(Note: the doc stamp rate is $.70 per $100 for all Florida counties except Miami-Dade where the rate is $.60 per $100. Section 212.02(c) provides that the conversion or merger of a trust that is not a legal entity that owns real property in Florida into a legal entity is treated as a conveyance of real property. Documentary stamps are $5,250 calculated on the mortgage balance amount. The documentary stamps are determined based upon the proportion of the corporation’s value which reflects the indirect interest in the real estate through the LLC. In the wake of the Crescent decision, which was published during one of the most active real estate markets in Florida’s history, practitioners began structuring sales of Florida real property to avoid the imposition of Florida documentary stamp tax.8 The benefit of this planning approach is illustrated by the following example: Assume seller S and purchaser P have entered into a purchase and sale contract with a purchase price of $5 million in connection with the sale of real estate. Under Florida law, E-mail addresses are public records. Regardless of where the deed or other document is signed and delivered, documentary stamp tax is due. However, because the Supreme Court’s interpretation, combined with other settled law regarding the application of s. 201.02, allows for the tax-free transfer of ownership interests in real property from one owner to another through the use of artificial entities, it is the Legislature’s intent by this act to impose the documentary stamp tax when the beneficial ownership of real property is transferred to a new owner … In Florida, the Department of Revenue charges “documentary stamp taxes” on real estate transactions. The State of Florida has preserved a unique, arguably antiquated stream of revenue since 1931. The statute contains three notable exceptions from the application of documentary stamp tax on the conveyance of ownership interests of conduit entities within three years of the conveyance of real property to such entities. In general, documentary stamp taxes are: Determined based on the consideration given for the transfer. 201.02. 2d 913 (Fla. 2005), interprets s. 201.02, Florida Statutes, in a manner that permits tax avoidance inconsistent with the intent of the Legislature at the time the statute was amended in 1990.”11. Documentary Stamp Tax at $.70 per $100, rounded up, based on the total purchase price. Prior to July 1, 2009, sellers of unencumbered Florida real estate were able to avoid the documentary stamp tax by first transferring the real estate to a limited liability company wholly-owned by the sellers, then transferring the LLC interests to the buyer. The Legislature expressly rejects any application of the court’s interpretation where the facts are not comparable to the facts in Crescent. Adi Rappoport is a shareholder of Gunster, Yoakley & Stewart, P.A., residing in the firm’s West Palm Beach office. That offers some support for the proposition that a transfer of interests in a conduit entity to another entity owned by the same person is not a taxable transaction. In such case, the documentary stamp tax would not apply to the grantor’s sale of ownership interests in such public company. 2d 913 (Fla. 2005), that such conveyances are not subject to documentary stamp tax. 76 Fla. B. J. at 42 (May 2002). If you do not want your E-mail address released in response to a public records request, do not send electronic mail to this entity. On November 3, 2011, the Florida DOR issued Emergency Rule 12B11-17 to provide additional guidance on application of the documentary stamp tax to such transfers of LLC interests. The rate is equal to 70 cents per $100 of the deed's consideration. Thus, the provision excludes from documentary stamp tax a transaction that for state law purposes is a sale for consideration, but which is ignored under a fiction created by federal tax law. The provision in Section 689.071(4), F.S., which defines the interest of a beneficiary under a trust agreement to be personal property only, does not exempt a transfer of the beneficial interest in the trust from documentary stamp tax. However, because the Supreme Court’s interpretation, combined with other settled law regarding the application of s. 201.02, Florida Statutes, allows for the tax-free transfer of ownership interests in real property from one owner to another through the use of artificial entities, it is the Legislature’s intent by this act to impose the documentary stamp tax when the beneficial ownership of real property is transferred to a new owner or owners by the use of techniques that apply the Supreme Court’s decision in. The three-year holding period in many ways diminishes the desirability of structuring a sale of real property through a conduit entity. Hank transfers a Florida beach house valued at $1 million with a $750,000 mortgage balance to a LLC that is 100% owned by him. CMC appealed the adverse summary judgment to the Third District Court of Appeal, which affirmed the order of the lower court in favor of the DOR. The legislature addressed its stated concerns by amending §201.02 to confirm the essence of the Florida Supreme Court’s opinion in Crescent that a conveyance of unencumbered real property to an entity is not subject to documentary stamp tax. Code R. 12B-4.014(2)(a) (2009). In addition to the payment of any increase in taxes during such 10-year period, the property owner would be required to pay interest at a 15 percent annual rate on such increase in taxes and a penalty of 50 percent of such increase in taxes.22. Thus, a potential buyer would be hesitant to acquire interests in an entity that was funded with real estate and has been operating for more than three years. 8 Jeff Ostrowski, Critics Push to Plug Hole in Tax Loophole, Palm Beach Post, August 12, 2007. J. . The Florida Department of Revenue (DOR) denied the application, and the transferee filed suit in Miami-Dade Circuit Court challenging the DOR’s refund denial. The fed- eral government imposed a documentary stamp tax on transfers of real property deeds until the tax was re- pealed in 1967. 10 The Florida Legislature’s response is discussed later in this article. Despite its long history, the Documentary Stamp Tax has continued to receive updates and shows no signs of being repealed in the future. (The Miami-Dade County rate is $.60 on all documents plus $.45 surtax on documents transferring anything other than a single-family residence). The Documentary Stamp Tax also applies to documents executed or delivered in the state of Florida. First, a gift of an ownership interest in a conduit entity is not subject to tax to the extent that there is no consideration.17 This exception is consistent with the general rule that the documentary stamp tax does not apply to gifts of unencumbered realty.18. Most practitioners and real estate investors are familiar with the 2005landmark case Crescent Miami Center, LLC v. Florida Department of Revenue which, at its core, centered on the imposition of documentary stamp tax where an entity transfers property to another entity (where the grantor’s ownership interest in the selling entity is identical to the grantor’s ownership interest in the … The Florida Documentary Stamp Tax (Stamp Tax) is an excise tax levied upon a variety of documents in Florida. A documentary stamp tax will be due on the deed transferring the property in an amount equal to $1,400 ($200,000/100 x .70). 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