Findings Of Fact Prior to the hearing the parties jointly moved to consolidate the two (2) above styled cases and stated the stipulation would cover both 76-2197, D.O.A.H., and 77-604, D.O.A.H. The former involved six (6) deeds and the latter three (3) deeds. The following facts were stipulated to by the parties: The Respondent, Department of Revenue, imposed a documentary stamp tax upon six (6) deeds which transferred the title to properties from individual persons to Petitioner Corry. The transfer came about as a result of the following: In each of the six (6) transfers under question, Petitioner Corry sold property to certain individuals. The Petitioner gave to the individuals a deed and took back a purchase money mortgage. The purchasers made essentially no payments on the mortgage to Petitioner Corry and ultimately the purchasers deeded the property back to the Petitioner. The deeds were recorded in the courthouse records. In one of the deeds there is a specific statement that the deed is executed in lieu of foreclosure and that the purchaser is released from all liability. There is no such specific statement in the other deeds. By a Proposed Notice of Assessment dated August 3, 1976, the Respondent, Department of Revenue, sought to impose a documentary stamp tax upon the six (6) deeds. The consideration upon which the tax is based in cases like the instant case is usually the amount of mortgage debt forgiven but in the instant case no such information was provided and the tax was based on the assessed values of the property. Petitioner Corry is contesting the legal liability of Petitioner for the assessment and is not contesting the legal liability of Petitioner for the assessment and is not contesting the mathematical computation of the amount allegedly due. It is Petitioner's contention that the six (6) deeds are not subject to documentary stamp taxation inasmuch as the Petitioner paid nothing for the deeds and were signed by the mortgagors at the request of the Petitioner to clear title of the equitable owner. It is the Respondent Department of Revenue's contention that the six (6) deeds are subject to documentary stamp taxation since they are deeds in lieu of foreclosure or are deeds given when debts are rendered unenforceable. At the time the six (6) deeds were recorded on December 22, 1975, in Taylor County, the Deputy Clerk asked Petitioner how much he paid for the six (6) deeds in question and when he responded that he paid nothing for the deeds the Deputy Clerk advised him that he owed no documentary stamp tax or surtax thereon. Relying on the Deputy Clerk's advice, the deeds were recorded and no taxes were paid, only the recording fees. The Hearing Officer further finds: The deeds in question were secured for the purpose of clearing title to the equitable owner. The Petitioner paid nothing to the mortgagor for the deeds. The stipulation controls both cases No. 76-2197 and 77-604.
Recommendation Hold the assessments as valid assessment. DONE and ORDERED this 6th day of July, 1977, in Tallahassee, Florida. COPIES FURNISHED: Caroline C. Mueller, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32304 William W. Corry, Esquire Post Office Box 527 Tallahassee, Florida 32302 DELPHENE C. STRICKLAND Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 6th day of July, 1977.
Findings Of Fact On or about January 31, 1974, the Petitioner purchased a certain tract of property from Rio Branco Corporation. As a part of the purchase price, the Petitioner executed a secured promissory note, and a purchase money mortgage. A copy of the mortgage and the promissory note were received in evidence as Joint Exhibit 1. Although the promissory note is in the form of a direct obligation for the Petitioner to pay the face amount of the note to Rio Branco Corporation, its obligations were limited. The note provides in Paragraph 12 as follows: "Mortgagor, (Petitioner] assumes no corporate liability for the payment of the debt evidenced by this note and mortgage. Mortgagee [Rio Branco Corporation] waives any corporate liability and agrees to look solely to the property securing such debt for payment thereof." Petitioner apparently defaulted on the mortgage and the promissory note, and a foreclosure suit was initiated by Rio Branco Corporation. Petitioner was named as the defendant in this suit which was filed in Sarasota County, and given case number CA-75-1107. Prior to the completion of the foreclosure action, Petitioner executed a quitclaim deed conveying its interest in the subject property back to Rio Branco Corporation. The quitclaim deed was executed in lieu of foreclosure. A copy of the quitclaim deed was received in evidence as Joint Exhibit 2. The Petitioner stipulated that, it executed Joint Exhibit 2 in order to prevent any deficiency from being entered following a judicial sale in connection with the foreclosure proceeding. Despite the stipulation it is apparent that Rio Branco Corporation could not have enforced any such deficiency against the Petitioner due to the above quoted provision of the promissory note. The quitclaim deed was apparently recorded by a representative of Rio Branco Corporation. Through a proposed notice of assessment dated September 9, 1976, the Respondent is seeking to impose documentary stamp taxes, documentary surtaxes, penalties and interest in the total amount of $745.13 upon Petitioner. It is not clear whether the Respondent is also seeking to impose the same taxes upon the grantee of the quitclaim deed, Rio Branco Corporation. Respondent contends that the Petitioner is liable for the documentary stamp taxes on the quitclaim deed, and that the amount of consideration for the deed is the amount of mortgage debt extinguished as a result of execution of the deed. Petitioner contends that as the grantor of the instrument, it has no responsibility for paying documentary stamp taxes, and that further no consideration was given for the deed as a matter of law since no debt which the Petitioner could have been forced to pay was extinguished.
The Issue The issue for consideration in this case is whether deeds by property owners which convey unencumbered real property to a corporation solely owned by them, are subject to a documentary stamp tax imposable under Section 201.021(1), Florida Statutes, and Rule 12B-4.013(7), Florida Administrative Code.
Findings Of Fact By Warranty Deed dated April 30, 1991, W. Dewey Kennell sold eight condominium apartments, units 1731, 1733, 1735, 1737, 1741, 1743, 1745 and 1747, in Baywood Colony Southwood Apartments IV, a condominium, to Kurt Rabau and Ronald Rabau, his son, residents of Germany. The Rabaus purchased the properties as an investment in rental property for income. At the time of the sale, the property was subject to mortgages totaling $250,000, which the Rabaus paid off on May 24, 1994. Sometime after the purchase, the Rabaus were advised to incorporate and hold title to the properties in a corporate capacity to protect themselves against personal liability. Thereafter, on September 14, 1994, the Rabaus formed Kuro, Inc., the Petitioner herein, to take and hold title to the properties, with Kurt Rabau and Ronald Rabau each owning 50% of the corporate stock. There were no other owners of stock in the corporation. On October 12, 1994, the Rabaus transferred all eight properties to Kuro, Inc. Kuro, Inc. had no assets other than the eight apartments, and did no business prior to the transfer of those apartments to it. Consequently, the stock of Kuro, Inc. was valueless prior to the receipt of the transferred apartments. The corporation’s federal tax form relating to transfer of property to a corporation, the “Corporation’s Statement on Transfer of Property Under Code Section 351” reflects that the Rabaus “transferred the jointly owned property [described therein] for which Kuro Inc. issued the stock”. From the evidence presented it is clear that the Kuro Inc. stock was issued in exchange for the contribution of the apartments to the corporation. Other documents in the corporation’s 1994 tax return indicate that the property was valued at fair market value at the time of transfer to the corporation, and the transferee’s, (corporation’s) adjusted basis was identical after the transfer. Each of the Rabaus received 500 shares of the corporation’s stock which was valued at $618,642. Of that amount, $617,642 was considered additional paid-in capital. There was no additional property received or possessed by the corporation. A minimal documentary stamp tax was paid by the parties at the time the eight Warranty Deeds for the apartments were transferred to the corporation. The consideration reflected on the face of each deed was “...the sum of $10.00 and other valuable consideration.” Subsequent to the transfer, the Department conducted an audit of the Clerk of Circuit Court in Sarasota County and, on November 10, 1994, issued a Notice of Intent to Make Documentary Stamp Tax and Discretionary Surtax Audit Changes, by which it indicated its intent to impose a documentary tax of $4,207.00 on the transfers, a 50% penalty of $2,103.50, and interest totaling $38.73 through November 10, 1994, with additional interest to accrue at the rate of 1% per month, prorated daily ($1.38), until date of payment. Thereafter, on March 27, 1995, the Department issued a Notice of Proposed Assessment to Kuro, Inc., and Petitioner timely filed a protest. Subsequent to that action, on January 11, 1996, the Department issued its Notice of Decision sustaining the proposed assessment, penalty and accrued interest, and Petitioner requested formal hearing.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Revenue enter a final order imposing a tax in the amount of $4,207.00 with interest from date of filing at 1 percent per month based on the amount of tax not paid to date of payment. DONE and ENTERED this 22nd day of April, 1997, in Tallahassee, Florida. ARNOLD H. POLLOCK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6947 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of April, 1997. COPIES FURNISHED: C. Samuel Whitehead, Esquire 2199 Ringling Boulevard Sarasota, Florida 34237 James F. McAuley, Esquire Office of the Attorney General The capitol - Tax Section Tallahassee, Florida 32399-1050 Linda Lettera General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs Executive Director Department of Revenue Tallahassee, Florida 32399-1011
Findings Of Fact On or about January 9, 1974, Petitioners and their partners, Edward Mehler, and Sylvia Mehler, sold certain property located in Broward County, Florida, to Leo Koehler, Pat Manganelli, and Walter Urchison. A copy of the deed was received in evidence as Respondent's Exhibit 1. The Petitioners and the Mehlers took a $50,000 mortgage from the buyers as a part of the purchase price. The mortgage deed was received in evidence as Respondent's Exhibit 2. The face amount of the mortgage is $50,000. The buyers defaulted on the mortgage to the Petitioners and the Mehlers without having made any payments on the mortgage. The Petitioners and the Mehlers were unsuccessful in negotiating any payment from the buyers. The buyers were apparently irresponsible, and were unsuccessful in business. The buyers had given their deed to the property to a Mr. Frank Post. Mr. Post apparently took the deed in payment for a debt. The Petitioners and the Mehlers were unsuccessful in negotiating any payment on the mortgage from Post. The Petitioners and the Mehlers were unsuccessful in locating any market for the mortgage. The mortgage had no market value. Rather than foreclosing one the mortgage, the Petitioners and the Mehlers took a warranty deed from the original buyers and a quitclaim deed from Post. These deeds were received in evidence as Respondent's Exhibits 3 and 4. The deeds were taken in lieu of foreclosure, and the effect of the deeds was to discharge the $50,000 mortgage obligation. Petitioners and the Mehlers placed minimum Florida documentary stamp tax and surtax stamps on each deed, taking the position that the consideration for the deeds was nothing. The Respondent took the position that the consideration for the deeds was the discharge of the mortgage obligation, and assessed $410 in stamp tax, surtax, and penalty obligations upon the Petitioners. The petitioners subsequently commenced this action. The property which is the subject of this matter has very little market value. The property has been on the market for some time, and no buyer has been found. The property has been valued at $12,500, but its market value is less than that.
Findings Of Fact Prior to the bankruptcy of Recreation Corporation of America (RCA), Drexel Properties (Drexel), predecessor in interest to Petitioner Sheridan Ventures, Inc., engaged in negotiations with RCA and Fidelco Growth Investors (Fidelco) for the purchase of some eighty-three acres of land owned by RCA that was located in Hollywood and Dania, Florida. Fidelco held a mortgage on the property in the amount of $2,400,000.00. On January 20, 1976, a bankruptcy judge in the United States District Court for the Southern District of Florida issued an amended order in Case No. 75-16-BK-JE-H, authorizing the trustee in bankruptcy of the estate of RCA, bankrupt, to accept the offer of Drexel to purchase the trustee's equity in the real property of the bankrupt for the sum of $15,000.00, subject to the first lien of Fidelco, taxes, interest, certain costs, and two subordinate liens in the amounts of $5,939.92 and $2,691.50. On January 28, 1976, the trustee executed a Bankruptcy Trustee's Deed conveying the property in question to Petitioner, subject to the Fidelco lien and taxes. Petitioner recorded the aforesaid deed in Broward County on February 27, 1976, and state documentary tax stamps in the amount of $45.00 were paid. (Testimony of Mehallis, Exhibits 1-2, Exhibit D to Petition) Respondent issued a proposed notice of assessment of documentary stamp tax, penalty, and interest in the total amount of $14,807.52 on September 7, 1976, based on a taxable consideration of $2,415,000.00. This sum represented the $15,000.00 cash paid by Petitioner and the $2,400,000.00 existing mortgage on the property. In this assessment, Petitioner was credited with the $45.00 previously paid for documentary tax stamps. An informal conference was held on September 21, 1976, after which a revised assessment in an increased amount was withdrawn when both parties agreed that the subordinate liens had been satisfied out of the $15,000.00 cash given for the deed. Subsequently, Respondent issued Revised Assessment No. 2, dated September 22, 1976, reflecting a sum due of $7,653.30 payable for documentary stamp tax, a like sum as a penalty, and interest for six months and five days in the amount of $471.83, for a total of $15,778.43. It was stipulated by the parties at the hearing that this amount is correctly computed and is the proper amount payable if the Petitioner is deemed liable therefor. (Exhibits A, C, E to Petition, Exhibit 3) At the time Petitioner purchased the trustee's interest in the property, it had no intention of paying Fidelco's full lien because the amount of that mortgage exceeded the fair market value of the land. It intended to use the trustee's deed as a negotiating tool to get a better arrangement with Fidelco. Consequently, it made no payments on the mortgage and, on April 7, 1976, Fidelco filed foreclosure proceedings in the Broward County Circuit Court. Petitioner interposed set-off and a counter claim in an amount exceeding $500,000.00 based on funds it had previously advanced to RCA under a prior contract. (Testimony of Mehallis) A real estate appraisal of the property established its fair market value to be $1,120,000.00 as of January, 1976. (Testimony of Lukacs)
Recommendation That Petitioner be held liable for the proposed assessment of documentary stamp tax, penalty, and interest under Chapter 201, Florida Statutes, in the amount of $15,778.43. DONE and ENTERED this 28th day of April 1977, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304 COPIES FURNISHED: Edwin J. Stacker, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32304 Brian C. Deuschle, Esquire Spear, Deuschle and Curran, P.A. 5554 North Federal Highway Ft. Lauderdale, Florida 33308
The Issue The issue here concerns the propriety of the Respondent, State of Florida, Department of Revenue's assessment of tax under authority of Sections 201.01 and .08, Florida Statutes, in the amount of $11,557.20 and penalty of $577.86 against the Petitioner, Landmark Bank of Brevard. The specific nature of the assessment is one pertaining to items identified as detachable "Promissory Notes" which are attached to documents entitled "Trust Receipts."
Findings Of Fact The facts in this case reveal that the Petitioner Landmark Bank of Brevard, hereafter referred to as the "Bank," made loans to several motor vehicle dealers in Brevard County. The borrowers were Carl Schmidt Motors, Inc.; Bennie C. Chapman, who does business as Chapman Auto Sales; and Harley Davidson of Melbourne, Inc. The arrangements for the loans were on the basis that the dealers would apply with the Bank to receive moneys which would be used to "floor plan" automobiles and motorcycles being sold through their retail outlets. The applications were processed through the loan committee and when the loans were approved a Promissory Note was signed by the appropriate persons acting in behalf of the dealers. (Copies of the notes executed were attached to the Petition for Formal Hearing and acknowledged to be correct through the answer filed in behalf of the Respondent and the notes as attached to the Petition are being provided with this Recommended Order together with those exhibits offered in behalf of the parties.) The notes allow for the single disbursement of a stated amount of money, with the repayment of principal and payment of interest being due by one payment for which demand is made within a period as short as several months or as long as one year depending on the note conditions. Collateral is provided, according to the terms of the notes, either by the lease and rental autos listed on separate documents entitled "Trust Receipts," which Trust Receipts are held by the Bank or otherwise described as such motor vehicles as were then owned by the dealers at the time the execution of the note or as would thereafter be acquired. These notes, meaning the initial Promissory Notes, had Documentary Stamps placed and canceled in the monthly journal of the Bank at the time of the execution of the Promissory Notes, in an effort by the Petitioner to comply with Section 201.08, Florida Statutes. The amount of Documentary Stamps utilized was in keeping with the face amount of the loan proceeds reflected on the Promissory Notes. Therefore, when the Promissory Notes are examined an impression is created that a single disbursement of loan proceeds has been made for which Documentary Stamp tax has been collected. In reality, the arrangement between the dealers and the Petitioner was to the effect that the full amount of the loan proceeds would not be assigned to the account of the dealers upon execution of the note. What would happen, is that the dealers would be allowed to make "draws" against the loan proceeds on the basis of surrendering the title of a used motor vehicle which they had acquired or having the manufacturer of a new motor vehicle submit the Manufacturer's Certificate of Origin to the Bank. In turn, moneys were advanced to the dealer equal to the value of the used unit or commensurate with the amount reflected on the Manufacturer's Certificate of Origin if a new unit. These titles and Manufacturer's Certificates of Origin were held as collateral and the dealers would take possession of the actual vehicles to be placed in the dealer's inventory until a retail purchase had been made. The vehicles for which the Petitioner had received title or the Manufacturer's Certificate of Origin were then listed on documents called "Trust Receipts." The "Trust Receipts" would show the vehicle description, make, serial number and price as described in the Manufacturer's Certificate of Origin or title. These descriptions were placed on individual "Trust Receipts" based upon the date the evidence of ownership was submitted from the dealer of the Bank. That is to say, if four Manufacturers' Certificates of Origin or titles were submitted to the Bank at one time, then four of the vehicles would be listed on a single "Trust Receipt" as opposed to listing the four new units on a "Trust Receipt" that already had a unit or units listed from another visit by the dealer. Examples of the various "Trust Receipt" documents may be found in the Respondent's Composite Exhibit 3 admitted into evidence which contains copies of the "Trust Receipt" examples. The "Trust Receipt" documents had attached to them an item entitled "Promissory Note," which item could be detached from the body of the "Trust Receipt." Some examples in the Respondent's Composite Exhibit 3 have the "Promissory Note" affixed, reflecting a date and money amount equal to the amount arrived at by totaling the value related to the various units shown in the "Trust Receipt." These examples also list the borrower's name and are signed by Margy Driggers, the Assistant Cashier of the Petitioner. Some are signed by Margy Driggers, with the initials "P.O.A." placed in front of or after her title as Assistant Cashier. One other example is the same as above but without the initials "P.O.A." There is also an example signed by Bennie C. Chapman, one of the dealers who borrowed money. The Chapman example reflects the amount of value shown in the "Trust Receipt," to which the "Promissory Note" is attached and it has a date, but does not reflect the amount of interest to be paid if this is indeed a Promissory Note. There was another category of "Trust Receipt" and attached "Promissory Note" reflecting motor vehicles for which money had been loaned and this was a type in which no entries had been made on the "Promissory Note"; however, an example of this type was not provided through the Respondent's Exhibit 3. Both parties acknowledged that the initials "P.O.A." stand for power of attorney. They disagree on the question whether a power of attorney had been granted to the Petitioner to act in behalf of the subject dealers. The Petitioner through its witnesses claim that the designation "P.O.A." is simply an extension of a long standing policy of the Bank which predates the current Assistant Cashier and has no meaning. Therefore, no power of attorney has ever been granted from the dealers to the Bank to execute promissory notes on behalf of the dealers. The Respondent through its auditor, whose investigation led to the assessment in dispute, claims that Margy Driggers, the Assistant Cashier, told him that "P.O.A." means power of attorney and that she had the ability to sign for Carl Schmidt. (Carl Schmidt Motors, Inc.) None of the dealers were presented in the course of the hearing to state their position on the granting of power of attorney to the Petitioner for purposes of executing the item known as "Promissory Note" attached to the various "Trust Receipts," and there are no written documents which would demonstrate the granting of a power of attorney to the Bank. Moreover, nothing in the original Promissory Notes executed by the dealers leads to the conclusion that the item known as "Promissory Note" attached to the "Trust Receipt" may be executed by a Bank official through power of attorney for the dealer. Consequently, no power of attorney has been shown to be granted from the dealers to Margy Driggers or any other employee of the Petitioner, on the subject of executing "Promissory Notes" attached to the "Trust Receipts." When the items were filled out, copies of the "Trust Receipts" and attached "Promissory Notes" were forwarded to the several dealers. When a dealer sold one of the automobiles for which the Petitioner held the title or Manufacturer's Certificate of Origin as security, then the dealer paid an amount equal to that amount reflected in the "Trust Receipt" document and an entry was made in the date paid column of that document which showed that amount of debt had been satisfied by the dealer. During the operative period of the initial Promissory Note, meaning that period between the time of the execution of the note and the time the note was due as reflected on the face of the note, the dealer could borrow an amount not to exceed the face amount of the loan proceeds and if some portion of that amount was retired, then an additional amount could be borrowed, which effectively meant that in the active life of the loan as shown by the initial Promissory Note more money could be borrowed during the life of the note than the amount reflected on the face of the Promissory Note. For example, hypothetically the Promissory Note could entitle the dealer to borrow $19,959.00 on May 10, 1976, to be repaid by May 10, 1977. That dealer could then borrow $19,959.00 between those dates and pay back that amount of money with interest and borrow an additional $5,000.00 to be paid back before the expiration date of the loan and in actuality would have borrowed $24,959.00, ostensibly under the terms and conditions of the initial note. These additional amounts of loan proceeds cannot be seen by examining the initial Promissory Notes; they can only be discovered by adding the individual amounts reflected in the "Trust Receipts" and comparing the total to what is shown by adding the loan amounts depicted in the initial Promissory Notes. This is in fact what was done by the auditor in conducting the audit and it is the differential between the amounts shown in the "Trust Receipt" aggregate as contrasted to the initial Promissory Note aggregate for which the Respondent claims Documentary Stamp tax is owed. The Respondent would have the Documentary Stamp tax applied to some combination of the so-called "Promissory Notes" attached to the "Trust Receipts" equal to an amount representing the differential spoken to before. The Respondent did not establish which "Trust Receipts" with attached "Promissory Notes" would be subject to the assessment of Documentary Stamp tax. Through this process, the Respondent in its Revised Notice of Assessment is claiming tax of $11,557.20 and a penalty of $557.86. (A copy of this notice may be found as Respondent's Exhibit 4 admitted into evidence.)
Recommendation It is RECOMMENDED that the proposed assessment for Documentary Stamp tax and penalty made by the Department of Revenue, State of Florida, against the Petitioner, Landmark Bank of Brevard, a banking corporation organized and existing under the laws of the State of Florida, formerly Landmark Bank of Melbourne, N.A., be DISALLOWED. 1/ DONE AND ENTERED this 9th day of April 1980 in Tallahassee, Florida. CHARLES C. ADAMS Hearing Officer Division of Administrative Hearings 101 Collins Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 9th day of April 1980.
Findings Of Fact This case comes on for consideration based upon the request of the Petitioner, Fanpac Corporation, for a formal administrative hearing on the question of the propriety of the December 8, 1976 assessment, A-54, of the Respondent, State of Florida, Department of Revenue. The claimed assessment pertains to an assignment of lease, recorded at Book 4182, Page 562, Public Records, Duval County, Florida. The assessment states that documentary stamp tax is owed in the amount of $5,404.50, together with accrued interest and a penalty in the amount of the claimed documentary stamp tax. The assessment also states that documentary surtax is owed in the amount of $370.15, together with accrued interest and a penalty in the amount of the claimed documentary surtax. In furtherance of the consideration of the case, the parties have submitted a factual stipulation to be examined by the undersigned in arriving at the terms of the recommended order. Quoting from the stipulation it states:
Recommendation It is recommended that the compromise agreement entered into by the parties, that the Petitioner pay documentary stamp tax and documentary surtax and interest on those amounts in the aggregate of $6,519.06 be accepted. It is further recommended that penalties in the amount of 25 percent of $5,404.50, documentary stamp tax, together with a penalty in the amount of 25 percent of $370.15 documentary surtax, be imposed. DONE AND ENTERED this 7th day of November, 1977, in Tallahassee, Florida. CHARLES C. ADAMS Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Paul M. Harden, Esquire Smith, Davenport, Peek and Bloom 2601 Gulf Life Tower Jacksonville, Florida 32207 Daniel C. Brown, Esquire Assistant Attorney General Department of Revenue The Capitol Tallahassee, Florida 32304 John D. Moriarty, Esquire Department of Revenue Room 104, Carlton Building Tallahassee, Florida 32304 ================================================================= AGENCY FINAL ORDER =================================================================
Findings Of Fact Ken La Pointe was predecessor in interest to Petitioner, KANAPHA MEADOWS, INC, in a number of land transactions. Mr. La Pointe sold 15 lots in "1000 Oaks Subdivision" to third parties. These sales generated 13 deeds and 15 mortgages. The deeds given by La Pointe reflect that they are subject to two prior mortgages. La Pointe sold these 15 lots without getting a release on a prior mortgage held for the same property by C. L. Brice, individually and C. L. Brice, Trustee (apparently operating in some capacity as "Kanapha Ranch"), and also without getting a release on another prior mortgage held by Peoples' Bank. However, there is no contention by the parties that La Pointe did not place the proper documentary tax stamps on these deeds. La Pointe continued collecting on the 15 mortgages generated by the 13 deeds and in turn paid interest payments on his mortgage to Peoples' Bank but did not pay anything on the mortgage to Kanapha Ranch, Inc. Accordingly, C. L. Brice (operating through Kanapha Ranch) demanded, with the leverage of threatened foreclosure, that La Pointe assign these 15 mortgages to Kanapha Ranch, Inc. for collection and that all such collections would be applied to the Kanapha Ranch, Inc. mortgage as long as La Pointe continued to owe Kanapha Ranch, Inc. Thereafter, by an Assignment of Mortgages dated June 12, 1980 La Pointe assigned these mortgages to Kanapha Ranch, Inc. for collection only. Thereafter, La Pointe and Brice negotiated a deal, this time with Brice operating through Petitioner, KANAPHA MEADOWS, INC., whereby La Pointe provided a deed to KANAPHA MEADOWS, INC. for the balance of unsold property in "1000 Oaks Subdivision" and assigning to KANAPHA MEADOWS, INC. all mortgages due La Pointe (including the ones already assigned to Kanapha Ranch for collection) and whereby KANAPHA MEADOWS, INC., was to release La Pointe from all debts regarding the "1000 Oaks Subdivision." There were 39 lots in "1000 Oaks Subdivision." Thirty three of these deeds were transferred with proper documentary stamps. Six of these lots deeded to KANAPHA MEADOWS, INC. form the fulcrum of the issue between the parties to this proceeding. La Pointe and KANAPHA MEADOWS, INC. resorted to an elaborate percentage basis formula to determine the value of the property and the debts being assumed. After applying the mortgage amount against the indebtedness, $53,529.86 of the indebtedness was calculated as applicable to the six lots conveyed. This was the amount upon which documentary stamps of $214.40 were calculated and affixed to the Warranty Deed from La Pointe to KANAPHA MEADOWS, INC. for Lots 5, 6, 15, 16, 17, and 21, which deed was dated October 15, 1980 and recorded July 17, 1981 in Official Record Book 1359, pages 522-533 of the Public Records of Alachua County, Florida. No money changed hands at that point and apparently the executed deed was not delivered to KANAPHA MEADOWS, INC. until later. When the exact data and balance due on each mortgage was collected, approximately February 21, 1981, the parties were ready to close. On February 24, 1981, La Pointe assigned all 15 mortgages (most of them third mortgages because they had not been released from La Pointe's liability of the first two mortgages to Kanapha Ranch and Peoples' Bank) to KANAPHA MEADOWS, INC. At that time, La Pointe received an Assumption Agreement with Release from KANAPHA MEADOWS, INC. assuming the Peoples' Bank mortgage and also an Assumption Agreement with Release assuming the Kanapha Ranch mortgage. The 6 lots were received then and are now indicated on the KANAPHA MEADOWS, INC. books at an evaluation of $17,600.94. The October 15, 1980 Warranty Deed, the Assignment of Mortgages, and both Assumptions/Releases were recorded July 17, 1981. Petitioner contends that the $214.40 in tax stamps affixed thereto was appropriate based on the difference between the liabilities assumed and the assets received by KANAPHA MEADOWS, INC. from La Pointe. Respondent's position is that additional tax is due in the amount of $1,199.80 based upon the mortgages to which the deed was subject, which mortgages are reflected on the face of the deed and were specifically assumed by Petitioner.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is recommended that the Department of Revenue enter a Final Order ratifying its assessment of an additional documentary stamp tax owed by Petitioner of $1,198.80 plus appropriate penalties and interest to date of that Final Order. DONE and ENTERED this 19th day of March, 1985, in Tallahassee, Florida. ELLA JANE P. DAVIS Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of March, 1985. COPIES FURNISHED: William Townsend, Esquire Department of Revenue Carlton Building Tallahassee, Florida 32301 C. L. Brice 6500 S. W. Archer Road Gainesville, Florida 32608 Edwin A. Bayo Assistant Attorney General Department of Legal Affairs Room LL04, The Capitol Tallahassee, Florida 32301 Randy Miller Executive Director 102 Carlton Building Tallahassee, Florida 32301
The Issue By this petition, American Foam Rubber Distributors, Inc. (AFRD) and Edward Rothbard seek to have the Department of Revenue's assessment for documentary stamp tax and penalties on a transfer of real property by quit claim deed from Edward Rothbard to AFRD set aside. Petitioners contend that the transfer was without consideration and therefore nontaxable under sec. 201.02, F.S. , while Respondent contends that consideration flowed to the grantor by virtue of the grantee making the mortgage payments; and therefore, documentary tax stamps were due on the deed of conveyance computed on the amount of the mortgage at the time of transfer. One witness testified in behalf of Petitioners and four exhibits were admitted into evidence. From the pleadings, interrogatories and evidence presented at the hearing, the facts are largely undisputed and are as follows:
Findings Of Fact Edward Rothbard owns 100 percent of the outstanding stock of AFRD and he has been the sole shareholder and chief executive officer of the company since the company s inception in 1962. On March 9, 1973 the Seaboard Coastline Railroad (SCL) entered into an agreement with AFRD to sell a tract of land in Miami to the latter at an agreed price of $116,978.00 with certain conditions. The principal condition was that the grantee erect a warehouse on the property within one year from the date of the transfer. By deed dated August 23, 1973 the property was conveyed by SCL to Edward Rothbard rather than as per the contract. This deed was apparently delivered in late October, 1973 and the proper documentary stamp tax was paid on this transaction. Mr. Rothbard's testimony that the sole reason for taking the property in his name was to expedite the transaction was not rebutted. In exhibits 1 and 2 copies of letters from SCL dated September 21 and 26, 1973, SCL referred to Rothbard as nominee of AFRD to be grantee of the property. Exhibit 4, the title page of an interim title insurance binder, indicates that the title insurance policy on the property purchased from SCL was intended to be in the name of AFRD. In August, 1974 the building erected on the site for the use and benefit of AFRD was completed and Edward Rothbard mortgaged the property to secure a note in the amount of $550,000.00. His wife also executed the note and mortgage. AFRD occupied the building in September, 1975 and made all mortgage payments to the mortgagee including the first payment. By quitclaim deed executed February 26, 1975 Edward Rothbard conveyed the property here involved to AFRD subject to the mortgage. Minimum documentary tax stamps were placed on this deed. On February 26, 1975 the outstanding balance due on the mortgage was $543,969.59.
Findings Of Fact By Deposit Receipt dated June 12, 1975 (Exhibit 1) Kenneth H. Maxwell and Janet A. Maxwell contracted to purchase a lot for $7,000 from D & D Builders of Ft. Lauderdale, Inc. (D & D) with house to be built thereon for $29,900 in accordance with described plan. $3,690 was paid as earnest money deposit on this contract. It was intended that Maxwell would obtain a construction loan from the lending institution and before making the loan the lender required the value and plan number of the house to be included on the deposit receipt contract. The property was deeded to the Maxwells by Warranty Deed dated July 14, 1975 (Exhibit 2) and documentary stamp taxes in the amount of $21 was attached thereto. This is the correct amount for a $7,000 consideration for such a transfer. On July 15, 1975 a mortgage deed was executed by the Maxwells to the First Federal Savings and Loan Association of Highlands County to secure a loan in the amount of $33,200 and intangible taxes were paid thereon. At the time D & D and the Maxwells entered into their contract it was intended that Maxwell, who taught construction at a local junior college, would build his own house. When Maxwell attempted to get a building permit the county would not issue one because he was not a licensed contractor. He then arranged for D & D to pull the permit and for the bank to make the draws payable to D & D who would disburse the funds to the subcontractors, suppliers, and Maxwell. On July 15, 1975 the lender disbursed a check to D & D for $3,310 which, when added to the $3,690 initially paid by the Maxwells, completed the $7,000 payment for the lot to the seller D & D. Thereafter Maxwell constructed his house. D & D made the draws and disbursed the funds to suppliers, subcontractors, and to Maxwell. Exhibit 5 shows 8 checks were made payable to Maxwell totaling some $4,400. D & D did not supervise construction, received no compensations for its services, and acted only as a conduit for the construction loan.
