Does a Disclaimer of Real Property Require a Legal Description in Florida?

In a recent case, a disclaimant signed a disclaimer that purported to include real property owned by a decedent, but did not provide a legal description for the real property. After entering into the disclaimer, the disclaimant apparently had a change of heart and desired to retain the disclaimed real property, claiming the disclaimer was invalid.

Here are the key statutory provisions (emphasis added):

Fla.Stats. §739.104(3): “To be effective, a disclaimer must be in writing, declare the writing as a disclaimer, describe the interest or power disclaimed, and be signed by the person making the disclaimer and witnessed and acknowledged in the manner provided for deeds of real estate to be recorded in this state. In addition, for a disclaimer to be effective, an original of the disclaimer must be delivered or filed in the manner provided in s. 739.301.”

Fla.Stats. §739.601:

     “(1) A disclaimer of an interest in or relating to real estate does not provide constructive notice to all persons unless the disclaimer contains a legal description of the real estate to which the disclaimer relates and unless the disclaimer is filed for recording in the office of the clerk of the court in the county or counties where the real estate is located.

      (2) An effective disclaimer meeting the requirements of subsection (1) constitutes constructive notice to all persons from the time of filing. Failure to record the disclaimer does not affect its validity as between the disclaimant and persons to whom the property interest or power passes by reason of the disclaimer.”

As noted, Fla.Stats. §739.104(3) does not require a legal description. Fla.Stats. §739.601 does require it. The trial court held that the disclaimer was ineffective without a legal description.

Reversing the trial court, the 3rd DCA determined that a legal description is required for constructive notice purposes only via recording. As between the disclaimant and the persons who would receive the real property if there is a valid disclaimer, a legal description for real property is NOT required to enforce the disclaimer.

As an aside, the disclaimer was also rejected by the trial court as failing to meet the writing requirements of the statute of frauds. The appellate court noted that the disclaimer was in writing and signed by the disclaimant, and thus the statute of frauds was met.

Lee v. Lee, 44 Fla.L.Weekly D284 (3rd DCA 2019)

Applicable Federal Rates - May 2019

NFL Draft Day and Federal Income Tax

Two concepts that you don’t often see together!

While only of direct interest to a few taxpayers, a Revenue Procedure addressing draft picks and player contracts issued this week does make for interesting reading.

Tax professionals know that the sale or exchange of property gives rise to taxable gain or loss if the amount received is more or less than the taxpayer’s basis in the property, absent the application of a nonrecognition provision of the Internal Revenue Code. Player contracts and draft picks are property. Therefore, when they are exchanged or traded between teams, gain or loss can result. Gain is the excess of the amount realized from the exchange over the tax basis of the property given up. Loss occurs if the amount realized is less than the basis.

In Revenue Procedure 2019-18, the IRS has provided a safe harbor for professional sports teams to avoid gain on such trades. It provides that teams can assign a zero value to player contracts and draft picks. Thus, a team receiving a contract or draft pick has an amount realized of $0 and will not recognize any gain on the transaction. They will also obtain a $0 basis in the received contract or draft pick.

A loss is possible, if the exchanging team has more than a $0 basis in the contract or draft pick that is being disposed of. Also, if there is cash being paid or received in the transaction, then those amounts WILL enter into the amount realized or the basis of an acquired asset.

To use the safe harbor, the following requirements must be met:

1. The parties to the trade that are subject to federal income tax must treat the trade on their respective federal income tax returns consistent with the Revenue Procedure;

2. Each team that is a party to the trade must transfer and receive a personnel contract or draft pick. In the trade, no team may transfer property other than a personnel contract, draft pick, or cash;

3. In the trade, no personnel contract or draft pick may be an amortizable Code Sec. 197 intangible; and

4. The financial statements of teams that are parties to the trade must not reflect assets or liabilities resulting from the trade other than cash.

Why the special treatment for the teams? Is it the special love that Treasury officials have for professional sports? Or is it because the value of player contracts and draft picks is extremely difficult to value, is subjective to the particular team,  and is subject to constant fluctuation? The IRS says it is the latter.

Who says tax law can’t be fun?

Revenue Procedure 2019-18