STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

JERRY W. THOMAS, )

)

Petitioner, )

)

vs. ) CASE NO. 75-1710

) STATE OF FLORIDA, DEPARTMENT ) OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a hearing was conducted before Charles C. Adams, Hearing Officer, Division of Administrative Hearings at the Baker County Courthouse, Macclenny, Florida, at 10:00 A.M., March 31, 1976.

APPEARANCES

For Petitioner: Granvel S. Kirkland, Esquire

Post Office Box 928 Macclenny, Florida 32063

For Respondent: Patricia S. Turner, Esquire

Department of Legal Affairs The Capitol

Tallahassee, Florida 32304 ISSUES

Whether or not the Petitioner is held to pay documentary stamp tax, documentary surtax, and penalties, on certain transactions which are the subject of the petition as provided for in Section 201.02, Section 201.021, and Section 201.17(2), Florida Statutes, respectively.

FINDINGS OF FACT

1. The area of dispute involves an alleged insufficiency of payment of documentary stamp tax and documentary surtax, and associated penalties for the insufficiencies, in transactions which are reflected in the Exhibit "C" to the Petition. The parties did not dispute the accuracy of the computation found in the Exhibit "C" to the petition, which was prepared by an investigator of the Respondent.

   
   

2. The Petitioner contends that he is only responsible for paying the amount of documentary stamp tax and documentary surtax on the value of the real estate which was conveyed to the several grantees shown in Exhibit "C", as opposed to paying documentary stamp tax and documentary surtax on the value of the real estate, together with the value of the home which was built on that real estate. The facts show that the Petitioner has only paid documentary stamp

   tax and documentary surtax on the value of the real estate which he conveyed to the several grantees in Exhibit "C".

   
   

3. In describing the arrangement between the Petitioner and his wife with the several grantees, The Petitioner and Respondent stipulated that Petitioner's Exhibit #1 accurately represents the documents involved in the initial contact between the Petitioner and the grantee. The Petitioner's Exhibit #1 is a composite exhibit which shows a blank sales contract and installment contract prepared by the Petitioner, together with a copy of an executed sales contract and installment contract in behalf of one of the several grantees. This document has as its function providing a rough estimate in behalf of the parties on the question of the cost of a lot and home, together with the attendant tangible property items that go with the sale. This document is subject to the special conditions of the Farmers Home Administration of the United States Department of Agriculture and is not binding on the grantee.

   
   

4. The parties stipulated that Petitioner's Exhibit #2, a composite exhibit, was utilized in the case of the several grantees in this matter. The Petitioner's Exhibit #2 is a construction contract in blank form and a form as executed in behalf of one of the grantees. This construction contract is prepared by the Farmers Home Administration, United States Department of Agriculture. This construction contract identifies the price and contains a general description of the lot which was sold by the Petitioner, and is executed after the grantee has met with the Farmers Home Administration and been approved for a loan.

   
   

5. Prior to the execution of the construction contract, the grantees came to the place of business of the Petitioner, which is an office in the back of his home. This meeting was not pursuant to any advertising other than communication by other parties who had sought the services of Jerry W. Thomas, who is a general contractor, certified by the Farmers Home Administration to build homes which the Farmers Home Administration is financing. The grantee would come to Mr. Thomas's office and discuss the construction of a home, and, in the case of the grantees in Petitioner's Exhibit "C", it is contemplated that that home would be built on a lot which Mr. Thomas and his wife owned and would convey to the grantee. In fact, in every instance reflected in Exhibit "C" the home was constructed by Mr. Thomas and was constructed on a lot which Mr. Thomas and his wife sold to the grantee.

   
   

6. Before the construction contract was signed, it was necessary for the grantee to be approved for financing by the Farmers Home Administration. It was also necessary under the system that was utilized in financing the matters set forth in the Exhibit "C", that the Petitioner sign an irrevocable option to purchase realty, which was executed in favor of the several grantees. A replica of this form is made a part of the record as Petitioner's Exhibit #4. The meaning of the option to purchase real property, was that the Petitioner stated a price for his real estate and he was bound by that price and must sell the real estate to the grantee, whether or not the Petitioner ever built a home on the real estate. This option to purchase real property was a precondition to the overall financing scheme which was utilized by the Farmers Home Administration. This particular method was identified as a contract method. Should the appraisal of the property as conducted by the Farmers Home Administration indicate that the asking price stated in the option to purchase real property was in excess of the appraised value, then the Petitioner could have refused to sell. In the case of all the grantees found in Exhibit "C", the price stated for the real property was acceptable and the contract was consummated.

7. The technique for executing the contract conditions once the option to purchase real property had been completed and accepted was as follows:

   
   

   1. A closing was held at which point a warranty deed was executed by the Petitioner and his wife in favor of the several grantees. Payment for the real estate was made from a supervised account in behalf of the several grantees. The warranty deed, which form is shown in Petitioner's Exhibit #3 and is stipulated as being the form utilized in all conveyances alluded to in Petitioner's Exhibit "C" was then recorded. At the moment of recording, documentary stamp tax and documentary surtax was paid on the amount of the real property only.

      
      

   2. On the day that the warranty deed was recorded, a mortgage and note was also recorded in favor of the Farmers Home Administration for the amount financed by the grantees.

      
      

   3. Subsequent to the closing alluded to in paragraph one and two of this explanation, the grantee, at his option, had the home constructed. The option referred to, pertains to the ability to hire any contractor that he desired to construct the home on the property which had been conveyed to him. The Petitioner would not have had the right to oppose the grantees' choice of contractor. Had the several grantees desired to choose other contractors, then the Petitioner would have been required to sell his real estate at the option price and that would have concluded the contract. In all cases shown in the Exhibit "C" to the petition, Mr. Thomas not only conveyed the property but constructed the homes on the property as the chosen contractor and was paid out of the supervised account through scheduled payments and a final disbursement made at the 100 percent completion point.

      
      

8. Subsequent to the time that the warranty deed conveying the lot, together with the mortgage and note, were recorded, an audit was performed by the Respondent and an assessment placed for the additional value reflected in the the cost of constructing the home. This assessment was for the unpaid documentary stamp tax, documentary surtax and penalties associated with those deficiency assessments.

   
   

   CONCLUSIONS OF LAW

   
   

9. . The Division of Administrative Hearings has jurisdiction over the subject matter of this case and over the parties.

   
   

10. The transactions involved in this case were transactions for the purchase of a lot with a completed residence dwelling. The consideration paid by purchasers was for both a lot and a completed residence dwelling. The consideration paid was for the aggregate value of the lot and home. Raccoon Development, Inc. v. United States, 391 F.2d 610 (Court of Claims 1968); First Development Corporation of America v. State of Florida, Case No. 70-J974 (12th Judicial Circuit, Final Judgment entered August 17, 1972) affirmed, 286 So.2d 233, (2 DCA Fla. 1973); Florida Administrative Code Chapter 12A-4.13(22).

    
    

11. The documentary stamp tax, and documentary surtax which Petitioner is obliged to pay is the amount of the tax and surtax which would be paid on the full consideration of the lots and completed residence dwellings.

12. The fact that the grantee in those transactions shown in Exhibit "C" of the petition could have elected to have another contractor build the home does not alter the effect of the law pertaining to this cause.

RECOMMENDED ORDER

Based upon the foregoing findings of fact and conclusions of law, it is, hereby recommended: That the Petitioner be assessed the taxes and penalties set out in Exhibits "A" thru "C" of the Petition.

DONE and ENTERED this 11th day of June, 1976, in Tallahassee, Florida.

CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304

(904) 488-9675

COPIES FURNISHED:

Granvel S. Kirkland, Esquire; Post Office Box 92B Macclenny, Florida 32063

Patricia S. Turner, Esquire Department of Legal Affairs The Capitol

Tallahassee, Florida 32304

Docket for Case No: 75-001710

Orders for Case No: 75-001710