp tax paid on the fair market value of the property, is a conduit entity as defined in s. 201.02(1)(b)(1),
F.S. In the case at hand, the Company will become a conduit entity when the property is transferred to it
since documentary stamp tax will not be paid on the fair market value of the property. If any or all of the
members of the Company then transfer any of their membership interests in the Company within 3 years
of the date the property is transferred to the Company, documentary stamp tax will be due based on the
consideration for the transfer. See s. 201.02(1)(b), F.S.
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

Technical Assistance Advisement 11B4-005
Page 4

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,

Joy B. Eldred, CPA
Tax Law Specialist
Technical Assistance and Dispute Resolution
JBE/tlg
Record ID: 91715