Did Florida's 1999 TAA tax a contribution of unencumbered land to a wholly owned LLC?

Plain-English summary

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

The grantors proposed contributing unencumbered land to a newly formed LLC that they would own entirely. No money would be paid. The Department nevertheless concluded that the deed was taxable: after the transfer, the land would belong to the LLC, while the grantors would hold personal-property interests in the company whose value increased because of the contribution.

The Department treated that increase in value as consideration and presumed the consideration equaled the real property's fair market value. That is the obsolete holding preserved in this TAA, not a statement of current law.

What this means for you

Property owners and LLC members

Do not use this TAA to determine the current tax on a deed contributing property to an LLC. Its obsolete label means later authority changed the legal landscape.

Accountants and tax professionals

The document remains useful only as historical background: it shows why the Department originally viewed the LLC interest received or enhanced by the transfer as consideration.

Common questions

What did the 1999 TAA hold? It treated the land contribution as a change in beneficial ownership and taxed the deed based on presumed fair market value.

Why did the Department find consideration without a cash payment? The grantors surrendered direct ownership of the land and received an increase in the value of their personal-property interests in the LLC.

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

Citations and references

• Fla. Stat. § 201.02(1)
• Fla. Stat. §§ 608.425, 608.431
• Fla. Admin. Code R. 12B-4.012
• Fla. Admin. Code R. 12B-4.013(7), (10)
• 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 99B4-008

Original ruling text

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

SUMMARY

It is the position of the Department that a conveyance of
the land to the limited liability company affects a change
in the beneficial ownership of the property. Property
acquired or contributed to a limited liability company is
the property of the company. The members have no rights in
the real property after the transfer but have an interest
in the limited liability company which is an interest in
personal property. The contribution of real property to the
limited liability company increases the value of the
ownership interests in the limited liability company. The
grantors are giving up their interest in the real property,
and in exchange receive an increase in the value of their
interest in the company. This constitutes consideration.
The Florida Supreme Court has held that when there is
consideration there is, of necessity, a purchaser. Dept.
of Revenue v. DeMaria, 338 So.2d 838 (Fla. 1976). The deed
will be subject to tax based on the consideration, which is
presumed to be equal to the fair market value of the real
property transferred.

Jul 20, 1999

Re: Technical Assistance Advisement No. 99(B)4-008
Documentary Stamp Tax; Conveyance of Property to a Limited
Liability Company
s. 201.02(1), F.S.; Rule 12B-4.013(7) & (10), F.A.C.
XXX (hereinafter grantors)
XXX (hereinafter company)

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 Presented by the Petitioner

The grantors plan to convey real property to a limited
liability company currently being formed. The grantors will own
all the interest in the company. The land being granted to the
company is not encumbered by a mortgage. No money is being paid
by the company for the property.

Request for Advisement

The petitioner's opinion is that the beneficial ownership
of the real property will remain unchanged by the conveyance.
The petitioner suggests that the limited liability company be
treated the same as a partnership for documentary stamp tax
purposes. The petitioner feels that only the minimum tax will
be required on conveyance of real property from the grantors to
the company, based on Kuro, Inc. v. State of Florida, 713 So.2d
1021 (Fla. 2nd DCA 1998),

Laws and Analysis

Section 201.02(1), F.S., imposes tax on deeds which convey
real property. The amount of tax is based on the amount of
consideration given for the conveyance. Consideration is not
limited to money paid, mortgages or other encumbrances. When
there is consideration other than money, it is presumed that the
consideration is equal to the fair market value of the real
property or interest therein.

Rules 12B-4.012 and 12B-4.013, F.A.C., provide:

Rule 12B-4.012 Rate, Consideration.

(2)Definitions:

(a) ... 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.

(b) "Property other than money" includes, but shall not be
limited to property that is corporeal or incorporeal,
tangible or intangible, visible or invisible, real or
personal; everything that has an exchangeable value or
which goes to make up wealth or estate.

Rule 12B-4.013 Conveyances Subject to Tax.

(7) Corporation: A conveyance of realty to a corporation in
exchange for shares of its capital stock, or as a
contribution to the capital of a corporation, is subject to
tax....

(10) Partnerships: A conveyance of real property by a
partner in exchange for an interest in the partnership, or
where the value of the partner's interest in the
partnership is increased by the conveyance, is taxable.
There is the presumption that the consideration is equal to
the fair market value of the real property interest being
transferred....

In Kuro, the court found no consideration for a conveyance
of real property to the corporation's capital and, therefore,
that no tax was due. The Kuro case applied to a contribution to
the capital of a particular corporation, and the court found
that no other exchange or benefit was received for the
conveyance of the property. Furthermore, in Kuro no stock was
issued as a result of the conveyance, nor was a sale of the
shares of stock contemplated.

The Florida Limited Liability Company Act and the
Partnership Laws are contained in Chs. 608 and 620, F.S.,
respectively. These statutes establish limited liability
companies and partnerships as entities separate from their
owners. Pursuant to s. 608.425, F.S., all property contributed
to a limited liability company is limited liability company
property. A member of a limited liability company receives an
interest in the limited liability company. Section 608.431,

F.S., provides that the interest of a member in a limited
liability company is a personal property interest. The court's
decision regarding Kuro applied to a corporation which was
established under Ch. 607, F.S., and not to a limited liability
company or a partnership.

A conveyance of unencumbered property to a limited
liability company or partnership is subject to tax based on the
consideration given in exchange for the conveyance. In Re: the
Petition of Helen Gladman, DOR No. 96-002 DS, per curiam
affirmed, 693 So.2d 34 (Fla. 1st DCA 1997), the Department held
that the deeds conveying unencumbered property from the
individual to the partnership were subject to tax, and the First
District Court of Appeal affirmed that decision, without
opinion.

Position of the Department

It is the position of the Department that a conveyance of
the land to the limited liability company affects a change in
the beneficial ownership of the property. Property acquired or
contributed to a limited liability company is the property of
the company. The members have no rights in the real property
after the transfer but have an interest in the limited liability
company which is an interest in personal property. The
contribution of real property to the limited liability company
increases the value of the ownership interests in the limited
liability company. The grantors are giving up their interest in
the real property, and in exchange receive an increase in the
value of their interest in the company. This constitutes
consideration. The Florida Supreme Court has held that when
there is consideration there is, of necessity, a purchaser.
Dept. of Revenue v. DeMaria, 338 So.2d 838 (Fla. 1976). The
deed will be subject to tax based on the consideration, which is
presumed to be equal to the fair market value of the real
property transferred.

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,

Celestine Grantham
Senior Tax Specialist
Technical Assistance and Dispute Resolution
Office of General Counsel

CG/mh