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TIMBER RIVER, INC. vs. DEPARTMENT OF REVENUE, 83-000910 (1983)
Division of Administrative Hearings, Florida Number: 83-000910 Latest Update: Apr. 19, 1985

Findings Of Fact On or about August 15, 1979, Mead Timber Company and Scott Timber Company conveyed certain property located in Suwannee County, Florida (hereinafter referred to as the "Property"), to Tommy M. Faircloth, Sam L. Rudd, and Alvin C. Futch (hereinafter referred to as the "Original Conveyance"). The warranty deed for the Original Conveyance was recorded on August 15, 1979, at Official Records Book 187, page 444, of the Public Records of Suwannee County, Florida. In connection with said Original Conveyance the closing statement therefor showed a purchase price of Two Million Four Hundred Thousand Dollars ($2,400,000.00), said amount being the actual amount of the purchase and sale. In connection with the deed for said Original Conveyance, the closing statement indicated that Seven Thousand Two Hundred Dollars ($7,200.00) of documentary stamp taxes were paid based upon Thirty Cents ($.30) per One Hundred Dollars ($100.00) of consideration, and said Seven Thousand Two Hundred Dollars ($7,200.00) for documentary stamps was in fact paid. In connection with said Original Conveyance, a first mortgage and security agreement was given by Tommy M. Faircloth, Sam L. Rudd, and Alvin C. Futch, to the Mutual Life Insurance Company of New York, said mortgage dated and filed August 15, 1979, at Official Records Book 187, page 451, of the Public Records of Suwannee County, Florida (hereinafter referred to as "First Mortgage"). The mortgage secured a note with a face amount of Three Million Dollars ($3,000,000.00) dated August 15, 1979. The First Mortgage showed a face amount of Three Million Dollars ($3,000,000.00). In connection with the First Mortgage, pursuant to the loan commitment dated April 13, 1979, only One Million Eight Hundred Thousand Dollars ($1,800,000.00) was disbursed thereunder. The parties thereto anticipated that an additional One Million Two Hundred Thousand Dollars ($1,200,000.00) would be disbursed at some future date, subject to conditions precedent that (a) the Borrowers place all of the Property encumbered thereby into cultivation, after having first cleared and prepared same for cultivation, and (b) that the Borrowers install twenty (20) 12-inch irrigation wells which would be appropriately drilled and equipped, and (c) that the Borrowers install twenty (20) automatic center-pivot irrigation systems thereon. The aforementioned conditions precedent have not been accomplished to date. The time period during which the conditions precedent set forth in paragraph seven (7) above could be completed, and during which time period the Borrowers could require the First Mortgage lender to make the additional disbursement under the First Mortgage, has expired, and the Borrowers have no further legal right to require any additional disbursements under the First Mortgage. The Petitioner has waived any right to seek or obtain the additional One Million Two Hundred Thousand Dollars ($1,200,000.00) from the holder of the First Mortgage. In connection with the First Mortgage for the Original Conveyance, the Borrowers paid Four Thousand Five Hundred Dollars ($4,500.00) as documentary stamp taxes on the promissory note secured by the First Mortgage, and paid Six Thousand ($6,000.00) in intangible taxes. In connection with the Original Conveyance, a second mortgage was given by Tommy M. Faircloth, Sam L. Rudd and Alvin C. Futch to Mead Timber Company and Scott Timber Company in the original principal sum of Three Hundred Thousand Dollars ($300,000.00), said mortgage dated and filed August 15, 1979, at Official Records Book 187, page 461, of the Public Records of Suwannee County, Florida (hereinafter referred to as the "Second Mortgage"). On or about October 1, 1980, Tommy M. Faircloth, Sam L. Rudd, and Alvin C. Futch conveyed a portion of the Property to Timber River, Inc., a Florida corporation, by warranty deed which instrument was filed October 2, 1980, at Official Records Book 203, page 790, of the Public Records of Suwannee County, Florida (hereinafter referred to as the "Second Conveyance"). In connection with the deed for said Second Conveyance, only minimum documentary stamps in the amount of Forty Cents ($.40) were attached and affixed thereto. The Respondent herein has alleged that, since the Second Conveyance was subject to both the First Mortgage and the Second Mortgage, the taxable consideration should be Three Million Three Hundred Thousand Dollars ($3,300,000.00)(the face amount of the two [2] mortgages combined), and therefore the documentary stamps which should have been affixed to the deed would be Thirteen Thousand Two Hundred Dollars ($13,200.00), leaving an additional tax due in the amount of Thirteen Thousand One Hundred Ninety-nine and Sixty One-hundredths Dollars ($13,199.60). Timber River, Inc., the grantee of the Second Conveyance, is a corporation which was wholly owned by Tommy M. Faircloth, Sam L. Rudd, and Alvin C. Futch in equal proportions at the time of the Second Conveyance. Timber River, Inc., in consideration of Tommy M. Faircloth, Sam L. Rudd, and Alvin C. Futch conveying to said corporation the property described in the deed of the Second Conveyance, issued its common stock to said individuals in equal proportions. Timber River, Inc., took the Property subject to the First Mortgage and second Mortgage, and did not assume or agree to assume either the First Mortgage or the second Mortgage. Tommy M. Faircloth, Sam L. Rudd, and Alvin C. Futch, individually, have at all times been or are presently liable to the mortgagee, Mutual Life Insurance Company of New York, and are personally responsible for making all payments under said mortgage. All payments under said mortgage both prior to and subsequent to the Second Conveyance have been made by Tommy M. Faircloth, Sam L. Rudd, and Alvin C. Futch, individually.

Florida Laws (2) 201.01201.02
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58TH STREET, INC. vs. DEPARTMENT OF REVENUE, 76-002191 (1976)
Division of Administrative Hearings, Florida Number: 76-002191 Latest Update: Jun. 23, 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.

Florida Laws (3) 120.57201.01201.02
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DEPARTMENT OF REVENUE vs. D & D BUILDERS OF FT. LAUDERDALE, INC., 77-001079 (1977)
Division of Administrative Hearings, Florida Number: 77-001079 Latest Update: Nov. 29, 1977

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.

Florida Laws (1) 201.02
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LANDMARK BANK OF BREVARD vs. DEPARTMENT OF REVENUE, 79-002262 (1979)
Division of Administrative Hearings, Florida Number: 79-002262 Latest Update: Aug. 20, 1980

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.

Florida Laws (3) 120.57201.01201.08
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RALPH MONROE, JOHN ELOIAN, ALLEN WOLFSON, ET AL. vs. DEPARTMENT OF REVENUE, 78-000800 (1978)
Division of Administrative Hearings, Florida Number: 78-000800 Latest Update: Oct. 03, 1978

Findings Of Fact The individual taxpayers purchased a motel giving not secured by a mortgage on the motel as a portion of the consideration paid to the grantors. The individual taxpayers subsequently conveyed an undivided one-half interest in the motel to 6804 East, Inc., a corporation wholly owned by the individual taxpayers. Although no consideration was recited in the conveyance, the corporation assumed responsibility for 50 percent of the mortgage indebtedness which was stipulated to have been $96,250. Subsequently, 6804 East, Inc. transferred the property to 6804 Motel, Inc., another corporation wholly owned by the individual taxpayers. Again, no consideration was recited in the conveyance; however, 6804 Motel, Inc. assumed responsibility from 6804 East, Inc. for 50 percent of the indebtedness on the property. The Department of Revenue asserts that documentary stamp taxes are due on both of the transfers pursuant to Section 201.02, Florida Statutes, there having been only nominal documentary stamp taxes placed on the documents. The individual taxpayers and 6804 Motel, Inc., controvert the assessment of taxes on the basis that there was no consideration because the individual taxpayers were never relieved of any responsibility for the debt because they fully owned the two corporations and because they had such an equity investment in the purchase that they could not stand aside and see the corporations default. 6804 Motel, Inc. also questions the assessment of the taxes against it as the grantee in the transfer from 6804 East, Inc. In support of their arguments, the taxpayers introduced evidence that the individual taxpayers intended, prior to purchase, to convey an interest in the motel to 6804 East, Inc., and that after the transfer to 6804 Motel, Inc., the individual taxpayers paid all deficit operating expenses for the motel.

Recommendation Based upon the foregoing findings of fact and conclusions of law the Hearing Officer recommends that the petition of the taxpayers in this case is denied and that the documentary stamp taxes, as proposed in assessments M-65 and M-66, together with a 25 percent penalty and 1 percent interest per month on the unpaid tax be assessed. DONE AND ORDERED this 3rd day of August, 1978, in Tallahassee, Florida. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of August, 1978. COPIES FURNISHED: Ralph Monroe 7211 North Dale Mabry Tampa, Florida 33614 Maxie Broome, Jr., Esquire Assistant Attorney General The Capitol Tallahassee, Florida 32304

Florida Laws (1) 201.02
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A. J. COYLE vs. DEPARTMENT OF REVENUE, 77-000426 (1977)
Division of Administrative Hearings, Florida Number: 77-000426 Latest Update: Jul. 11, 1977

Findings Of Fact The facts in this case are undisputed. On April l6, 1976, petitioner Arthur J. Coyle and his wife Katie Coyle, became the sole shareholders of Sara- Wolf, Inc., a Florida Corporation, whose assets consisted of an apartment building in Miami Beach, Florida. Thereafter, the Coyles decided to transfer the corporate assets to themselves as individuals. They were advised by their attorney that, in view of the 1975 decision of the First District Court of Appeal in Florida Department of Revenue v. DeMaria, 321 So 2d 101 (Fla. 1st DCA 1975) in a similar factual situation, no state documentary stamp tax would be due on the transaction. Therefore, relying upon that judicial decision, petitioner and his wife proceeded to execute a quit claim deed of the corporate real estate to themselves on May 13, 1976, and file the same in the public records of Dade County, Florida, on May 18, 1976, with payment of only nominal documentary stamp tax. The decision of the District Court of Appeal had been stayed by the Supreme Court on December 8, 1975. Subsequent to the decision of the Supreme Court in the DeMaria case on October 14, 1976, which quashed the lower court's decision, respondent issued a notice of proposed assessment of documentary stamp tax in the amount of $526.50 based on a taxable consideration of $175,500, less 30 cents tax paid, for a total tax due of $526.20 plus a like amount as a penalty, and $42.00 in interest, for a total asserted liability of $1,094.40. (Testimony of petitioner, Exhibits 1-3)

Recommendation That the proposed assessment of $1,094.40 against petitioner Arthur J. Coyle and Katie Coyle is valid and should be enforced. DONE and ENTERED this 31st day of May, 1977 in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Robert A. Glassman, Esquire 903 Biscayne Building 19 West Flagler Street Miami, Florida 33130 Edwin J. Stacker, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32304

Florida Laws (2) 201.02201.17
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KBC DEVELOPMENT CORPORATION vs. OFFICE OF THE COMPTROLLER AND DEPARTMENT OF REVENUE, 76-001596 (1976)
Division of Administrative Hearings, Florida Number: 76-001596 Latest Update: Jun. 15, 1979

The Issue The sole issue posed herein is: Whether or not the transfer to Petitioner by individuals Hugh P. Conser, Stewart L. Krug and Sidney Barbane1 of certain real property located in Pinellas County, Florida, on or about October 26, 1974, constitutes a conveyance subject to the Documentary Stamp Tax Act, pursuant to Chapter 201, Florida Statutes.

Findings Of Fact On or about October 26, 1974, the Petitioner received title to certain real property located Pinellas County, Florida, from Stewart L. Krug, Sidney Barbanel and Hugh P. Conser, the principals in KBC Development Corporation, which was recorded in Official Records Book 4229, page 1052, Public Records of Pinellas County, Florida. The only consideration, as evidenced by the deeds filed in the case, is that the conveyance was for "good and valuable consideration and ten dollars". This other good and valuable consideration, according to Petitioner and the other record evidence, consisted of the issuance of all one hundred shares of the authorized stock of KBC Development Corporation, Petitioner, as evidenced by the Minutes of the Shareholders Meeting of such corporation which was held on July 18, 1973. (See the minutes reflected in an attachment to Petitioner's Exhibit Number 1.) The issued stock had a par value of $5.00. The corporate entity, KBC, as Petitioner, was formed for the purpose of taking title to the property in question and, as evidenced by the record, had no other assets when the subject property was conveyed. On May 6, 1975, the Florida `Department of Revenue, Respondent, recorded in the office of the Circuit Court of Pinellas County, Florida, a warrant for collection of delinquent documentary stamp taxes in connection with the above-referenced transaction in the amount of $27,599.70, plus an identical amount of penalty, for a total sum of $55,212.40. Said warrant is recorded in O.R. Book 4286, page 31, Public Records of Pinellas County, Florida. Following a conference with the Department of Revenue, the taxes were paid by the Petitioner under protest. That payment set the stage for the Petitioner's filing of the claim for refund with the Respondent, the Comptroller of the State of Florida, pursuant to Florida Statutes section 215.26. The Petitioner argues that the only taxable consideration resulting from the subject conveyance was the par value of the stock, of which amount sufficient documentary stamps were affixed to the deeds in question. In support of this position, the Petitioner cites the fact that there are no income tax returns filed by the corporation, FIG; no business activities pursued by the corporation; no bank account of the corporation; and no assets held by the corporation, except as agents for the three individuals, Krug, Barbanel and Conser, all of which were acknowledged by all of the mortgagees. Additionally, the Petitioner urges that the bank and lending institutions involved regarded and held each individual personally liable for the indebtedness in connection with the loans advanced for the property in question. Finally, the Petitioner urges that, based on the conveyance in question, there was no shift in the economic burden to the corporation and, therefore, no taxable transaction occurred when the property in question was conveyed from the individuals, Krug, Barbanel and Conser, to FIG Development Corporation.

Conclusions The documentary stamp tax provided by Florida Statutes section 201.02 is an excise tax imposed on particularly described transactions, and in the case of instruments relating to realty, is based upon the total consideration involved in the transfer or conveyance. Thus, the key point in determining whether documentary stamps are to be affixed to an instrument transferring an interest in realty is in the presence or absence of consideration for the transfer. Rule 12A-4 .14, Florida Administrative Code, describes conveyances not subject to the documentary stamp tax as those "conveyances of realty without consideration, including. . .a deed to or by a trustee not pursuant to a sale . . . ." The facts of this case clearly do not illustrate an express or resulting trust relationship between KBC Development Corporation and its principals, Stewart L. Krug, Sidney Barbanel and Hugh P. Conser. When KBC took title to the property from Krug, Conser and Barbanel, the consideration was $10.00 and other valuable consideration and, based on the face of the instrument, the conveyance was not made to KBC subject to payment of any mortgages, etc., by KPC (Petitioner's Exhibit No. 1). Section 201.02(1), Florida Statutes (1975). See Florida Department of Revenue v. De Maria, 338 So.2d 838 (Fla. 1976). Additionally, the facts herein reveal that the banks and lending institutions involved in the transaction required the personal guarantees of the individuals, Krug, Barbanel and Conser. No evidence was introduced indicating that Petitioner, KBC Development Corporation, was anything more than an entity whereby the lending institutions had advanced funds for the primary mortgages to Continental Investment and Development Company, which was in no way related to the present corporation, KBC, and that the corporate entity was used to protect the lending institutions from any possible violations of usurious transactions. As stated, the personal endorsements and/or guarantees of the individuals, Barbanel, Krug and Conser, were required by the lending institutions before the primary mortgagee, Continental Investment and Development Company, would be released. Krug, Barbanel and Conser were no more nor less obligated to pay and perform under the obligation, after the conveyance than before. Although there was a change in the form of the obligation, there was no change in the substance. See e.g., Straughn v. Story, 334 So.2d 337 (Fla. 1st DCA 1976) cert. discharged 348 So.2d 954 (1977). (See Petitioner's Exhibits 2, 3 and 4.) For all of these reasons, it is the considered opinion of the undersigned that the Respondents have failed to demonstrate that the consideration for the conveyances in question were anything more than the par value of the stock and, accordingly, documentary stamp taxes should only be assessed in the amount of $4.10. Accordingly, I shall recommend that the excess assessments which Petitioner paid under protest be refunded.

Recommendation Based on the foregoing findings of fact and conclusions of law, it is hereby, RECOMMENDED: That the Petitioner be refunded the amount of taxes and penalties it paid to the Respondent, Department of Revenue, under protest, over and above the amount it should have paid on the par value of the stock of KBC Corporation when the abovedescribed conveyance was made during October, 1974. RECOMMENDED this 3rd day of April, 1979, in Tallahassee, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings Room 101, Collins Building MAILING ADDRESS: 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Donald R. Hall, Esquire Goza, Hall & Peacock, P.A. 100 North Belcher Road Clearwater, Florida 33518 Cecil L. Davis, Jr., Esquire Assistant Attorney General The Capitol, Room LL04 Tallahassee, Florida 32304 ================================================================= AGENCY FINAL ORDER ================================================================= STATE OF FLORIDA, DEPARTMENT OF REVENUE TALLAHASSEE, FLORIDA KBC DEVELOPMENT CORPORATION, Petitioner, vs. CASE NO. 76-1596 GERALD LEWIS, as COMPTROLLER OF THE STATE OF FLORIDA, AND DEPARTMENT OF REVENUE, Respondents. / NOTICE TO: DONALD R. HALL, ESQUIRE ATTORNEY FOR PETITIONER GOZA, HALL & PEACOCK, P.A. 100 NORTH BELCHER ROAD CLEARWATER, FLORIDA 33518 CECIL L. DAVIS, JR., ESQUIRE ATTORNEY FOR RESPONDENTS ASSISTANT ATTORNEY GENERAL THE CAPITOL LL04 TALLAHASSEE, FLORIDA 32304 You will please take notice that the Governor and Cabinet, acting as head of the Department of Revenue at its meeting on the 12th day of June, 1979, approved the Respondent's Substituted Order, in lieu of the Division of Administrative Hearing's Recommended Order dated April 3, 1979. A copy of the Respondent's Proposed Substituted Order is attached. This constitutes final agency action by the Department of Revenue. JOHN D. MORIARTY, ATTORNEY DIVISION OF ADMINISTRATION DEPARTMENT OF REVENUE STATE OF FLORIDA ROOM 104, CARLTON BUILDING TALLAHASSEE, FLORIDA 32301 CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing Notice was furnished by mail to Donald R. Hall, Esquire, Goza, Hall & Peacock, P.A. 100 North Belcher Road, Clearwater, Florida 33518, Attorney for Petitioner; by hand delivery to Cecil L. Davis, Jr., Esquire, Assistant Attorney General, The Capitol LL04, Tallahassee, Florida 32304, Attorney for Respondents and James E. Bradwell, Esquire, Hearing Officer, Division of Administrative Hearings, Department of Administration, Room 530, Carrolton Building, Tallahassee, Florida 32304, this 14th day of June, 1979. JOHN D. MORIARTY, ATTORNEY Attachment STATE OF FLORIDA

Florida Laws (3) 120.57201.02215.26
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1701 COLLINS (MIAMI) OWNER, LLC vs DEPARTMENT OF REVENUE, 19-001879 (2019)
Division of Administrative Hearings, Florida Filed:Lauderdale Lakes, Florida Apr. 11, 2019 Number: 19-001879 Latest Update: Mar. 18, 2020

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.

USC (1) 26 U.S.C 197 Florida Laws (16) 1.02120.52120.54120.56120.57120.80125.0167201.01201.02201.031201.15213.255215.2672.01190.61690.702 Florida Administrative Code (4) 12B-4.00412B-4.00712B-4.01128-106.213 DOAH Case (3) 19-187919-188319-3639RU
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JAMES E. CORRY vs. DEPARTMENT OF REVENUE, 76-002197 (1976)
Division of Administrative Hearings, Florida Number: 76-002197 Latest Update: Oct. 13, 1977

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.

Florida Laws (1) 201.02
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