Beginning with Kuro, Inc. v. State, 713 So.2d 1021 (Fla.App. 2 Dist. May 15, 1998), and as finally confirmed by the Florida Supreme Court in Crescent Miami Center LLC in 2005, transfers of Florida real property from owners to wholly-owned entities are not subject to Florida documentary stamp taxes, at least when the property is unencumbered. Based on these decisions, the Florida Department of Revenue has acknowledged in various technical assistance advisements that transfers of unencumbered real estate between entities that are commonly owned are also nontaxable.
There are limits to these precedents. In a recent case, the 2nd District Court of Appeals held that a transfer of encumbered real estate was taxable, notwithstanding that it was a transfer from one entity to another, both of which were ultimately owned and controlled by the same individual.
So where does this leave the issue of such a transfer if the property is unencumbered?
In the case, documentary stamps were paid only on the mortgage balance, and refund was sought by the taxpayer. There was no mention of additional documentary stamps being due on the excess of the value of the property over the mortgage – but neither was there any discussion on that issue at all. Therefore, the case may be limited to situations when there is a mortgage, and that stamps are imposed only to the extent of the mortgage.
On the other hand, the court did discuss how this case is factually different from Crescent Miami Center LLC, apart from there being debt on the property. This leaves the door open to an argument that the concepts of Crescent Miami Center LLC (relating to a lack of consideration for transfers between owners and their wholly owned entities) may not apply in regard to transfers between commonly controlled entities.
DEPARTMENT OF REVENUE, Appellant, v. PINELLAS VP, LLC, Appellee. 2nd District. Case No. 2D07-6037. DEPARTMENT OF REVENUE, Appellant, v. TPA INVESTMENTS, LLC, f/k/a Condo LLC, Appellee. Case No. 2D07-6039. (Consolidated), 34 Fla. L. Weekly D101b, Opinion filed January 7, 2009.
5 comments:
"Commonly" versus "Wholly".
Charles, in this recent case, were the two entities wholly controlled by the same party (after working through the entities involved) or were they only partially owned by the same entity?
Did the Crescent case exempt doc stamps for any mortgages involved also? I don't remember if it did or did not.
Thanks
This new case makes no sense. A transfer tax is supposed to be a tax on a sale for consideration. If one guy owns both entities, there is no equitable transfer, whatever the legal fiction of 2 LLCs.
This is just another attempt by big-government types to take our property at any chance they get. We need to re-write the doc stamp laws to exempt transfers where there is no change of ownership or control.
I completely agree. This makes no sense.
I agree, just seems like yet another way to take advantage of the property of citizens.
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