The legislature was probably aware of this dynamic in requiring a three-year holding period. Another provision in the legislation addresses trust conversions and mergers. So, for example, on a $500,000 mortgage, the documentary stamp taxes payable to the state at the time of the transfer would be $3,500, which, for some, may not be worth the benefits of the transfer in the first place. 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. In Example #3 the transfer failed Prong #1.  There is a change in beneficial interest in the transfer from father to son. The 2007 Notice of Change of Control Legislation In 2007, the Florida Legislature enacted §193.1556, which requires any person or entity that owns nonhomestead real property to promptly notify the property appraiser of any change of ownership or control. 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. I don't know your individual circumstances, but generally, in almost all cases, it's a bad idea. Because there is a separate exception for gifts, the “estate planning” exception in the amendment likely refers to a sale to an irrevocable grantor trust that completes the transfer for estate tax purposes, but which is ignored for income tax purposes by application of the grantor trust rules. Step two would not be subject to the documentary stamp tax because there is no conveyance of real estate, since S is assigning a membership interest in a limited liability company. The Crescent Case and Its Aftermath In Crescent, the Florida Supreme Court addressed the application of the Florida documentary tax to the conveyance of a commercial building located in downtown Miami from a limited partnership to a wholly owned, second-tier subsidiary limited liability company called Crescent Miami Center, LLC (CMC). Drives my revocable real estate deed to get helpful tips and wife is interested can be retained in our attorneys and your trust in the transfer. 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. As outlined in Florida Statue §201.02, this stealth tax  must be considered in virtually all transfers of interests between or within Florida corporate entities, and all transfers of real estate, including real property gifts between family members. This example also fails Prong #2: Has there been consideration for the exchange of the property? ... A deed between revocable trusts and their grantors are not taxable Real Estate Transfer Tax. If the properties in Examples #1 and #2 had been free of mortgages the transfers would have been free of documentary stamp taxes. 2 Stephen G. Vogelsang and Adi Rappoport, Crescent — Did the Florida Supreme Court Effectively Repeal the Documentary Stamp Tax on Transfers of Real Estate? 2.    Husband and wife own a $2 million apartment complex as tenants by the entirety with a $1.5 million mortgage; they transfer this property to their LLC, owned by them as tenants by the entirety.  Documentary stamps are $10,500 calculated on the mortgage balance. That means if your property is worth $1,000, you will owe $7 in documentary stamps. However, you should really talk to an estate planning attorney to see if it is is a good idea to transfer a home that you (presumably) currently own as tenants by the entirety into a revocable trust. 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. This underscores the importance of understanding all terms of a contract before you sign. The deed stated that CMC paid $10 and “other good and valuable consideration” for the property. Following up on the previous example, in certain instances, there would be no need for P to dissolve S LLC, where the real estate is a commercial property. For example, one issue that was somewhat raised is that Documentary Stamp taxes are a tax in Florida that have to be paid on deeds that are recorded. This column is submitted on behalf of the Tax Section, Guy E. Whitesman, chair, and Michael D. Miller and Benjamin Jablow, editors. This article discusses these two significant recent developments. 79 Fla. B. 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. Estate Taxes – Tax clearances must still be obtained when a life tenant dies. 76 Fla. B. J. at 42 (May 2002). Does the Florida documentary stamp tax on deeds (the deed tax) apply to the conveyance of unencumbered Florida real property from a grantor to a wholly owned entity? Since Key West is in Monroe County, you would be paying the non-Miami-Dade tax rate listed above. After paying the tax, the transferee filed for a refund of the documentary stamp tax. The purchase and sale of ownership interests in an entity that owns Florida real estate may result in the imposition of deed tax and change of control disclosure obligations. If there is no financing involved, then the documentary stamp tax will be calculated based upon the sales price of the property itself at a rate of $0.70 per $100 of value. Florida documentary tax stamp rates are the same in each county, with the exception of Miami-Dade. 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. Florida assesses documentary stamps at the rate of $7 per $1,000. Although this has been included to facilitate “estate planning,” it is not entirely clear what this provision accomplishes. If the consideration paid or given in exchange for real property or any interest therein 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, The Legislature recognizes that the Supreme Court’s opinion in, is limited to the facts of the case and accepts the court’s interpretation of s. 201.02, Florida Statutes, that no consideration exists when owners of real property unencumbered by a mortgage convey an interest in such property to an artificial entity whose ownership is identical to the ownership of the real property before conveyance. No probate is needed for either asset to pass to intended heirs. Submitting a contact form, sending a text message, making a phone call, or leaving a voicemail does not create an attorney-client relationship. He received his J.D., summa cum laude, in 2006 and his LL.M. 8 Jeff Ostrowski, Critics Push to Plug Hole in Tax Loophole, Palm Beach Post, August 12, 2007. Revocable Living Trust vs. TOD or POD in Florida. The provision in Section 1896 689.071(4), F.S., 1898 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. It is advisable to contact a Florida attorney to assess the documentary stamp taxes on transfers of LLC interests. The purpose of the proposed amendments to Rule 12B-4.014, Florida Administrative Code (F.A.C.) Florida Department of Revenue, Documentary Stamp Tax, Page 2 Bonds Documentary stamp tax is due on the original issuance of bonds in Florida. So, let's say you live in Key West. Documentary stamps are $5,250 calculated on the mortgage balance amount. 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