Did Florida's 1999 TAA tax a delayed deed to a corporation when stock had already been issued for the intended property transfer?

Plain-English summary

This page preserves a historical 1999 Department position, but the official document is expressly marked obsolete and points readers to Crescent Miami Center, LLC v. Department of Revenue, 903 So. 2d 913 (Fla. 2005).

The shareholders formed a corporation to own and operate trailer-park property and intended to deed the property to it, but the deed was mistakenly never completed. Corporate shares were issued and later sold to a third party before the missing conveyance was discovered.

The Department concluded that the corrective deed was taxable because the shares had been issued in exchange for the intended property transfer. It treated that stock as noncash consideration and presumed the consideration equaled the property's fair market value. That is the obsolete holding recorded in the TAA, not current guidance.

What this means for you

Shareholders and corporate property owners

Do not use this TAA to determine current documentary stamp tax on a delayed or corrective deed. The official source itself says the ruling is obsolete.

Closing professionals and accountants

As historical background, the document shows that timing did not eliminate the Department's original consideration theory when stock had already been issued for the intended transfer.

Common questions

What did the 1999 TAA hold? It taxed the delayed deed based on the property's presumed fair market value.

Why did the Department find consideration? The shareholders had received corporate stock in exchange for the intended transfer.

Can this ruling be relied on now? No. The official document is marked obsolete and cites the 2005 Crescent Miami Center decision.

Citations and references

• Fla. Stat. § 201.02(1)
• Crescent Miami Center, LLC v. Department of Revenue, 903 So. 2d 913 (Fla. 2005) (identified by the official document's obsolete notice)
• Fla. Stat. § 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99B4-005

Original ruling text

Obsolete: See Crescent Miami Center, LLC v. Department of Revenue,
903 So.2d 913 (Fla. 2005)

SUMMARY

Question: Is a deed taxable when shares of stock were
issued in exchange for the transfer of the deed, even
though the transfer took place subsequent the shares being
issued due to an error on the part of the transferors?

Answer - Based on Facts Below: Yes, the deed is subject to
the documentary stamp tax based on the fair market value of
the property transferred, based on the provisions of s.
201.02(1), F.S. This section imposes tax on transfers
involving property other than money.

May 20, 1999

RE: Technical Assistance Advisement No. 99(B)4-005
Documentary Stamp Tax; Transfer of Interest in Real
Property
Section 201.02(1), F.S.
XXX (the taxpayers)
XXX (shareholder)
XXX (Corporation)
XXX (third party)

Dear :

This is in response to your recent request for a Technical
Assistance Advisement regarding the documentary stamp tax
implications in connection with a conveyance of real property
from two shareholders to a corporation.

FACTS PRESENTED BY TAXPAYER

In XXX, the taxpayers owned real property in the State,
which property was operated as a trailer park. On XXX,
shareholder formed the Corporation to own and operate the
trailer park. The taxpayers intended to convey the trailer park
property into the corporation, but failed to do so. On XXX,
shareholder transferred all of his shares of stock in the
Corporation to a third party. The taxpayers took a $XX mortgage
note and mortgage from the Corporation and the third party. A
copy of the front and back of the stock certificate issued to
the shareholder, a copy of the front and back of the stock
certificate issued to the third party, a copy of the mortgage
and mortgage note, and a copy of a Stock Pledge Agreement have
been provided. The appropriate documentary stamp tax and
intangible tax were paid on the recorded mortgage.

The Corporation did not have legal title to the real
property on the date the mortgage was executed or on the date
that the shareholder transferred his shares of stock in the
Corporation to the third party.

The taxpayers and the third party have now discovered that
legal title to the real property was never conveyed by the
taxpayers to the Corporation, as intended. The taxpayers now
intend to convey legal title to the real property to the
Corporation.

REQUESTED ADVICE

The taxpayers request a Technical Assistance Advisement in
regard to documentary stamp tax, if any, payable when the deed
from the taxpayers to the Corporation is recorded. The
taxpayers propose that no documentary stamp tax is payable when
the Warranty Deed is recorded, asserting that it merely
represents a capital contribution to the Corporation formed for
the purpose of owning and managing the asset. You have cited
the decision rendered in Kuro Inc. v. Dept. of Revenue, 713
So.2d 1021 (Fla. 2nd DCA 1998), to support your argument.

DETERMINATION

It is the opinion of this office that the deed is taxable

under s. 201.02(1), F.S., based on the fair market value of the
property transferred. Section 201.02(1), F.S., states:

"On deeds, instruments, or writings whereby any lands,
tenements, other real property, or any interest therein,
shall be granted, assigned, transferred, or otherwise
conveyed to, or vested in, the purchaser or any other
person by his or her direction, on each $100 of the
consideration therefor the tax shall be 70 cents. When the
full amount of the consideration for the execution
assignment, transfer, or conveyance is not shown in the
face of such deed, instrument, document, or writing, the
tax shall be paid at the rate of 70 cents for each $100 or
fractional part thereof of the consideration therefor. For
purposes of this section, 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, whether
or not the underlying indebtedness is assumed. If the
consideration paid or given in exchange for 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." (E.S.)

In this particular transaction, shares of stock were issued
in exchange for the transfer of the deed, even though such
transfer took place subsequent to the shares being issued due to
an error on the part of the transferors. The Kuro case did not
address the situation where shares of stock were issued in
exchange for the conveyance of property into a corporation.
Furthermore, the Kuro case did not address a deed to a
corporation where the shares in the corporation were sold.

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,

Joy B. Eldred, C.P.A.
Tax Law Specialist
Technical Assistance and Dispute Resolution
Office of the General Counsel

JE/mh