FLORIDA stamp taxes had to be paid on a property transfer because of poor planning.

A limited partnership set up a limited liability company as a subsidiary and transferred land to it. The documents said that the property was being transferred to the LLC for $10 and other “good and valuable consideration.”  Florida collects a documentary stamp tax on transfers of real property to a “purchaser.”  The tax in this case was $1.2 million. The transfer should have been merely a capital contribution by a parent company to a new subsidiary.

However, a Florida appeals court said in September that the tax had to be paid because the statute defines a “purchaser” as anyone who “acquires property by paying an equivalent in money or other exchange in value,” and there is a presumption where the documents suggest that nonmonetary consideration was given in exchange for property, the consideration was equivalent in value.

The case is a warning to be careful to describe transfers of property clearly as capital contributions when that is what they are in substance. It is Crescent  Miami Center LLC v. Department of  Revenue.

Keith Martin