The Issue Whether the modification of a promissory note and mortgage should be taxed on the full amount as modified ($157,500.00) or on the difference between the amount of the original note and mortgage and the modification.
Findings Of Fact Eleven individuals executed a promissory note to the Lewis State Bank in the amount of $142,500.00. Stamps were affixed thereto as required by Florida Statutes 201.08, which assess the documentary stamp tax on obligations to pay money. Approximately three years later, six of the individuals who had executed the note, executed a modification of the promissory note mortgage. The later note increased the amount from $142,500.00 to $157,500.00 and the interest rate was increased from 7 1/2 to 10 percent. In addition to the increase in the face amount of the note and the increase in the interest, the note provided for the release from liability of five of the original makers. At the, time of the recordation of the modification the amount of $22.50 was affixed which was documentary stamps for the amount of $15,000. The Respondent notified the Petitioner that documentary stamps under Florida Statutes 201.08 were due on the total amount of the new obligation, $157,500.00. tax:
Recommendation Affirm the assessment of the Department of Revenue, Respondent. DONE and ORDERED this 7th day of May, 1976. DELPHENE C. STRICKLAND Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Bryan W. Henry, Esquire Henry & Buchanan, P.A. P. O. Box 1049 Tallahassee, Florida 32302 Harry F.X. Purnell, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32304
Findings Of Fact Upon consideration of the stipulation of the parties and documents attached thereto, the following relevant facts are found: On or about October 9, 1979, Dade County, a political subdivision of the State of Florida acting for the use and benefit of its Department of Housing and Urban Development, a public housing authority ("PHA"), entered into a Contract for Project Dade 8-10 ("Contract") with Irbye Giddens, Inc. and Cohen- Ager, Inc., a joint venture, for the construction of Project Dade 8-10, a/k/a Singer Plaza, a housing development for the physically handicapped. The Contract was granted to Cohen-Ager, Inc. and Irbye Giddens, Inc. pursuant to competitive negotiations based on a document titled Dade 8-10 Request for Proposals. Cohen-Ager, Inc. and Irbye Giddens Inc. were selected on the basis of their bid submission as modified by the agreement of the parties due to delay in commencing construction. As indicated by the original bid submission of Cohen-Ager, Inc. and Irbye Giddens, Inc. the original price of the project was $2,576,000; but at the request of Cohen-Ager Inc. and Irbye Giddens, Inc., the contract price was eventually raised to the amount found in Part II of the Contract, $2,970,000. On or about October 10, 1979, Dade County deeded the subject undeveloped property to Cohen-Ager Inc. and Irbye Giddens Inc., the joint venture, by "Quit-Claim County Deed Subject to Possibility of Reverter," ("Quit- Claim Deed"). The Quit-Claim Deed, which incorporated by reference the Contract described in paragraph "1," provided for automatic reverter to Dade County of all of the right, title, and interest of Cohen-Ager, Inc., in the property upon, among things, the termination, rescission or complete performance of the Contract. Cohen-Ager, Inc., and Irbye Giddens, Inc. having obtained title to the property by virtue of the Quit-Claim Deed, rightfully used the property as collateral to obtain financing to cover the cost of construction of project 8- 10. Cohen-Ager, Inc., and Irbye Giddens, Inc., were legally obligated under the Contract and the Quit-Claim Deed to complete construction of project 8-10 and to reconvey clear title to Dade County when the project was completed. Cohen-Ager, Inc., and Irbye Giddens, Inc., fully performed under the terms of the Contract and Quit-Claim Deed, and reconveyed the property to Dade County by Warranty Deed dated February 12, 1981, and recorded March 12, 1981 ("Warranty Deed"). The Warranty Deed is the instrument on which the State of Florida Department of Revenue seeks to impose the documentary stamp tax at issue here. The Warranty Deed was one step in a multi-step transaction used to finance the development and construction of project 8-10. Under this method of financing development of its property, Dade County transfers title to undeveloped property and "repurchases" developed property. Pursuant to the terms of the Contract, Dade County transferred title to the undeveloped property site to Cohen-Ager, Inc. and prohibited the transfer of the contract or property except (1) to an entity to which the contract is assigned with the written prior approval of the PHA and (2) to a mortgagee for the purpose of obtaining financing of the completion of the property. Dade County paid for the development of project 8-10 with the proceeds of Special Housing Revenue Bonds issued for that project pursuant to Chapters 159 and 166, Florida Statutes, Dade County Ordinance No. 79-49, and Dade County Board of County Commissioners' Resolutions R-1270-79 and R-1423-79. The Special Housing Revenue Bonds were issued under a Trust Indenture. When the property was reconveyed to Dade County by the Warranty Deed, Dade County paid to Cohen-Ager, Inc., and Irbye Giddens, Inc. the contract price, $2,970,000, from the proceeds of the bonds. The Department of Revenue seeks to impose the documentary stamp tax on the total amount of the contract price as the consideration for the Warranty Deed. The documentary stamp tax on $2,970,000 is $11,880.00, or $.40 per $100 of consideration. Article VII, paragraph (c), of the contract of Sale, attached to and made a part of the Contract, specifies in part that the Contractor (herein Cohen-Ager, Inc.) "shall pay all documentary stamps and taxes applicable to" the coveyance of the property to Dade County by warranty deed.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law it is RECOMMENDED that the Department of Revenue enter a Final Order assessing Cohen-Ager, Inc., for the documentary stamp tax due on the Warranty Deed to Dade County in the amount of $11,880.00, plus penalties and interest. DONE and ORDERED this 16th day of January, 1986, in Tallahassee, Florida. DIANE K. KIESLING 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 16th day of January, 1986. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 84-1425 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. Rulings on Proposed Findings of Fact Submitted by Petitioner and Intervenor Adopted in Finding of Fact Adopted in Finding of Fact 2. Adopted in substance in Finding of Fact 3 as regards the first two sentences of the proposed finding of fact. The last three sentences of the proposed finding of fact are rejected as unnecessary, as not supported by the evidence, as beyond the scope of the facts stipulated by the parties, and as being commentary. Adopted in Finding of Fact 4. Adopted in Finding of Fact 5. Adopted in Finding of Fact 6. Adopted in Finding of Fact 7. Adopted in Finding of Fact 8. Adopted in Finding of Fact 9. Adopted in Finding of Fact 10. Rulings on Proposed Findings of Fact Submitted by Respondent Rejected as unnecessary and irrelevant. It is simply a recap of part of the history and issues in the case and is therefore unnecessary to a determination of the issues. Adopted in substance in Findings of Fact 1, 6, and 7. Adopted in substance in Findings of Fact 5 and 6. There is an apparent typographical error in that the last two lines of Proposed finding of fact 3 are incomplete and the subject of the incomplete sentence is omitted. However it may be that the substance intended by Respondent is adopted in Finding of Fact 13. There is no proposed finding of fact 4. It may be that the incomplete sentence referred to above was intended to be proposed finding of fact 4. If so, the ruling on it is incorporated above. 5. Adopted in substance in Findings of Fact 2, 11 and 12. COPIES FURNISHED: Lewis R. Cohen, Esquire 1428 Brickell Avenue Eight Floor Miami, Florida 33131 Linda Lettera, Esquire Department of Legal Affairs Room LL04 The Capitol Tallahassee, Florida 32301 Joni B. Armstrong Assistant County Attorney 16th Floor 73 West Flagler Street Miami, Florida 33130 Randy Miller Executive Director 102 Carlton Building Tallahassee Florida 32301 William D. Townsend General Counsel 104 Carlton Building Tallahassee, Florida 32301 =================================================================
Findings Of Fact On May 8, 1986, Petitioner filed with the Department of Revenue, as agent for the Comptroller, an application for documentary stamp tax refund in the amount of $16,125.00. Subsequently, the Department of Revenue recommended that the application be denied and on November 24, 1986, the Comptroller issued an Order denying the application. Thereafter Petitioner duly requested an Administrative Hearing pursuant to the provisions of Chapter 120, Florida Statutes, and such hearing was duly conducted by William J. Kendrick, Hearing Officer for the Division of Administrative Hearings, on April 13, 1987, in Tallahassee, Florida. On June 10, 1987, Hearing Officer Kendrick issued his Recommended Order in which he separately stated Findings of Fact and Conclusions of Law and recommended that the application be approved. Copies of that Recommended Order have been furnished to all parties. Petitioner has filed no exceptions to the Recommended Order as of the date hereof, however, the Assistant Attorney General, representing the Comptroller in this matter, has filed exceptions to paragraph 5 of the hearing officer's Conclusions of Law which reads as follows. The tax imposed by Section 201.08, Florida Statutes, is levied on a written obligation to pay money, not on a security interest. Under the provisions of Section 201.09(2), a security interest (mortgage) is not subject to taxation if the written obliga- tion to pay money (promissory note) is exempt from the tax. Therefore, whether the transac- tion is exempt is dependent upon whether there was any material change in the promissory note and the renewal note, and not whether there as any material change in the mortgage. Since, in the instant case, there was no material change between the original promissory note and the renewal note, it follows that the subject transaction is exempt from the tax levied by Section 201.08, Florida Statutes. The Findings of Fact as determined by the Hearing Officer were by stipulated agreement of the parties filed with the hearing officer on June 8, 1987. Those findings are adopted as the Findings of Fact for this Order and were as follows: On February 2, 1981, a Mortgage and Security Agreement was signed by the proper corporate officers of SNW Corp. ("SNW"), PNW Corp ("PNW"), and KNW Corp. ("KNW"), all Florida Corporations securing a Note in the amount of $22,000,000.00 upon which documen- tary and intangible taxes were paid. On October 1, 1983, an Amendment to the Mortgage was signed by the appropriate corporate officers of SNW, PNW AND KNW. No documentary stamps were affixed to this document. On March 13, 1986, a Second Amend- ment to Mortgage and Security Agreement (the "Second Amendment") was signed by the appro- priate corporate officers of SNW, PNW, KNW, and Kenneth Wolofsky, Individually and as Trustee. The Second Amendment refers to the Mortgage and was intended to "secure that certain Renewal Note" from SNW, PNW AND KNW in the amount of $10,000,000.00. The Renewal Note was executed by Kenneth Wolofsky solely in his corporate capacity on behalf of KNW not individually or as trustee. Petitioner, Chicago Title Company, was acting in its capacity as agent for the borrowers and was responsible for having the Second Amendment to Mortgage and Security Agreement dated March 13, 1986, recorded. Documentary stamps were paid under protest upon recordation of the Second Amend- ment in the amount of $16,125.00. Petitioner filed an Application for Refund from the State of Florida for the documentary stamps paid on the Second Amend- ment which was denied by the Comptroller of the State of Florida. Thereafter, the Peti- tioner sought an administrative hearing.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That Petitioner's request for refund in the sum of $16,125.00 be GRANTED. DONE AND ORDERED this 10th day of June, 1987, in Tallahassee, Florida. WILLIAM J. KENDRICK Hearing Officer Division of Administrative Hearings The Oakland Building 2900 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of June, 1987. APPENDIX Petitioner's proposed findings of fact 1-6 are addressed in paragraphs 1-6, respectively. Respondent's proposed findings of fact 1-6 are addressed in paragraphs 1-6, respectively. COPIES FURNISHED: Warren R. Tranzenfeld, Esquire Kirkpatrick & Lockhart 1428 Brickell Avenue Forth Floor Miami, Florida 33131 Alan Burns, Esquire Department of Legal Affairs Tax Section, Capitol Building Tallahassee, Florida 32399-1050 Honorable Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0305 =================================================================
The Issue The issue in this case is whether Petitioner is entitled to a refund of nearly $500 thousand on an alleged overpayment of the stamp tax, where Petitioner paid the tax based on the entire undifferentiated consideration it had received, as a lump-sum payment, from the sale of an operating hotel business comprising real estate, tangible personal property, and intangible personal property.
Findings Of Fact On February 23, 2015, Petitioner 1701 Collins (Miami) Owner, LLC ("Taxpayer"), a Delaware limited liability company, entered into a Purchase and Sale Agreement ("Agreement") to sell a going concern, namely a hotel and conference center doing business in Miami Beach, Florida, as the SLS Hotel South Beach (the "Hotel Business"), to 1701 Miami (Owner), LLC, a Florida limited liability company ("Purchaser"). Purchaser paid Taxpayer $125 million for the Hotel Business. The Hotel Business comprised two categories of property, i.e., real estate ("RE") and personal property ("PP"). The PP, in turn, consisted of two subcategories of property, tangible personal property ("TPP") and intangible personal property ("ITPP"). It is undisputed that the property transferred pursuant to the Agreement included RE, TPP, and ITPP. The sale closed on June 5, 2015, and a special warranty deed was recorded on June 8, 2015, which showed nominal consideration of $10. Pursuant to the Agreement, Taxpayer was responsible for remitting the documentary stamp tax and the discretionary surtax (collectively, "stamp tax"). Stamp tax is due on instruments transferring RE; the amount of the tax, payable per instrument recorded, is based upon the consideration paid for RE. Stamp tax is not assessed on consideration given in exchange for PP. The Agreement contains a provision obligating the parties to agree, before closing, upon a reasonable allocation of the lump-sum purchase price between the three types of property comprising the Hotel Business. For reasons unknown, this allocation, which was to be made "for federal, state and local tax purposes," never occurred. The failure of the parties to agree upon an allocation, if indeed they even attempted to negotiate this point, did not prevent the sale from occurring. Neither party declared the other to be in breach of the Agreement as a result of their nonallocation of the consideration. The upshot is that, as between Taxpayer and the Purchaser, the $125 million purchase price was treated as undifferentiated consideration for the whole enterprise. Taxpayer paid stamp tax in the amount of approximately $1.3 million based on the full $125 million of undifferentiated consideration. Taxpayer paid the correct amount of stamp tax if the entire consideration were given in exchange for the RE transferred to Purchaser pursuant the Agreement——if, in other words, the Purchaser paid nothing for the elements of the Hotel Business consisting of PP. On February 6, 2018, Taxpayer timely filed an Application for Refund with Respondent Department of Revenue (the "Department"), which is the agency responsible for the administration of the state's tax laws. Relying on a report dated February 1, 2018 (the "Deal Pricing Analysis" or "DPA"), which had been prepared for Taxpayer by Bernice T. Dowell of Cynsur, LLC, Taxpayer sought a refund in the amount of $495,013.05. As grounds therefor, Taxpayer stated that it had "paid Documentary Stamp Tax on personal property in addition to real property." Taxpayer's position, at the time of the refund application and throughout this proceeding, is that its stamp tax liability should be based, not on the total undifferentiated consideration of $125 million given in the exchange for the Hotel Business, but on $77.8 million, which, according to the DPA, is the "implied value" of——i.e., the pro-rata share of the lump-sum purchase price that may be fairly allocated exclusively to——the RE transferred pursuant to the Agreement. Taxpayer claims that, to the extent it paid stamp tax on the "implied values" (as determined in the DPA) of the TPP ($7 million) and ITPP ($40.2 million) included in the transfer of the Hotel Business, it mistakenly overpaid the tax.1/ On February 23, 2018, the Department issued a Notice of Intent to Make Refund Claim Changes, which informed Taxpayer that the Department planned to "change" the refund amount requested, from roughly $500 thousand, to $0——to deny the refund, in other words. In explanation for this proposed decision, the Department wrote: "[The DPA] was produced 3 years after the [special warranty deed] was recorded. Please provide supporting information regarding allocation of purchase price on or around the time of the sale." This was followed, on April 2, 2018, by the Department's issuance of a Notice of Proposed Refund Denial, whose title tells its purpose. The grounds were the same as before: "[The DPA] was produced 3 years after the document was recorded." Taxpayer timely filed a protest to challenge the proposed refund denial, on May 31, 2018. Taxpayer argued that the $125 million consideration, which Purchaser paid for the Hotel Business operation, necessarily bought the RE, TPP, and ITPP constituting the going concern; and, therefore, because stamp tax is due only on the consideration exchanged for RE, and because there is no requirement under Florida law that the undifferentiated consideration exchanged for a going concern be allocated, at any specific time, to the categories or subcategories of property transferred in the sale, Taxpayer, having paid stamp tax on consideration given for TPP and ITPP, is owed a refund. The Department's tax conferee determined that the proposed denial of Taxpayer's refund request should be upheld because, as he explained in a memorandum prepared on or around December 27, 2018, "[t]he taxpayer [had failed to] establish that an allocation of consideration between Florida real property, tangible personal property, and intangible property was made prior to the transfer of the property such that tax would be based only on the consideration allocated to the real property." The Department issued its Notice of Decision of Refund Denial on January 9, 2019. In the "Law & Discussion" section of the decision, the Department wrote: When real and personal property are sold together, and there is no itemization of the personal property, then the sales price is deemed to be the consideration paid for the real property. [2] Likewise, when the personal property is itemized, then only the amount of the sales price allocated for the real property is consideration for the real property and subject to the documentary stamp tax. The first of these propositions will be referred to as the "Default Allocation Presumption." The second will be called "Consensual-Allocation Deference." The Department cited no law in support of either principle. In its intended decision, the Department found, as a matter of fact, that Taxpayer and Purchaser had not "established an allocation between all properties prior to the transfer" of the Hotel Business. Thus, the Department concluded that Taxpayer was not entitled to Consensual-Allocation Deference, but rather was subject to the Default Allocation Presumption, pursuant to which the full undifferentiated consideration of $125 million would be "deemed to be the consideration paid for the" RE. Taxpayer timely requested an administrative hearing to determine its substantial interests with regard to the refund request that the Department proposes to deny. After initiating the instant proceeding, Taxpayer filed a Petition to Determine Invalidity of Agency Statement, which was docketed under DOAH Case No. 19-3639RU (the "Rule Challenge"). In its section 120.56(4) petition, Taxpayer alleges that the Department has taken a position of disputed scope or effect ("PDSE"), which meets the definition of a "rule" under section 120.52(16) and has not been adopted pursuant to the rulemaking procedure prescribed in section 120.54. The Department's alleged PDSE, as described in Taxpayer's petition, is as follows: In the administration of documentary stamp tax and surtax, tax is due on the total consideration paid for real property, tangible property and intangible property, unless an allocation of consideration paid for each type of property sold has been made by the taxpayer on or before the date the transfer of the property or recording of the deed. If the alleged PDSE is an unadopted rule, as Taxpayer further alleges, then the Department is in violation of section 120.54(1)(a). Although the Rule Challenge will be decided in a separate Final Order, the questions of whether the alleged agency PDSE exists, and, if so, whether the PDSE is an unadopted rule, are relevant here, as well, because neither the Department nor the undersigned may "base agency action that determines the substantial interests of a party on an unadopted rule." § 120.57(1)(e)1., Fla. Stat. Accordingly, the Rule Challenge was consolidated with this case for hearing. The Department, in fact, has taken a PDSE, which is substantially the same as Taxpayer described it. The undersigned rephrases and refines the agency's PDSE, to conform to the evidence presented at hearing, as follows: In determining the amount stamp tax due on an instrument arising from the lump-sum purchase of assets comprising both RE and PP, then, absent an agreement by the contracting parties to apportion the consideration between the categories or subcategories of property conveyed, made not later than the date of recordation (the "Deadline"), it is conclusively presumed that 100% of the undifferentiated consideration paid for the RE and PP combined is attributable to the RE alone. According to the PDSE, the parties to a lump-sum purchase of different classes of property (a "Lump—Sum Mixed Sale" or "LSMS") possess the power to control the amount of stamp tax by agreeing upon a distribution of the consideration between RE and PP, or not, before the Deadline.2/ If they timely make such an agreement, then, in accordance with Consensual-Allocation Deference, which is absolute, the stamp tax will be based upon whatever amount the parties attribute to the RE. If they do not, then, under the Default Allocation Presumption, which is irrebuttable, the stamp tax will be based upon the undifferentiated consideration. Simultaneously with the issuance of this Recommended Order, the undersigned is rendering a Final Order in the Rule Challenge, which determines that the PDSE at issue is an unadopted rule. This determination precludes the undersigned, and the Department, from applying the PDSE as an authoritative rule of decision in determining Taxpayer's substantial interests. The undersigned concludes further, for reasons set forth below, that the PDSE does not reflect a persuasive or correct interpretation of the applicable law. Rather, because the stamp tax is assessed only against the consideration given in exchange for RE, the law requires that, in determining the amount of stamp tax due on an instrument arising from an LSMS, a pro-rata share of the undifferentiated consideration must be allocated to the RE. The amount of the undifferentiated consideration that is reasonably attributable to the RE conveyed in an LSMS is a question of fact. To prove its allegation that only $77.8 million of the consideration received from Purchaser for the Hotel Business, and not the entire $125 million, is attributable to the RE conveyed in the LSMS, Taxpayer relies upon the DPA and the testimony of Ms. Dowell, who authored that report. The Department did not present any expert testimony to rebut the opinions of Ms. Dowell concerning the allocation of the undifferentiated consideration. Rather, the Department argues that Ms. Dowell's opinions are unreliable as a matter of law and should be disregarded, if not excluded as inadmissible——a position that depends heavily upon the Daubert standard for screening expert testimony, which does not apply in administrative proceedings, for reasons that will be explained in the Conclusions of Law. Alternatively, the Department asserts, based on Taxpayer's 2015 federal income tax return, that the amount paid for the RE component of the Hotel Business was actually $122 million. Although this argument is inconsistent with the Department's main position, because it concedes that the allocation is a disputable issue of material fact, rather than a legal conclusion driven by the Default Allocation Presumption or Consensual-Allocation Deference, as applicable, the Department is correct that the tax return can be viewed as evidence in conflict with Ms. Dowell's testimony; the undersigned will resolve the evidential conflict in favor of Ms. Dowell's testimony, in findings below. Primarily, though, the Department eschews evidence bearing on the pro-rata allocation of the consideration on the grounds that the Default Allocation Presumption conclusively establishes the taxable amount as a matter of law. In other words, the Department considers Ms. Dowell's opinions to be irrelevant, regardless of her credibility as an expert witness—— or lack thereof. In this respect, the Department has made a strategic error because the Default Allocation Presumption, besides being extralegal, is both irrational and arbitrary. It is irrational to assume that the seller in an arm's length transaction would simply give away valuable PP for nothing of value in return. It is arbitrary automatically to assign all of the undifferentiated consideration paid in an LSMS to one category of property transferred, i.e., RE, to the exclusion of the other property types exchanged. Systematically allocating the entire purchase price to any other involved property class, e.g., TPP, would be equally (un)justifiable. Put another way, there is no rational answer to the question: Why not deem the entire purchase price allocable to the personal property? Why not a 50/50 split instead? Or 60/40? The Default Allocation Presumption, in short, is not even a reasonable inference. Without the Default Allocation Presumption to trump the DPA, the Department is left with the representations of value in the Form 4797 attached to Taxpayer's 2015 federal income tax return as its best, indeed only, rebuttal evidence. The form is used to report gain or loss from sales of business property, such as, in this instance, the Hotel Business. In its return, Taxpayer reported gross sales prices of $20 million for the hotel land, $102 million for the hotel building, and $3 million for the hotel's furniture, fixtures, and equipment. In other words, Taxpayer represented to the Internal Revenue Service that $122 million of the undifferentiated consideration for the Hotel Business was attributable to RE, with the balance going towards TPP. Notably, Taxpayer did not list, much less assign value to, any "section 197 intangible" property, such as goodwill, going concern value, workforce in place, business records, operating systems, permits, licenses, trade names, etc. See 26 U.S.C § 197(d). Taxpayer's Form 4797 statements regarding the cumulative sales price of the RE are admissions that, arguably at least, conflict with Ms. Dowell's opinions as expressed in the DPA. See § 90.803(18), Fla. Stat. What is to be made of these admissions? They are not binding, of course. Taxpayer is free to disavow or distinguish the statements in its Form 4797, which is essentially what it has done. Different taxes, different rules, different reasons—— in these general terms, Taxpayer strives to deflect attention from, and dismiss as irrelevant any serious consideration of, its federal income tax filing. Taxpayer's position is not without merit because, in fact, the stamp tax is fundamentally different from the federal income tax, as are the laws governing these noncomparable revenue raising measures. On the other hand, Taxpayer did declare the gross sales prices of the land, building, and TPP to be as described above, and these statements of apparent historical fact would seem to be true regardless of the specific tax purposes that prompted their making. There is more to this evidence than Taxpayer would have it. Ultimately, however, the undersigned finds the Form 4797 evidence to be less persuasive than the DPA, for several reasons. First, it is undisputed that ITPP was conveyed in the LSMS of the Hotel Business, and this ITPP included section 197 intangibles. But: Was Taxpayer required to segregate, and report separately, the gross sales price of these section 197 intangibles on its Form 4797? The undersigned does not know. Or, was Taxpayer allowed (or even obligated) to put the value of the section 197 intangibles onto, say, the building? Again, the undersigned does not know. To evaluate the persuasive force of the Form 4797 admissions, however, one needs to know these things. If Taxpayer were not required, for example, to report separately the value of the section 197 intangibles, and if, further, there were tax advantages in not doing so, then the admissions at issue would not be very probative. There is no evidence in the record regarding how, from May 2012, when Taxpayer acquired the Hotel Business, Taxpayer valued the attendant section 197 intangibles, for federal income tax purposes. It is possible that, for reasons undisclosed in this proceeding, Taxpayer never segregated the cost of the section 197 intangibles but instead allowed the value of the ITPP to be taxed as part of the value of the building. In any event, topics such as the proper classification of business property under the Internal Revenue Code; the different amortization periods applicable to various types of property; the tax planning strategies an owner might cautiously, aggressively, or even illegally employ to minimize its liability; and the common mistakes made, or advantages overlooked, by tax preparers, are complex and beyond the scope of the current record.3/ As a result, the statements regarding asset prices in Taxpayer's 2015 federal income tax return, which sit in the record practically devoid of meaningful context, are consistent with too many alternative possibilities to be credited as persuasive admissions about the respective values of the land and building in question.4/ Second, as mentioned, Taxpayer did not state, on the Form 4797, that ITPP was sold for a price of $0, in which case one might expect Taxpayer also to have reported a loss on the sale of section 197 intangible property. Rather, Taxpayer did not disclose the sale of any ITPP in the LSMS at issue. This is important, from a weight-of-the-evidence standpoint, because it is an undisputed historical fact that valuable ITPP was conveyed to Purchaser in the subject transaction, which makes it unreasonable to infer a gross sales price of $0 for the ITPP. Imagine, however, the probative force the Form would have had if Taxpayer had listed a gross sales price of, say, $1 million for the ITPP, together with corresponding reductions in the prices of the RE and TPP; in such a hypothetical situation, the Form 4797 admissions would have been much more persuasive as an apportionment of the undifferentiated consideration. As it stands, however, the reasonably inferable likelihood is that Taxpayer did not report the sales price of the ITPP because it did not report the sale of ITPP——not because there was no sale (for there was) or because the sales price was $0 (which is unlikely), but for other reasons, unknowable on the instant record. Third, for purposes of levying Taxpayer's 2015 real estate property taxes, the Miami-Dade Tax Collector appraised the RE at $39 million. (This figure is the higher of two contemporaneous assessments by the local taxing authority.) This is less than one-third of $122 million——but, in contrast, constitutes 50% of Ms. Dowell's pro-rata allocation of consideration to the RE. There is no evidence in the record regarding the reliability of the local tax collector's appraisals of hotel property, or specifically the percentage of fair market value such assessments are reasonably likely to reflect. Therefore, the undersigned does not place too much weight on the 2015 ad-valorem tax assessments. Still, one cannot help but notice that Ms. Dowell's opinions on the RE's implied value are much closer to the Miami-Dade County Tax Collector's appraisal than the Form 4797 admissions.5/ Having found that the Form 4797 admissions possess some, but not much, probative value regarding the allocation of the undifferentiated consideration, the DPA emerges largely unscathed. As fact-finder, the undersigned has the discretion, nevertheless, to reject, as not credible, the expert testimony of Ms. Dowell. But he credits her opinions, both because Ms. Dowell is a qualified authority on the subject matter, and because the opinions she has expressed are objectively reasonable and logically supported. As for Ms. Dowell's credentials, she has a bachelor of science degree and a master of science degree, both in finance. She has worked in the field of property valuation for around 30 years. Working for major hotel companies, Ms. Dowell routinely performed the sort of allocation of value between asset classes that she has conducted in this case. In 2007, Ms. Dowell formed Cynsur, Inc., which performs value allocations for hospitality industry clients, predominately for taxation purposes, as here. Ms. Dowell has conducted approximately 1,000 deal pricing analyses for clients around the country. In the niche of implied value allocations between the categories of property transferred in LSMS transactions involving hotel operations, Ms. Dowell is clearly an experienced, knowledgeable, and credible expert. The DPA that Ms. Dowell prepared is not an independent appraisal of the hotel property per se, but an allocation of the undifferentiated consideration, which uses estimates of value as the basis for dividing the lump-sum purchase price into three shares, each representing an amount reasonably attributable to a type of property conveyed in the LSMS. The estimates of value that provide the grounds for determining the implied price-per- category are a kind of appraisal, but the DPA is not designed or expected to produce a total valuation that might exceed, or fall short of, the $125 million lump-sum purchase price that is being apportioned. Again, to be clear, the goal of the DPA is to divide the $125 million into asset classes, not to verify whether $125 million was the fair market value of the Hotel Business in 2015, because the stamp tax applies, not to fair market value as such, but to that portion of the undifferentiated consideration fairly attributable to the RE conveyed. Ms. Dowell's approach to apportionment is to determine the "implied values" of the RE and TPP by analyzing the income an owner would expect to receive on a separate investment in the RE or TPP, as the case may be, apart from the Hotel Business as a whole. She starts with a discounted cash flow analysis of the Hotel Business as a going concern, using the Purchaser's pro forma projections as developed at the time of the LSMS. In this instance, Purchaser had presented a five-year projection of cash flow to analyze the investment, which assumed that the Hotel Business would be sold at the end of year five. Using Purchaser's assumptions, Ms. Dowell determined that the hotel acquisition would yield an implied rate of return on (and of) investment of 11.99%. With this in mind, Ms. Dowell sought to quantify the present value of the income that an owner would expect to receive on an investment in the hotel RE alone, based on a hypothetical or proxy rent for this asset in isolation. To determine the hypothetical rent, Ms. Dowell needed to make certain assumptions, which are set forth in the DPA. She determined, ultimately, that 12% of gross operating revenue represents a reasonable approximation of the proxy rent for the RE assets in question. Of course, the assumptions underlying this determination are not necessarily, or even probably, the only reasonable assumptions that could have been made. The Department, however, did not offer any expert opinion evidence that challenged Ms. Dowell's assumptions, nor did it present alternative rental scenarios. Ms. Dowell discounted the projected, five-year RE income stream at 10%, reflecting the more conservative nature of a pure RE investment as compared to an investment in the Hotel Business as a going concern. The Department did not offer any expert opinion testimony disputing this discount factor. Ms. Dowell concluded that the net present value of the RE at issue was $77,803,500 ($77.8 million when rounded), which represents about 62% of the undifferentiated consideration for the Hotel Business. The undersigned credits this opinion and finds that $77.8 million is a reasonable allocation of consideration to the RE component of the Hotel Business. Ms. Dowell performed a similar analysis of a hypothetical standalone investment in the hotel TPP and calculated a net present value of $7 million, using a discount rate of 11%. This left the remainder of $40,196,500 to be allocated to ITPP. For present purposes, the breakdown between TPP and ITPP is relatively unimportant because the stamp tax is not payable on consideration given for PP of any stripe. Indeed, the ultimate factual determination that $77.8 million of the undifferentiated consideration is reasonably attributable to RE is the material finding; from that, it follows mathematically that the remaining balance of $47.2 million reflects consideration for the PP, however that figure might be allocated between TPP and ITPP. Thus, having found that $77.8 million is a reasonable allocation of consideration to the RE component of the Hotel Business, the undersigned is bound to determine that $47.2 million is a reasonable allocation of consideration to the PP. Because Taxpayer paid stamp tax on $125 million instead of $77.8 million, it overpaid the tax and is due a refund. It is undisputed that the amount of the stamp tax that Taxpayer paid on the excess consideration above $77.8 million is $495,013.05.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order approving Taxpayer's claim and authorizing payment of $495,013.05 to Taxpayer as a refund of overpayment of the stamp tax, plus statutory interest if and to the extent section 213.255, Florida Statutes, requires such additional compensation. (If a dispute of material fact arises in connection with the payment of interest, the Department should return the matter to DOAH for a hearing.) DONE AND ENTERED this 17th day of December, 2019, in Tallahassee, Leon County, Florida. S JOHN G. VAN LANINGHAM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 17th day of December, 2019.
Findings Of Fact On May 2, 1978 the Exchange Bank of Osceola and Tomlinson Motors, Inc., (Tomlinson) entered into a financing arrangement known as a floor plan agreement. In essence the agreement provides that the bank establish a line of credit in the amount of $100,000.00 which is represented by a promissory note in that amount. It will be referred to below as the "master note." Tomlinson then drew against that credit line as necessary to purchase used cars. These draws were secured by trust receipts under which the bank owned each car, but allowed Tomlinson to have possession of them until such time as they were sold. At the time of sale Tomlinson then paid back against the master note the amount of the initial draw needed to purchase the car. Once the draw was returned to the bank it was again available to be drawn down again for later car purchases; provided however, that at no time could the total outstanding draws exceed $100,000.00. The trust receipts which Tomlinson periodically executed had attached to them a detachable promissory note form. Each time Tomlinson signed a trust receipt he also executed the note for the amount of the particular draw he was making to purchase cars. For example, if he bought four cars and paid a total of $15,900.00 for them, he would sign the note form in the amount of $15,900.00. No evidence was produced on what was done with each detachable note form after the draw corresponding to that form was paid back to the bank. The execution of the detachable note form was not required of Tomlinson by the bank. The master note between the bank and Tomlinson had the proper amount of documentary stamps affixed for a $100,000.00 promissory note. None of the detachable notes had any documentary stamps affixed. The Department of Revenue has proposed assessing a stamp tax of $1,592.06 including penalties on the sum of all the detachable notes less credit for the stamps affixed to the $100,000.00 master note. Pursuant to the Dealer Floor Plan Agreement 1/ the bank had the authority to fill in the blanks on any of the forms such as the detachable notes, necessary to give effect to the Floor Plan Agreement. All of the detachable note forms were executed as follows in this example: PROMISSORY NOTE March 6, 1979 On demand, the undersigned (jointly and severally, if more than one) promises to pay to the order of Fifteen Thousand Nine Hundred and no/100 DOLlARS ($15,900.00) with interest at percent per annum after date. The makers, guarantors, indorsers and any other parties to this note hereby waive presentment, demand, protest and notice of dishonor and protest, and hereby agree that extension or extensions of time of payment of this note or any installment or part thereof may be made before, at, or after maturity by agreement with any maker without notice to and without releasing the liability of any other maker, guarantor, indorser, or other party, and all thereof waive the right to be sued in the county of their residence, and jointly and severally agree to pay all costs of collection, including reasonable attorney's fees, and all makers, guarantors, indorsers and other parties consent that any security for this note may be exchanged or surrendered at any time and from time to time without notice. Tomlinson Motors, Inc.(SEAL)By /s/ Billy E. Thomlinson (Owner, Officer or Partner --state which) Trustee) On none of them was the name of the payee filled in.
Recommendation Based on the foregoing findings of fact and conslusions of law, it is RECOMMENDED: That the Department of Revenue enter a final order determining that the excise tax on documents imposed by Section 201.08, Florida Statutes (1979) is not applicable to the executed promissory note forms attached to the trust receipts in this case. DONE and RECOMMENDED this 22nd day of October, 1981, in Tallahassee, Florida MICHAEL P. DODSON 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 22nd day of October, 1981.
Findings Of Fact The parties stipulated to the facts-of the case as follows: On March 2, 1972, the petitioners, Fred W. Baggett and John S. Miller, Jr., along with one Michael W. Duggar, incorporated a Florida corporation known as Tallahassee Properties , Inc. and filed Articles of Incorporation with the Secretary of State, State of Florida. On June 29, 1972, the above described corporation took title to the property described as follows: All that part of Lot Number 176 in the Original Plan of the City of Tallahassee, in the County of Leon, State of Florida, described as follows: to-wit: Begin at the Northwest corner of said lot and run thence East along the South line of College Avenue (formerly Clinton Street) 39 feet to the wall of a brick building, thence run South along the side of said building 60 feet, thence run West 39 feet to the East line of Adams Street, thence run North along the East line of Adams Street 60 feet to the Northwest corner of said Lot 176, being the point of beginning; from LeRoy Collins and Mary Call Collins, said deed being recorded in Official Records Book 532, Page 327 of the Public Records of Leon County, Florida. On that same date, Tallahassee Properties, Inc. executed a note and mortgage in the amount of $55,000 to Leon Federal Savings and Loan Association, said mortgage being recorded in Official Records Book 532, Page 328 of the Public Records of Leon County, Florida. The said note was personally endorsed by John S. Miller, Jr., Fredric W. Baggett and Michael W. Duggar. On June 29, 1972, Tallahassee Properties, Inc. executed a note in the original principal amount of $72,405.84 to LeRoy Collins and Mary Call Collins secured by a second mortgage on the property and as recorded in Official Records Book 532, Page 376 of the Public Records of Leon County, Florida, The said note was personally endorsed by John S. Miller, Jr., Fredric W. Baggett and Michael W. Duggar. On September 8, 1972, an agreement was entered into between Michael W. Duggar and Ronald C. LaFace of Tallahassee, Florida, wherein the said Michael W. - Duggar conveyed his interest in Tallahassee Properties, Inc. to Ronald C. LaFace and the said Ronald C. LaFace agreed therein to hold Michael W. Duggar harmless and relieve him of liability and indemnifying him for any liabilities which Michael W. Duggar may or could have as a result of his interest in Tallahassee Properties, Inc. This is the reason that the said Ronald C. LaFace is the proper party petitioner in this action. On April 18, 1973, Tallahassee Properties, Inc. executed an additional note to Leon Federal Savings and Loan Association in the amount of $17,500 which said note was also secured by that certain mortgage dated June 29, 1972 and recorded June 29, 1972 in Official Records Book 532, Page 328 of the Public Records of Leon County, Florida. The said note was personally endorsed by John S. Miller, Jr., Fredric W. Baggett and Ronald C. LaFace. On April 23, 1973 by an instrument recorded in Official Records Book 584, Page 94 of the Public Records of Leon County, Florida, Tallahassee Properties, Inc. conveyed an equal one-third interest in the subject property to John S. Miller, Jr., Fred W. Baggett and 5 Ronald C. LaFace. Affixed to the said deed were documentary surtax stamps in the amount of 55 cents and State of Florida documentary stamp tax in the amount of 30 cents. By letter dated September 24, 1975, the respondent, State of Florida, Department of Revenue, informed the petitioners that they had failed to pay an additional documentary stamp tax in the amount of $434.70 due on that certain warranty deed described above as having been recorded on April 23, 1973 in the Public Records of Leon County, Florida. This proceeding was initiated by petitioners after having received said letter from the respondent for a determination that the assessment was improper in that the subject conveyance was not a taxable event. Respondent has asserted that a tax of $434.70 is due and owing from the petitioners. In addition, they have assessed an additional 100 percent penalty for a total claim of $869.40 exclusive of interest or other penalties. The assessment was determined by the Department of Revenue on the basis of adding the original principal balance of the three above described notes secured by mortgages. The original principal amount of the notes was $144,905.84. By the application of the tax imposed by Section 201.02, Florida Statutes, if the petitioners have any liability for payment of the documentary stamp tax, then the determination of $434.70 as an assessment is a correct figure. Petitioners' exhibits 1 through 4, respondent's exhibit 1 and 2, and posthearing briefs of counsel are appended to the record.
Recommendation That petitioners be, found not liable for the proposed assessment of documentary stamp tax and penalty under Chapter 201, Florida Statutes. Done and Entered this 10th day of August, 1977, in Tallahassee, Florida. THOMAS C. OLDHAM Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Edwin J. Stacker, Esquire Department of Legal Affairs the Capitol Tallahassee, Florida 32304 Daniel J. Wiser, Esquire Post Office Box 1752 Tallahassee, Florida 32302
The Issue Whether American National can litigate its entitlement to a documentary stamp tax refund pursuant to Section 120.57, Florida Statutes (1987)? If so, whether American National is entitled to a refund of some or all of the $5,475 it paid in recording the first modification and consolidation of notes, mortgages and assignment of leases and rents executed by American National and General Electric Credit Corporation (GECC) on July 11, 1986?
Findings Of Fact Real estate in Escambia County which petitioner American National now holds as trustee (the property) once belonged to U.S.I.F. Pensacola Corporation (USIFP). On September 1, 1969, USIFP gave Town and Country Plaza, Inc. (T & P) a note for $1,500,000 and executed a mortgage on the property in favor of T & P as security for payment of the note. A separate $300,000 note was promptly repaid. On July 5, 1973, U.S.I.F Wynnewood Corporation (USIFW), USIFP's successor in title, gave U.S.I.F. Oklahoma Corporation (USIFO) a note for $625,000, and executed a mortgage on the property in favor of USIFO as security for payment of its note. On July 8, 1982, shortly after Trust No. 0008 acquired the property, Jacksonville National Bank, as trustee, gave First National Bank of Chicago (FNBC) two notes, each secured by a separate mortgage. One note was for $767,481.98, and the other was for $2,000,000. These two notes, along with the two notes originally given to T & P and USIFO, which were both subsequently assigned to FNBC, were the subject of the July 8, 1982, consolidation, modification and extension agreement. Documentary stamp tax owing on account of these notes (the consolidated notes) was eventually paid in its entirety. All four mortgages with which the property was encumbered when petitioner American National succeeded Jacksonville National as trustee were duly recorded, intangible tax having been fully paid upon recordation. In January of 1984, FNBC assigned the consolidated notes and the mortgages securing their payment to VPCO Properties, Inc., which itself assigned them later the same month to VPPI TCH, Inc. In July of 1986, GECC, the present holder of the consolidated notes acquired the notes and became the mortagee on the mortgages securing their payment. As of July 11, 1982, when American National, as trustee of Trust No. 0008, borrowed an additional $1,150,000 from GECC, the outstanding principal balance on the consolidated notes aggregated $3,650,000. On that date, GECC and American National, as trustee, executed the so- called first modification and consolidation of notes, mortgages and assignment of leases and rents, Petitioner's Exhibit No. 1, which recited the parties' understandings both with respect to the new borrowing and with regard to the existing indebtedness the consolidated notes reflected. In addition to signing Petitioner's Exhibit No. 1, American National, as trustee, also executed and delivered to GECC a promissory note in the amount of $1,500,000. This note, which was not offered in evidence, has never been recorded, nor have documentary stamps ever been affixed to it. At GECC's insistence, American National paid a documentary stamp tax of $7,920 at the time Petitioner's Exhibit No. 1 was recorded in Pensacola. Of this sum, $5,475 was paid on account of the indebtedness the consolidated notes evidenced; $1,725 was paid on account of the new borrowing; and $720 was paid because of the provisions in Petitioner's Exhibit No. 1, contemplating an increase in the principal amount of indebtedness. Under the agreement certain interest payments can be deferred, not to exceed $480,000, any such deferments being added to principal. The agreement provides: Notwithstanding the foregoing, so long as Borrower is making all payments on this Note when due, without giving effect to grace periods or requirements of notice, if any, and is otherwise not in default, taking into account, applicable grace periods, if any, under the Mortgage and other Security Documents Borrower shall be entitled to defer payment, in any month, of interest in excess of interest computed at the "Applicable Base Percentage Rate" (hereinafter defined) so long as the total interest deferred under this paragraph ("Deferred Interest"), including any and all Deferred Interest which has been added to the principal balance hereof, as hereinafter provided, does not exceed the lesser of ten percent (10 percent) of the outstanding principal balance hereof, excluding any and all Deferred Interest which has been added to the principal balance hereof, or $480,000. Such Deferred Interest, including any and all Deferred Interest which has been added to the principal balance hereof, shall be due and payable when and to the extent that, in any subsequent month, the Contract Index Rate is less than the "Applicable Base Percentage Rate", with the balance of such Deferred Interest being payable as provided below or on the maturity hereof, whether by lapse of time, prepayment or acceleration. The "Applicable Base Percentage Rate" shall mean the following per annum rates of interest, computed as aforesaid, for the periods indicated: Applicable Base Period Percentage Rate Date of This Note June 30, 1987 10.0 percent July 1, 1987-June 30, 1988 10.5 percent July 1, 1988-June 30, 1989 11.0 percent July 1, 1989-June 30, 1990 11.5 percent July 1, 1990-Maturity Date (hereinafter defined) 12.0 percent Unless previously paid by Borrower, the outstanding balance of Deferred Interest not previously added to principal in accordance herewith, if any, shall be added to the principal balance hereof on the first day of each calendar quarter beginning with October 1, 1986, and shall accrue interest thereafter at the Contract Index Rate provided for principal, which interest shall be payable in the same manner as is applicable to interest on the original principal balance hereof. Notwithstanding the foregoing, Borrower may pay Deferred Interest at any time without penalty. Of the documentary stamp tax American National paid, $720 was on account of future advances that Petitioner's Exhibit No. 1 was designed to secure, in the event GECC made them.
Findings Of Fact On February 16, 1979, I-B-A, Inc., a Florida corporation, executed a Declaration of Trust pursuant to Section 689.071, Florida Statutes (1977), designating I-B-A, Inc., as Beneficiary and Lewis H. Harmon as Trustee. The trust agreement defined and declared the interest of the Beneficiary to be personal property only. Pursuant to the terms of the trust agreement I-B-A, Inc., conveyed legal title to the real property described in the Declaration of Trust to the Trustee by Warranty Deed. I-B-A, Inc., assigned its beneficial interest to One Biscayne Tower, N.V. Following the assignment, the Trustee, upon direction of the Beneficiary, conveyed legal title to the property to One Biscayne Tower, N.V. by Special Warranty Deed. These documents were all executed on February 16, 1979, and only minimal documentary stamps were placed on the Warranty Deed and the Special Warranty Deed. The consideration paid for the assignment of the beneficial interest from I-B-A, Inc., to One Biscayne Tower, N.V. was $49,101,000. On June 27, 1978, attorneys for taxpayer requested a private ruling from DOR respecting the documentary stamp taxes due on conveyances transferring real property through a Florida land trust established pursuant to Section 689.071, Florida Statutes. By letter dated July 10, 1978, DOR responded to this inquiry by opining that if the necessary documentation exists to comply with the statute the two recorded conveyances would require only minimal documentary tax stamps. One or more articles and/or editorials appeared in Miami newspapers following the February 16, 1979, transaction above discussed pointing out that some $200,000 in documentary stamp taxes had not been collected by the State on the transfer of a large downtown office building from one owner to another. On November 8, 1979, taxpayer received a Notice of Proposed Assessment under Chapter 201, Florida Statutes, in which DOR claimed $268,939.10 in taxes, penalties and interest due on the Special Warranty Deed by which the Trustee conveyed the trust property to One Biscayne Tower, N.V. Following an informal conference between Taxpayer's attorneys and DOR, DOR on June 18, 1980, issued a Revised Notice of Proposed Assessment under Chapter 201, Florida Statutes, in which DOR claimed $283,939.76 in taxes, penalties and interest, with interest accruing at the rate of $66.18 per day. In this assessment DOR claimed taxes were due on the Special Warranty Deed from Trustee to Taxpayer or, in the alternative, on the assignment of the beneficial interest under the trust from I-B-A, Inc., to One Biscayne Tower, N.V. Both the Warranty Deed from I-B-A, Inc., to the Trustee and the Special Warranty Deed from the Trustee to One Biscayne Tower, N.V. were recorded. The Trust Agreement was not recorded. DOR's basis for the assessment issued in this transaction was that no recorded instrument contained a provision declaring the interests of the beneficiaries under the Trust Agreement to be personal property-only. Following receipt of the Revised Assessment, the Trustee and One Biscayne Tower, N.V. filed suit in the Circuit court in and for Dade County seeking to reform the Warranty Deed from I-B-A, Inc., to the Trustee to include a provision specifically stating that the interest of the beneficiaries under the Trust Agreement was personal property only. I-B-A, Inc., was joined as a defendant. On 18 July 1980, the parties to this suit submitted a stipulation to the court that final judgment may be entered ex parte without delay, reforming the Warranty Deed ab initio in accordance with the Complaint. By Final Judgment entered 12 August 1980, Circuit Judge Dan Satin reformed this Warranty Deed ab initio to include the language in a recorded instrument specified in Section 689.071(4), Florida Statutes. The purpose of the parties in setting up a Florida land trust through which to transfer the property was to avoid the payment of documentary stamp taxes and surtaxes on the $49,101,000 purchase price which a bankruptcy court had approved for the sale of this asset. Accordingly, the reformation of the Warranty Deed was to comply with the intent of the parties at the time the Warranty Deed was executed and delivered.
The Issue Whether Documentary Stamp Taxes pursuant to Section 201.08(1), Florida Statutes, are due on that part of a written obligation to pay money which purports to renew, extend, restate, modify and consolidate the borrower's pre- existing debt to the same lender, where another part of the written obligation to pay money makes a new or additional loan to the borrower.
Findings Of Fact On October 1, 1981, a "Consolidated and Restated Revolving Loan Agreement" ("Agreement") was executed by Flagship National Bank of Miami ("Bank" or the "lender"), Petitioner (or the borrower), and Alberto Vadia and Rosario Vadia (the guarantors). The Documentary Stamp Tax consequences of this Agreement (and the obligation to pay money which it evidences) are what is at issue here. By this Agreement, the Bank extended a loan, which Petitioner promised to repay, in the principal amount of $1,900,000.00, of which $818,624.69 remained outstanding under previous loans which the Bank had extended to Petitioner under 1971, 1975, and 1978 loan agreements. The balance of the loan -$1,081,375.31 - was a new or additional loan. The Agreement, in pertinent part, provides: Bank, Borrower and Guarantors desire to enter into this Consolidated and Restated Revolving Loan Agreement and the various documents and instruments incorporated herein by reference to increase the maximum principal amount of the loan to One Million Nine Hundred Thousand Dollars ($1,900,000) and extend the term thereof, secured and guaranteed in the same manner as the prior loans and to consolidate into one document the 1971 Agreement, the 1975 Agreement and the 1978 Agreement. This Consolidated and Restated Revolving Loan Agreement and the documents and instruments incorporated herein by reference constitute a complete restatement, modification, amendment and consolidation of the prior agreements to reflect the parties present intentions and agreements regarding such existing debt and the readvance of a previously amortized portion thereof back to Borrower, and not a novation or substitution of a new debt or obligation for an existing debt or obligation. * * * Such advances as Bank shall elect to make pursuant to the credit facility herein agreed to (and all unpaid sums remaining from the 1971, 1975 and 1978 Agreements which indebtedness shall be represented and renewed by such Note) shall be evidenced by a Consolidated Master Revolving Credit Note in the form attached hereto as Exhibit "C," pursuant to which Borrower promises to pay Bank the sums set forth therein together with interest thereon in accordance with the repayment schedule set forth therein, all as more fully set forth therein, the provisions of which Note are incorporated herein by reference. (e.s.) Documentary Stamp Tax in the amount of $1,622.10 has been paid on that portion of the Agreement representing a new loan or advance. (This represents tax at a rate of $.15 per hundred dollars on $1,081,375.31.) Documentary Stamp Tax has not been paid on that portion of the Agreement which restated, renewed, modified, and consolidated the existing debt or outstanding loan balance of $818,624.69 from the previous 1971, 1975 and 1978 loan agreements. The Department claims Petitioner is obligated to pay Documentary Stamp Taxes in the amount of $1,227.90 (at the rate of $.15 per $100 of amount loaned), plus penalty and interest, on the amount of the outstanding loan balance of $818,624.69 from the 1971, 1975 and 1978 agreements. Petitioner claims that the Documentary Stamp Tax does not apply to the outstanding loan balances carried forward from the three prior agreements or notes. (Petitioner, however, no longer maintains that it is entitled to a refund of Documentary Stamp and Intangible Tax previously paid, as alleged in its initial request for hearing.)
Recommendation Based on the foregoing, it is RECOMMENDED: That the Department enter a final order assessing Documentary Stamp Tax in the amount of $1,227.90, plus penalties and interest authorized by statute. DONE and ENTERED this 14th day of March, 1986, in Tallahassee, Florida. R. L. CALEEN, JR. 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 14th day of March, 1986. COPIES FURNISHED: Francis Marion Pohlig, Esquire 2121 Ponce de Leon Boulevard Suite 240 Coral Gables, Florida 33134 Linda S. P. Lettera, Esquire Department of Legal Affairs Tax Section, Capitol Building Tallahassee, Florida 32301 =================================================================
Findings Of Fact On October 29, 1973, R. Bartow Rainey and J. Howard Nichols leased an unimproved parcel of land located in Tallahassee, Florida, from William Welsh Boyd and Patricia Boyd McLain. The term of the lease was for a period of 30 years at an annual base rental and a percentage of annual gross income derived from the property. Article 10.03 provided in part: "All buildings, alterations, rebuildings, replacements, changes, additions, improvements, equipment and appurtenances on or in the premises at the commencement of the term, and which may be erected, installed or affixed on the premises during the term, shall be deemed to be and immediately become part of the realty . . ." Article 15 contemplated the securing of a mortgage on the lease-hold interest by the tenants which would be a first lien upon both the fee and leasehold estates by virtue of the landlord joining therein up to $2,500,000.00 on a loan having a term not in excess of 30 years, and further providing that the mortgage loan must be one where the proceeds were to be used to construct improvements mentioned in the lease. The aforesaid lease was recorded in the public records of Leon County, Florida, on November 14, 1973 (Exhibit 3). The lessees of the property executed a promissory note on November 13, 1973, payable to the Commonwealth Corporation, Tallahassee, Florida, in the principal sum of$1,800,000.00, secured by a mortgage of their leasehold interest of the same date which also was duly recorded in the public records of Leon County. The lessees thereafter improved the property constructing apartment buildings consisting of 200 to 500 units (Exhibit 4, Counsel for Petitioners). By an amendment to the aforementioned note and mortgage, dated May 22, 1975, Schumacher Mortgage Company, Inc., a Delaware Corporation, succeeded to the rights of Commonwealth Corporation as mortgagee, and the principal sum of the mortgage was increased to $1,850,000,00 (Exhibit 4). The lease then was assigned to Petitioners on July 1, 1975, subject to the terms and conditions of the lease which the assignees assumed and agreed to discharge, and they also mortgaged the leasehold estate as security for a promissory note, dated July 1, 1975, in the principal amount of $458,000.00. The mortgage was entered into on June 3, 1975, with R. Bartow Rainey and J. Howard Nichols as mortgagees. Also on July 1, 1975, Rainey and Nichols as "grantor" executed a warranty deed to Petitioners purporting to convey in fee simple the improvements located on the real property in question subject to the existing first mortgage of November 13, 1973 (Exhibit 2, 7, 8). By Notice of Proposed Assessment, dated October 14, 1975, Respondent seeks to collect from Petitioners documentary stamp tax under Section 201.02(1), Florida Statutes, in the amount of $5,549.70 and a penalty in a like amount for a total of $11,099.40. The tax liability was levied against the aforesaid assignment of lease and warranty deed, based upon consideration of $550,000.00 cash and for the assignment, and $1,850.000.00 under the amendment to the note and mortgage, for a total taxable consideration of $2,400,000.00. The base tax was $7,200.00, less tax previously paid in the amount of $1,650.30, leaving a sum of $5,549.70 as tax due, plus a penalty in a like amount. The parties stipulated that the computation of the tax and the amount of delinquency as assessed are correct assuming that the tax and penalty are due and owing.
Recommendation That Petitioners be held liable for an assessment of $11,099.40 for delinquent documentary stamp taxes and penalty under Chapter 201, Florida Statutes. DONE and ORDERED this 17th day of May, 1976, in Tallahassee, Florida. THOMAS C. OLDHAM Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Edgar M. Moore, Esquire Smith and Moore, P.A. P. O. Box 1169 Tallahassee, Florida 32302 Patrician S. Turner, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32304
