The Issue Whether the Petitioner is liable for documentary stamp taxes and interest to the Respondent totaling $80,405.54, plus additional interest accruing from the date of the assessment, as reflected in the Notice of Proposed Assessment dated January 24, 2011.
Recommendation Based on the foregoing, Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order finding that Jorge Ramos does not owe documentary stamp taxes on the October 18, 2007, Warranty Deed and withdrawing the assessment in the amount of $80,405.54, plus interest at $11.89 per day from January 25, 2011. DONE AND ENTERED this 1st day of June, 2012, in Tallahassee, Leon County, Florida. S JUNE C. McKINNEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 1st day of June 2012.
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.
Findings Of Fact Ken La Pointe was predecessor in interest to Petitioner, KANAPHA MEADOWS, INC, in a number of land transactions. Mr. La Pointe sold 15 lots in "1000 Oaks Subdivision" to third parties. These sales generated 13 deeds and 15 mortgages. The deeds given by La Pointe reflect that they are subject to two prior mortgages. La Pointe sold these 15 lots without getting a release on a prior mortgage held for the same property by C. L. Brice, individually and C. L. Brice, Trustee (apparently operating in some capacity as "Kanapha Ranch"), and also without getting a release on another prior mortgage held by Peoples' Bank. However, there is no contention by the parties that La Pointe did not place the proper documentary tax stamps on these deeds. La Pointe continued collecting on the 15 mortgages generated by the 13 deeds and in turn paid interest payments on his mortgage to Peoples' Bank but did not pay anything on the mortgage to Kanapha Ranch, Inc. Accordingly, C. L. Brice (operating through Kanapha Ranch) demanded, with the leverage of threatened foreclosure, that La Pointe assign these 15 mortgages to Kanapha Ranch, Inc. for collection and that all such collections would be applied to the Kanapha Ranch, Inc. mortgage as long as La Pointe continued to owe Kanapha Ranch, Inc. Thereafter, by an Assignment of Mortgages dated June 12, 1980 La Pointe assigned these mortgages to Kanapha Ranch, Inc. for collection only. Thereafter, La Pointe and Brice negotiated a deal, this time with Brice operating through Petitioner, KANAPHA MEADOWS, INC., whereby La Pointe provided a deed to KANAPHA MEADOWS, INC. for the balance of unsold property in "1000 Oaks Subdivision" and assigning to KANAPHA MEADOWS, INC. all mortgages due La Pointe (including the ones already assigned to Kanapha Ranch for collection) and whereby KANAPHA MEADOWS, INC., was to release La Pointe from all debts regarding the "1000 Oaks Subdivision." There were 39 lots in "1000 Oaks Subdivision." Thirty three of these deeds were transferred with proper documentary stamps. Six of these lots deeded to KANAPHA MEADOWS, INC. form the fulcrum of the issue between the parties to this proceeding. La Pointe and KANAPHA MEADOWS, INC. resorted to an elaborate percentage basis formula to determine the value of the property and the debts being assumed. After applying the mortgage amount against the indebtedness, $53,529.86 of the indebtedness was calculated as applicable to the six lots conveyed. This was the amount upon which documentary stamps of $214.40 were calculated and affixed to the Warranty Deed from La Pointe to KANAPHA MEADOWS, INC. for Lots 5, 6, 15, 16, 17, and 21, which deed was dated October 15, 1980 and recorded July 17, 1981 in Official Record Book 1359, pages 522-533 of the Public Records of Alachua County, Florida. No money changed hands at that point and apparently the executed deed was not delivered to KANAPHA MEADOWS, INC. until later. When the exact data and balance due on each mortgage was collected, approximately February 21, 1981, the parties were ready to close. On February 24, 1981, La Pointe assigned all 15 mortgages (most of them third mortgages because they had not been released from La Pointe's liability of the first two mortgages to Kanapha Ranch and Peoples' Bank) to KANAPHA MEADOWS, INC. At that time, La Pointe received an Assumption Agreement with Release from KANAPHA MEADOWS, INC. assuming the Peoples' Bank mortgage and also an Assumption Agreement with Release assuming the Kanapha Ranch mortgage. The 6 lots were received then and are now indicated on the KANAPHA MEADOWS, INC. books at an evaluation of $17,600.94. The October 15, 1980 Warranty Deed, the Assignment of Mortgages, and both Assumptions/Releases were recorded July 17, 1981. Petitioner contends that the $214.40 in tax stamps affixed thereto was appropriate based on the difference between the liabilities assumed and the assets received by KANAPHA MEADOWS, INC. from La Pointe. Respondent's position is that additional tax is due in the amount of $1,199.80 based upon the mortgages to which the deed was subject, which mortgages are reflected on the face of the deed and were specifically assumed by Petitioner.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is recommended that the Department of Revenue enter a Final Order ratifying its assessment of an additional documentary stamp tax owed by Petitioner of $1,198.80 plus appropriate penalties and interest to date of that Final Order. DONE and ENTERED this 19th day of March, 1985, in Tallahassee, Florida. ELLA JANE P. DAVIS Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of March, 1985. COPIES FURNISHED: William Townsend, Esquire Department of Revenue Carlton Building Tallahassee, Florida 32301 C. L. Brice 6500 S. W. Archer Road Gainesville, Florida 32608 Edwin A. Bayo Assistant Attorney General Department of Legal Affairs Room LL04, The Capitol Tallahassee, Florida 32301 Randy Miller Executive Director 102 Carlton Building Tallahassee, Florida 32301
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.
The Issue The issue in this proceeding is whether the Petitioners are entitled to refund of documentary stamp taxes paid pursuant to Sections 201.01 and 201.08 Florida Statutes.
Findings Of Fact Both Petitioners are limited partnerships validly existing and in good standing under the laws of the State of Florida. (Petitioner's exhibits No. 1 and No. 5.) Sugar Creek Business Center Phase I, Ltd. ("Sugar Creek") As to this Petitioner, the parties have further stipulated: On or about March 27, 1986, Petitioner and First Union National Bank, a national banking association, with its principal office located in Charlotte, North Carolina (the "Lender"), entered into a certain Construction Loan Agreement (the "Loan Agreement"). Pursuant to the Loan Agreement, Lender agreed to make and Petitioner agreed to accept a loan in the amount of $6,300,000.00 (the "Loan") to be used solely for the purpose of paying for the cost of developing and constructing a commercial building in Charlotte, Mecklenberg County, North Carolina. The Lender retained the law firm of Fowler, White, Gillen, Boggs, Villareal & Banker, P. A., Post Office Box 1438, 501 E Kennedy Boulevard, Suite 1700, Tampa, Florida 33602, as its Florida counsel in connection with closing the Loan. Petitioner retained the law firm of Peirsol, Boroughs, Grimm, Bennett & Griffin, Professional Association, Post Office Box 3309, Orlando, Florida 32802, as its counsel in connection with closing the Loan. On or about March 27, 1986, the General Partners of Petitioner executed a promissory note in the amount of $6,300,000.00 payable to Lender (the "Note"), a Deed of Trust and Security Agreement securing the Note in favor of Gibson L. Smith, Jr. Trustee, and First Union National Bank, Beneficiary (the "Mortgage"), and all other loan closing documents pursuant to the Loan Agreement. The Mortgage encumbers only land and the improvements thereon located in Charlotte, Mecklenberg County, North Carolina and was filed in the Public Records of Mecklenburg County, North Carolina on March 27, 1986, subsequent to closing upon the Loan Agreement. The proceeds of the Loan evidenced by the Note and secured by the Mortgage were used solely to develop and construct a commercial building upon the land encumbered by the Mortgage in Charlotte, Mecklenburg County, North Carolina. Florida documentary stamps were purchased from the area office of the Department of Revenue located in Tampa, Florida on May 1, 1986 and affixed to the Note to evidence payment of Florida documentary stamp tax with respect to the Note in the amount of $9,450.00 pursuant to Sections 201.00 and 201.08, Florida Statutes. (Petitioner's Exhibit No. 1) John Simpson, Jr., Esquire of Peirsol, Boroughs, Grimm, Bennett and Griffin, P. A. represented Sugar Creek in the purchase of property and the acquisition and closing of construction financing for improvements. The loan documents were mailed to him. He gave them to his client in Orlando, who signed and delivered them back to him in escrow. Simpson took the documents to Charlotte, North Carolina, for the closing on or around March 27, 1986. The purchase of property and loan closed simultaneously and the funds were disbursed in Charlotte. (Testimony of John Simpson, Jr., Esquire) One Dezavala Center, Ltd. As to this Petitioner, the parties have stipulated: On or about July 30, 1985, Petitioner and the First National Bank of Chicago, a national banking association, with its principal office located in Chicago, Illinois (the "Lender"), entered into a certain Construction Loan Agreement (the "Loan Agreement"). Pursuant to the Loan Agreement, Lender agreed to make and Petitioner agreed to accept a loan in the amount of $6,600,000.00 (the "Loan") to be used solely for the purpose of paying for the cost of developing and constructing four commercial buildings located in San Antonio, Bexar County, Texas. The Lender retained the law firm of Holland & Knight, 1200 Brickel Avenue, Post Office Box 015441, Miami, Florida 33101, as its Florida counsel in connection with closing the Loan. Petitioner retained the law firm of Peirsol, Boroughs, Grimm, Bennett & Griffin, Professional Association, Post Office Box 3309, Orlando, Florida 32802, as its counsel in connection with closing the Loan. On or about July 30, 1985, the General Partners of Petitioner executed a promissory note in the amount of $6,600,000.00 payable to Lender (the "Note"), a Deed of Trust, Mortgage, and Security Agreement securing the Note in favor of Harry M. Roberts, Jr., Esquire, Trustee (the "Mortgage"), and all other loan closing documents as required under the Loan Agreement. The Mortgage encumbers only land and the improvements thereon located in San Antonio, Bexar County, Texas and was filed in the Public Records of Bexar County, Texas on August 1, 1985, subsequent to closing upon the Loan Agreement. The proceeds of the Loan evidenced by the Note and secured by the Mortgage were used solely to develop and construct four commercial buildings on the land encumbered by the Mortgage in San Antonio, Bexar County, Texas. Florida documentary stamps were purchased from the area office of the Department of Revenue located in Miami, Florida on August 5, 1985, and affixed to the Note to evidence payment of Florida documentary stamp with respect to the Note in the amount of $9,900.00 pursuant to Sections 201.00 and 201.08 Florida Statutes. John Simpson, Jr., Esquire, also represented One Dezavala in the closing for the acquisition of the property and the loan. The note and other loan documents were signed in Orlando by Petitioner's General Partners. The documents were given to the lender's Florida Counsel in escrow, who sent the documents to the lender's Texas counsel. Closing on the acquisition of property and the loan took place simultaneously in San Antonio, Texas and the funds were disbursed in San Antonio. (Testimony of John Simpson, Jr., Esquire) Photocopies of the notes and stamps were admitted as Exhibits No. 3 and No. 7. The parties, by oral stipulation at the final hearing, agreed that before the Comptroller could be compelled to issue a Final Order authorizing the refund of such money as may properly be found owing Petitioners, Petitioners would make available to the Comptroller or his representatives, for inspection, cancellation and/or obliteration, the original documentary stamps forming the basis for the request for refund.
The Issue The issue in this unadopted-rule challenge is whether Respondent, in connection with the administration of the stamp tax, has formulated a statement of general applicability for allocating undifferentiated, lump-sum payments made in purchase- and-sale transactions involving joint real estate/personal property transfers; which meets the statutory definition of a rule but has not been adopted pursuant to the rulemaking procedure; and, as used by Respondent, has the effect of creating an entitlement to collect tax on 100% of the undifferentiated consideration.
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. Taxpayer also 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). The questions of whether the alleged agency PDSE exists, and, if so, whether the PDSE is an unadopted rule, are common to Taxpayer's separate actions under sections 120.57(1) and 120.56(4), respectively, 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 Taxpayer's refund claim for hearing. It is determined that the Department, in fact, has taken a PDSE, which is substantially the same as Taxpayer described it. The undersigned rephrases and refines the Department'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. The Department has not published a notice of rulemaking under section 120.54(3)(a) relating to the PDSE. Nor has the Department presented evidence or argument on the feasibility or practicability of adopting the PDSE as a de jure rule. It is determined as a matter of ultimate fact that the PDSE has the effect of law because the Department, if unchecked, intends consistently to follow, and to enforce compliance with, the PDSE. Because, in the Department's hands, the PDSE creates an entitlement to collect stamp taxes while adversely affecting taxpayers, it is an unadopted rule.
The Issue Whether petitioner is liable for documentary stamp surtax, penalty and interest, pursuant to Proposed Notice of Assessment, dated November 17, 1976. The parties stipulated to the relevant facts set forth in the petition. They also stipulated that the amounts of the proposed assessment are properly computed and due, if petitioner is determined to be liable therefor.
Findings Of Fact Petitioner is a Netherland Antilles Corporation, duly authorized to do business in the State of Florida. On April 9, 1974, petitioner executed a mortgage deed to Seville Management, a partnership, whereby it encumbered its long-term lease on certain real property located in Miami Beach, Florida, in the amount of $2,500,000. The lease contained an option to purchase the land in the amount of $1,500,000, which was later increased to $1,550,000. Paragraph 33 of the deed provided that petitioner would be obligated to consummate the exercise of the option to purchase on or before June 1, 1976, and that failure to do so would constitute a default of the mortgage on the leasehold interest. (Testimony of Cassel, Petition) In June 1976, Petitioner obtained fee simple title to the property in question through the exercise of the option to purchase for the sum of $1,550,000, by warranty deed dated June 27, 1976, from the trustees of Central States, Southeast and Southwest Areas Pension Fund as grantor. The deed provided that the lease was thereby "extinguished, canceled and terminated, the Grantee herein being owner of the interest of the Lessor and the Lessee in such lease. Petitioner recorded the warranty deed on July 6, 1976, and affixed the state documentary stamps on a consideration of $1,550,000. However it only affixed the nominal sum of 55 cents for documentary surtax, At the time of the conveyance, the mortgage balance on the property exceeded the purchase price of $1,550,000. (Testimony of Cassel, Petition) Subsequently, respondent assessed documentary surtax in the amount of $1704.45 and a penalty in a like amount, plus interest in the amount of $74.31 against petitioner with respect to the transaction based on a consideration of $1,550,000. On November 4, 1976, an informal conference was held with the respondent and thereafter by letter of November 17, 1976, respondent issued a Notice of Proposed Assessment in the total amount of $3,483.21 for delinquent documentary surtax, penalty and interest. (Petition, Exhibit 1)
Recommendation That the proposed assessment against petitioner in the amount of $3483.21 for documentary surtax, penalty, and interest under Section 201.021, F.S., be upheld and assessed. DONE and ENTERED this day of April, 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: Edwin J. Stacker, Esquire Assistant Attorney General The Capitol Tallahassee, Florida 32304 Craig B. Sherman, Esquire Broad and Cassel Barnett Bank Building 1108 Kane Concourse Bay Harbor Islands, Florida 33154
Findings Of Fact Petitioners were desirous of having a custom built home on a lot of their choice. During the course of this endeavor they met Jack Brolsma, President of Jack Brolsma & Associates (hereinafter called Brolsma) a builder, and also learned that a particular lot owned by Yanow in which they were interested was for sale at a price of thirty thousand dollars ($30,000) plus interest on mortgage. On July 17, 1977 the Greenes entered into a contract with Brolsma to construct a house on Lot 12, Plat IV, The President Country Club in West Palm Beach, Florida for one hundred thirty five thousand dollars ($135,000). Brolsma at all times here involved, was a builder of custom homes and not a land developer as that term is generally recognized. Jack Brolsma owned fifty percent of the corporation bearing his name. The contract provided that Greene would obtain a construction money mortgage and pay to Brolsma one hundred thirty five thousand dollars ($135,000) for the house and lot with the understanding that the lot would be deeded to Greene at cost to Brolsma plus a cost for de-mucking which previous testings had indicated would be required to provide a stable foundation. By Warranty Deed dated August 1, 1977 (Exhibit 10) Brolsma acquired title to Lot 12 from the Yanows. Documentary stamp taxes attached to this deed indicates that the total price was thirty one thousand nine hundred dollars ($31,900). By Warranty Deed dated August 1, 1977 (Exhibit 4) Brolsma deeded Lot 12 to the Greenes. This deed was recorded August 9, 1977. The Greenes qualified for a one hundred eight thousand dollar ($108,000) mortgage with Sun First National Bank of Delray Beach, and on August 8, 1977 executed a mortgage (Exhibit 7) and the transaction closed. Buyers and sellers closing statements are contained in Exhibit 3. At the closing on August 8, 1977 documentary stamps in the amount of four hundred five dollars ($405) and surtax of one hundred forty eight dollars and fifty cents ($148.50) was charged to buyer and affixed to deed. At closing buyers paid some twenty seven thousand five hundred dollars ($27,500) and the previous mortgage on the land was satisfied. Thereafter the construction was commenced with the mortgagee making disbursement to Brolsma per schedule (Exhibit 13). Prior to the time Lot 12 was purchased by Brolsma, Petitioners were aware of the ownership of this lot and that it was for sale for approximately thirty thousand dollars ($30,000). Since Brolsma was more familiar with acquiring land than were Petitioners he agreed to obtain the lot upon which Petitioners had contracted to have their house built.
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 The issue for consideration in this case is whether deeds by property owners which convey unencumbered real property to a corporation solely owned by them, are subject to a documentary stamp tax imposable under Section 201.021(1), Florida Statutes, and Rule 12B-4.013(7), Florida Administrative Code.
Findings Of Fact By Warranty Deed dated April 30, 1991, W. Dewey Kennell sold eight condominium apartments, units 1731, 1733, 1735, 1737, 1741, 1743, 1745 and 1747, in Baywood Colony Southwood Apartments IV, a condominium, to Kurt Rabau and Ronald Rabau, his son, residents of Germany. The Rabaus purchased the properties as an investment in rental property for income. At the time of the sale, the property was subject to mortgages totaling $250,000, which the Rabaus paid off on May 24, 1994. Sometime after the purchase, the Rabaus were advised to incorporate and hold title to the properties in a corporate capacity to protect themselves against personal liability. Thereafter, on September 14, 1994, the Rabaus formed Kuro, Inc., the Petitioner herein, to take and hold title to the properties, with Kurt Rabau and Ronald Rabau each owning 50% of the corporate stock. There were no other owners of stock in the corporation. On October 12, 1994, the Rabaus transferred all eight properties to Kuro, Inc. Kuro, Inc. had no assets other than the eight apartments, and did no business prior to the transfer of those apartments to it. Consequently, the stock of Kuro, Inc. was valueless prior to the receipt of the transferred apartments. The corporation’s federal tax form relating to transfer of property to a corporation, the “Corporation’s Statement on Transfer of Property Under Code Section 351” reflects that the Rabaus “transferred the jointly owned property [described therein] for which Kuro Inc. issued the stock”. From the evidence presented it is clear that the Kuro Inc. stock was issued in exchange for the contribution of the apartments to the corporation. Other documents in the corporation’s 1994 tax return indicate that the property was valued at fair market value at the time of transfer to the corporation, and the transferee’s, (corporation’s) adjusted basis was identical after the transfer. Each of the Rabaus received 500 shares of the corporation’s stock which was valued at $618,642. Of that amount, $617,642 was considered additional paid-in capital. There was no additional property received or possessed by the corporation. A minimal documentary stamp tax was paid by the parties at the time the eight Warranty Deeds for the apartments were transferred to the corporation. The consideration reflected on the face of each deed was “...the sum of $10.00 and other valuable consideration.” Subsequent to the transfer, the Department conducted an audit of the Clerk of Circuit Court in Sarasota County and, on November 10, 1994, issued a Notice of Intent to Make Documentary Stamp Tax and Discretionary Surtax Audit Changes, by which it indicated its intent to impose a documentary tax of $4,207.00 on the transfers, a 50% penalty of $2,103.50, and interest totaling $38.73 through November 10, 1994, with additional interest to accrue at the rate of 1% per month, prorated daily ($1.38), until date of payment. Thereafter, on March 27, 1995, the Department issued a Notice of Proposed Assessment to Kuro, Inc., and Petitioner timely filed a protest. Subsequent to that action, on January 11, 1996, the Department issued its Notice of Decision sustaining the proposed assessment, penalty and accrued interest, and Petitioner requested formal hearing.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Revenue enter a final order imposing a tax in the amount of $4,207.00 with interest from date of filing at 1 percent per month based on the amount of tax not paid to date of payment. DONE and ENTERED this 22nd day of April, 1997, in Tallahassee, Florida. ARNOLD H. POLLOCK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6947 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of April, 1997. COPIES FURNISHED: C. Samuel Whitehead, Esquire 2199 Ringling Boulevard Sarasota, Florida 34237 James F. McAuley, Esquire Office of the Attorney General The capitol - Tax Section Tallahassee, Florida 32399-1050 Linda Lettera General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs Executive Director Department of Revenue Tallahassee, Florida 32399-1011
