Findings Of Fact By warranty deed dated July 9, 1973, Floyd L. and Michael Lewis conveyed the fee simple title to certain realty in North Miami Beach to Petitioners Eugene J. Howard and Herbert Seidel. The purchase price for the property was $405,000. The property sold consisted of a twenty-two (22) unit apartment building with twenty (20) furnished apartments and included storage shed, a pool, patio and dock furniture. The closing statement signed by the sellers and purchasers stated: "Florida documentary stamps - on deed - $1,215.00, Florida documentary surtax - on deed - $132.20." $1,347.20 was credited to the Petitioners Howard and Seidel. Petitioners actually paid $10.85 surtax and $132.20 documentary tax. The 1974 tax assessment of the Dade County Property Appraiser for the property was $241,769.00 realty and $14,500.00 for the personalty. Petitioner contends: That part of the purchase price was applicable to -personal property. That the Hearing Officer should make an allocation of the realty included and an allocation for the personalty included. That the Petitioners believe they are entitled to the equitable defense of laches in that the Respondent did not advise Petitioners of the possible error of miscalculation until approximately two years had passed. That if the stamp tax is found to be due and if a penalty is included, the penalty is "excessive penalty" under the Eighth Amendment of the Constitution of the United States of America, and Article I, Section 17, of the Florida Constitution. Respondent contends: That there was an agreement between the Parties, in a signed document that $1,215 in documentary stamps and $132.20 in surtax stamps, reflecting the actual consideration paid for the realty under consideration, would be affixed to the conveyance. That Petitioners failed to fulfill such a an agreement and affixed $132.20 in documentary stamps and $10.85 in surtax stamps to the deed. . That the Department is entitled to the delinquent taxes plus penalty. That the assessment is dated July 9, 1975 and a three- year statute of limitations is applicable. The Hearing Officer further finds: The purchase price for the property under consideration was $405,000. Documentary stamps required on such a purchase were $1,215.; that stamps actually paid were in the amount of $132.20, that $10.85 was actually paid and still due and owing is $121.35. That the Petitioners as well as the Sellers were aware of the proper amount of tax due and signed a receipt reflecting the monies allocable for documentary and surtax stamps. That the Petitioners failed either intentionally or negligently to pay the proper amount of documentary and surtax stamps at the time of recording the deed.
Recommendation Assess the documentary stamps and the documentary surtax against Petitioners together with applicable penalties. DONE and ORDERED this 9th day of July, 1976, in Tallahassee, Florida. DELPHENE C. STRICKLAND Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Eugene J. Howard, Esquire 2212 Biscayne Blvd. Miami, Florida 33137 Harold F. X. Purnell, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32304
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.
Findings Of Fact Stewart executed a mortgage note dated February 3, 1972 in the amount of $2,943,400 payable to City National Bank of Miami. This note was secured by a mortgage executed by Stewart as mortgagor to City National Bank of Miami as mortgagee of same date. This mortgage was recorded on February 8, 1972 at which time documentary stamp tax and intangible taxes were paid. The note was designated a mortgage note in the face amount of $2,943,400 and taxes paid were predicated on this sum. The mortgage provided, inter alia, in item 24 thereof: "That the funds to be advanced herein are to be used in the construction of certain improvements on the land herein described, in accordance with a building loan agreement between the mortgagor and the mortgagee dated February 8, 1972, which building loan agreement (except such part or parts thereof as may be inconsistent herewith) is incorporated herein by reference to the same extent and effect as if fully set forth and made a part of this mortgage; if the construction of the improvements to be made pursuant to said building loan agreement shall not be carried on with reasonable diligence, or shall be discontinued at any time for any reason other than strikes or lockouts, the mortgagee, after due notice to the mortgagor or any subsequent owner, is hereby invested with full and complete authority to enter upon said premises, employ watchmen to protect such improvement from depredation or injury, and to preserve and protect the personal property therein, and to continue any and all outstanding contracts for the erection and completion of said building or buildings, to make and enter into any contracts and obligation wherever necessary, either in its own name or in the name of the mortgagor, and to pay and discharge all debts, obligations, and liabilities incurred thereby. All such sums so advanced by the mortgagee (exclusive of advances of the principal of the indebtedness secured hereby) shall be added to the principal of the indebtedness secured hereby and shall be secured by this mortgage and shall be due and payable on demand with interest at the rate of the same rate as provided in the note secured hereby, but no such advances shall be insured unless same are specifically approved by the Secretary of Housing and Urban Development acting by and through the Federal Housing Commissioner prior to the making thereof. The principal sum and other charges provided for herein shall, at the option of the mortgagee or holder of this mortgage and the note secured hereby, become due and payable on the failure of the mortgagor to keep and perform any of the covenants, conditions, and agreements of said building loan agreement. This covenant shall be terminated upon the completion of the improvements to the satisfaction of the mortgagee and the making of the final advance as provided in said building loan agreement;" Prior to the completion of the project for which the note and mortgage were executed and before the full amount stated in the note had been advanced Stewart went into receivership. No advances were made under the note and mortgage subsequent to December, 1974, and only $1,935,378 had been disbursed to Stewart prior to foreclosure. On March 17, 1976 Stewart requested a refund in the amount of $1512 for documentary stamp taxes and $2016 for intangible taxes paid on the difference between $2,943,400 and $1,935,378.29. By letters dated June 16 and 17, 1976, each of the refund requests was denied by the Comptroller on the ground advanced by Department of Revenue that the claims were barred as not being timely filed. Vanguard executed a note in the amount of $2,000,000 payable to the Chase Manhattan Bank secured by a building loan mortgage from Vanguard as mortgagor to Chase as mortgagee. This mortgage was recorded and documentary stamp taxes and intangible taxes were paid on April 19, 1973. Other than the amount of the note and the total advanced prior to Vanguard going into receivership, the basic facts were the same as in Stewart. At the time of the last payment in May, 1975 Vanguard had received $1,388,008 of the $2,000,000 evidenced by the note. Vanguard's application for refund of $1224 for intangible taxes paid was denied by the Comptroller for the same reason Stewarts was denied. Here the application dated April 19, 1976 was postmarked in Miami on April 20, 1976 and received by Respondent on April 22, 1976. Worthington executed a building loan note dated October 25, 1972 in the amount of $2,750,000 payable to Trustees of C. I. Mortgage Group which was secured by a mortgage loan of same date. Worthington also went into receivership in December, 1974 after $1,962,750 had been advanced. Application for refund of documentary stamp taxes in the amount of $1180.80 and intangible taxes in the amount of $1574.50 filed March 17, 1976 was denied by the Comptroller on the grounds that the application was not timely filed. All of the above loans, for which the mortgages were recorded, were construction loans and provided for periodic payments to the mortgagor as the construction progressed. Provided the mortgagor complied with the terms of the building agreement the mortgagee was legally required to advance funds when due. In determining valuation for the purpose of computing the intangible taxes due clerks of the circuit court follow 199.122(7) F.S. which provides that obligations for payment of money secured by a mortgage shall be valued at the principal amount of indebtedness evidenced by such transactions. Accordingly in the cases at hand the clerks would have refused to record the mortgages unless the intangible taxes and documentary stamp taxes computed using the principal amount of the obligation were paid. An application for refund of the intangible tax representing the difference between the face amount of the mortgage to secure future advances, and the amount advanced, will be disapproved by the Department of Revenue so long as advances on the face amount of the loan are still being made.
Findings Of Fact On or about January 9, 1974, Petitioners and their partners, Edward Mehler, and Sylvia Mehler, sold certain property located in Broward County, Florida, to Leo Koehler, Pat Manganelli, and Walter Urchison. A copy of the deed was received in evidence as Respondent's Exhibit 1. The Petitioners and the Mehlers took a $50,000 mortgage from the buyers as a part of the purchase price. The mortgage deed was received in evidence as Respondent's Exhibit 2. The face amount of the mortgage is $50,000. The buyers defaulted on the mortgage to the Petitioners and the Mehlers without having made any payments on the mortgage. The Petitioners and the Mehlers were unsuccessful in negotiating any payment from the buyers. The buyers were apparently irresponsible, and were unsuccessful in business. The buyers had given their deed to the property to a Mr. Frank Post. Mr. Post apparently took the deed in payment for a debt. The Petitioners and the Mehlers were unsuccessful in negotiating any payment on the mortgage from Post. The Petitioners and the Mehlers were unsuccessful in locating any market for the mortgage. The mortgage had no market value. Rather than foreclosing one the mortgage, the Petitioners and the Mehlers took a warranty deed from the original buyers and a quitclaim deed from Post. These deeds were received in evidence as Respondent's Exhibits 3 and 4. The deeds were taken in lieu of foreclosure, and the effect of the deeds was to discharge the $50,000 mortgage obligation. Petitioners and the Mehlers placed minimum Florida documentary stamp tax and surtax stamps on each deed, taking the position that the consideration for the deeds was nothing. The Respondent took the position that the consideration for the deeds was the discharge of the mortgage obligation, and assessed $410 in stamp tax, surtax, and penalty obligations upon the Petitioners. The petitioners subsequently commenced this action. The property which is the subject of this matter has very little market value. The property has been on the market for some time, and no buyer has been found. The property has been valued at $12,500, but its market value is less than that.
Findings Of Fact Based upon the oral argument of the parties and the evidence adduced at the hearing, as well as the pleadings, the following pertinent facts are found: On June 30, 1973, an agreement for purchase and sale was executed between Bayshore 21, Inc., as purchaser, and Arthree, Inc., as seller, for the purchase and sale of real estate commonly known as the Carriage House. This agreement was executed by Bayshore 21, Inc. in its corporate name, and not as a trustee or other representative capacity. The provisions of this agreement were individually guaranteed by Marvin Glick, the president and sole stockholder of Bayshore 21, Inc. The purchase and sale agreement discloses that the total purchase price of the property is $19,500,000, payable by taking subject to a first mortgage held by the Prudential Insurance Company with the remainder, subject to certain prorations, to be paid in cash. An earnest money deposit in the amount of $500,000.00 was placed in escrow by Bayshore at the time of execution of the purchase and sale agreement. Bayshore 21, Inc. represented and warranted in said agreement that it was a corporation duly organized and in good standing with full capacity to make and execute the agreement and to consummate the transaction embodied therein. Further, Bayshore warranted that there was no provision in its charter or bylaws, nor was it a party to any agreement, which would limit or prevent its consummation of the agreement. Also, Bayshore reserved the right to assign it's interests to any other party upon the assignee's assumptions of Bayshore's obligations or to direct Arthree, Inc. that the deed or other closing instruments would run in favor of a designated grantee other than Bayshore. Pursuant to the agreement for purchase and sale described above, Arthree, Inc. conveyed the Carriage House to Bayshore 21, Inc. by warranty deed dated August 17, 1973. There was evidence that the transaction was not closed until August 23, 1973. Bayshore 21, Inc. took title in its own corporate name, and not as a trustee or in a representative capacity. Proper documentary stamps were attached to this document. On either August 22 or 23, 1973, Bayshore 21, Inc. executed a $1,300,000.00 note and mortgage to Commercial Trading Company, Inc. and a $5,000,000.00 note and mortgage to Security Mortgage Investors. These notes and mortgages were in the corporate name of Bayshore 21, Inc. but were guaranteed by the petitioner and Marvin Glick. These guarantees contain language that the mortgagee may proceed directly against the guarantors in the event of default. There was evidence that utilization of Bayshore 21, Inc. to effectuate the loans from Commercial Trading Company and Security Mortgage Investors was required by said mortgagees because of the fact that the then prevailing interest rate levels were in excess of the noncorporate statutory interest limit. On August 23, 1973, a joint venture agreement was entered into between petitioner and Marvin Glick. This joint venture agreement provided that "The parties acknowledge that BAYSHORE 21, INC. has taken title to certain property as trustee for ZUCKERMAN-VERNON CORP. and MARVIN GLICK and, upon completion of the financing arrangements, will convey the property to ZUCKERMAN-VERNON CORP. and MARVIN GLICK, a fifty (50 percent) percent interest being conveyed to each party. The property that is the subject of this joint venture is the CARRIAGE HOUSE, located at 54th Street and Collins Avenue, Miami Beach, Florida, each party to this agreement having a fifty (50 percent) percent interest in said property." On August 27, 1973, title to the Carriage House was conveyed by quitclaim deed from Bayshore 21, Inc. to Marvin Glick and petitioner, each to have an undivided fifty percent interest. Minimal stamps were affixed to this document, which bore the notation "No documentary stamps are required on this Deed inasmuch as the Grantor took title solely as Trustee for the Grantees herein." Thereafter, the respondent Department of Revenue assessed the parties to this August 27, 1973 deed for the documentary stamp taxes due, based upon the $18,550,000.00 existing mortgages on the property at the time of the conveyance ($12,250,000.00 to Prudential, $5,000,000.00 to Commercial Trading Company and $5,000,000.00 to Security Mortgage Investors). The delinquent documentary stamp taxes were assessed in the amount of $55,649.70, and a penalty was assessed in a like amount, making the total amount due $111,299.40.
Recommendation Based upon the above findings of fact and conclusions of law, it is recommended that petitioner be assessed the taxes and penalties set forth In the proposed Notice of Assessment of Tax and Penalty under Chapter 201, Florida Statutes, dated April 23, 1975. Respectfully submitted and entered this 30th day of January, 1976, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Mr. Ed Straughn Executive Director Department of Revenue Room 102, Carlton Building Tallahassee, Florida 32304 Paul R. Lipton, Esquire 17071 West Dixie Highway North Miami Beach, Florida Harold F.X. Purnell, Esquire Assistant Attorney General The Capitol Tallahassee, Florida
Findings Of Fact Upon consideration of the stipulation of the parties and documents attached thereto, the following relevant facts are found: On or about October 9, 1979, Dade County, a political subdivision of the State of Florida acting for the use and benefit of its Department of Housing and Urban Development, a public housing authority ("PHA"), entered into a Contract for Project Dade 8-10 ("Contract") with Irbye Giddens, Inc. and Cohen- Ager, Inc., a joint venture, for the construction of Project Dade 8-10, a/k/a Singer Plaza, a housing development for the physically handicapped. The Contract was granted to Cohen-Ager, Inc. and Irbye Giddens, Inc. pursuant to competitive negotiations based on a document titled Dade 8-10 Request for Proposals. Cohen-Ager, Inc. and Irbye Giddens Inc. were selected on the basis of their bid submission as modified by the agreement of the parties due to delay in commencing construction. As indicated by the original bid submission of Cohen-Ager, Inc. and Irbye Giddens, Inc. the original price of the project was $2,576,000; but at the request of Cohen-Ager Inc. and Irbye Giddens, Inc., the contract price was eventually raised to the amount found in Part II of the Contract, $2,970,000. On or about October 10, 1979, Dade County deeded the subject undeveloped property to Cohen-Ager Inc. and Irbye Giddens Inc., the joint venture, by "Quit-Claim County Deed Subject to Possibility of Reverter," ("Quit- Claim Deed"). The Quit-Claim Deed, which incorporated by reference the Contract described in paragraph "1," provided for automatic reverter to Dade County of all of the right, title, and interest of Cohen-Ager, Inc., in the property upon, among things, the termination, rescission or complete performance of the Contract. Cohen-Ager, Inc., and Irbye Giddens, Inc. having obtained title to the property by virtue of the Quit-Claim Deed, rightfully used the property as collateral to obtain financing to cover the cost of construction of project 8- 10. Cohen-Ager, Inc., and Irbye Giddens, Inc., were legally obligated under the Contract and the Quit-Claim Deed to complete construction of project 8-10 and to reconvey clear title to Dade County when the project was completed. Cohen-Ager, Inc., and Irbye Giddens, Inc., fully performed under the terms of the Contract and Quit-Claim Deed, and reconveyed the property to Dade County by Warranty Deed dated February 12, 1981, and recorded March 12, 1981 ("Warranty Deed"). The Warranty Deed is the instrument on which the State of Florida Department of Revenue seeks to impose the documentary stamp tax at issue here. The Warranty Deed was one step in a multi-step transaction used to finance the development and construction of project 8-10. Under this method of financing development of its property, Dade County transfers title to undeveloped property and "repurchases" developed property. Pursuant to the terms of the Contract, Dade County transferred title to the undeveloped property site to Cohen-Ager, Inc. and prohibited the transfer of the contract or property except (1) to an entity to which the contract is assigned with the written prior approval of the PHA and (2) to a mortgagee for the purpose of obtaining financing of the completion of the property. Dade County paid for the development of project 8-10 with the proceeds of Special Housing Revenue Bonds issued for that project pursuant to Chapters 159 and 166, Florida Statutes, Dade County Ordinance No. 79-49, and Dade County Board of County Commissioners' Resolutions R-1270-79 and R-1423-79. The Special Housing Revenue Bonds were issued under a Trust Indenture. When the property was reconveyed to Dade County by the Warranty Deed, Dade County paid to Cohen-Ager, Inc., and Irbye Giddens, Inc. the contract price, $2,970,000, from the proceeds of the bonds. The Department of Revenue seeks to impose the documentary stamp tax on the total amount of the contract price as the consideration for the Warranty Deed. The documentary stamp tax on $2,970,000 is $11,880.00, or $.40 per $100 of consideration. Article VII, paragraph (c), of the contract of Sale, attached to and made a part of the Contract, specifies in part that the Contractor (herein Cohen-Ager, Inc.) "shall pay all documentary stamps and taxes applicable to" the coveyance of the property to Dade County by warranty deed.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law it is RECOMMENDED that the Department of Revenue enter a Final Order assessing Cohen-Ager, Inc., for the documentary stamp tax due on the Warranty Deed to Dade County in the amount of $11,880.00, plus penalties and interest. DONE and ORDERED this 16th day of January, 1986, in Tallahassee, Florida. DIANE K. KIESLING Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 16th day of January, 1986. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 84-1425 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. Rulings on Proposed Findings of Fact Submitted by Petitioner and Intervenor Adopted in Finding of Fact Adopted in Finding of Fact 2. Adopted in substance in Finding of Fact 3 as regards the first two sentences of the proposed finding of fact. The last three sentences of the proposed finding of fact are rejected as unnecessary, as not supported by the evidence, as beyond the scope of the facts stipulated by the parties, and as being commentary. Adopted in Finding of Fact 4. Adopted in Finding of Fact 5. Adopted in Finding of Fact 6. Adopted in Finding of Fact 7. Adopted in Finding of Fact 8. Adopted in Finding of Fact 9. Adopted in Finding of Fact 10. Rulings on Proposed Findings of Fact Submitted by Respondent Rejected as unnecessary and irrelevant. It is simply a recap of part of the history and issues in the case and is therefore unnecessary to a determination of the issues. Adopted in substance in Findings of Fact 1, 6, and 7. Adopted in substance in Findings of Fact 5 and 6. There is an apparent typographical error in that the last two lines of Proposed finding of fact 3 are incomplete and the subject of the incomplete sentence is omitted. However it may be that the substance intended by Respondent is adopted in Finding of Fact 13. There is no proposed finding of fact 4. It may be that the incomplete sentence referred to above was intended to be proposed finding of fact 4. If so, the ruling on it is incorporated above. 5. Adopted in substance in Findings of Fact 2, 11 and 12. COPIES FURNISHED: Lewis R. Cohen, Esquire 1428 Brickell Avenue Eight Floor Miami, Florida 33131 Linda Lettera, Esquire Department of Legal Affairs Room LL04 The Capitol Tallahassee, Florida 32301 Joni B. Armstrong Assistant County Attorney 16th Floor 73 West Flagler Street Miami, Florida 33130 Randy Miller Executive Director 102 Carlton Building Tallahassee Florida 32301 William D. Townsend General Counsel 104 Carlton Building Tallahassee, Florida 32301 =================================================================
Findings Of Fact On 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.
The Issue The issue for consideration in this case is whether deeds by property owners which convey unencumbered real property to a corporation solely owned by them, are subject to a documentary stamp tax imposable under Section 201.021(1), Florida Statutes, and Rule 12B-4.013(7), Florida Administrative Code.
Findings Of Fact By Warranty Deed dated April 30, 1991, W. Dewey Kennell sold eight condominium apartments, units 1731, 1733, 1735, 1737, 1741, 1743, 1745 and 1747, in Baywood Colony Southwood Apartments IV, a condominium, to Kurt Rabau and Ronald Rabau, his son, residents of Germany. The Rabaus purchased the properties as an investment in rental property for income. At the time of the sale, the property was subject to mortgages totaling $250,000, which the Rabaus paid off on May 24, 1994. Sometime after the purchase, the Rabaus were advised to incorporate and hold title to the properties in a corporate capacity to protect themselves against personal liability. Thereafter, on September 14, 1994, the Rabaus formed Kuro, Inc., the Petitioner herein, to take and hold title to the properties, with Kurt Rabau and Ronald Rabau each owning 50% of the corporate stock. There were no other owners of stock in the corporation. On October 12, 1994, the Rabaus transferred all eight properties to Kuro, Inc. Kuro, Inc. had no assets other than the eight apartments, and did no business prior to the transfer of those apartments to it. Consequently, the stock of Kuro, Inc. was valueless prior to the receipt of the transferred apartments. The corporation’s federal tax form relating to transfer of property to a corporation, the “Corporation’s Statement on Transfer of Property Under Code Section 351” reflects that the Rabaus “transferred the jointly owned property [described therein] for which Kuro Inc. issued the stock”. From the evidence presented it is clear that the Kuro Inc. stock was issued in exchange for the contribution of the apartments to the corporation. Other documents in the corporation’s 1994 tax return indicate that the property was valued at fair market value at the time of transfer to the corporation, and the transferee’s, (corporation’s) adjusted basis was identical after the transfer. Each of the Rabaus received 500 shares of the corporation’s stock which was valued at $618,642. Of that amount, $617,642 was considered additional paid-in capital. There was no additional property received or possessed by the corporation. A minimal documentary stamp tax was paid by the parties at the time the eight Warranty Deeds for the apartments were transferred to the corporation. The consideration reflected on the face of each deed was “...the sum of $10.00 and other valuable consideration.” Subsequent to the transfer, the Department conducted an audit of the Clerk of Circuit Court in Sarasota County and, on November 10, 1994, issued a Notice of Intent to Make Documentary Stamp Tax and Discretionary Surtax Audit Changes, by which it indicated its intent to impose a documentary tax of $4,207.00 on the transfers, a 50% penalty of $2,103.50, and interest totaling $38.73 through November 10, 1994, with additional interest to accrue at the rate of 1% per month, prorated daily ($1.38), until date of payment. Thereafter, on March 27, 1995, the Department issued a Notice of Proposed Assessment to Kuro, Inc., and Petitioner timely filed a protest. Subsequent to that action, on January 11, 1996, the Department issued its Notice of Decision sustaining the proposed assessment, penalty and accrued interest, and Petitioner requested formal hearing.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Revenue enter a final order imposing a tax in the amount of $4,207.00 with interest from date of filing at 1 percent per month based on the amount of tax not paid to date of payment. DONE and ENTERED this 22nd day of April, 1997, in Tallahassee, Florida. ARNOLD H. POLLOCK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6947 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of April, 1997. COPIES FURNISHED: C. Samuel Whitehead, Esquire 2199 Ringling Boulevard Sarasota, Florida 34237 James F. McAuley, Esquire Office of the Attorney General The capitol - Tax Section Tallahassee, Florida 32399-1050 Linda Lettera General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs Executive Director Department of Revenue Tallahassee, Florida 32399-1011
Findings Of Fact Petitioner Kenneth Blume, an unmarried man, purchased real property in his name on December 19, 1988. Petitioner Kenneth Blume obtained a mortgage on the property in his own name with PNC Mortgage Servicing Company. Petitioner Kenneth Blume married Petitioner Tina Blume on November 3, 1990. Thereafter, Petitioner Kenneth Blume contacted a title company, Advance Title, Inc. to refinance the property and transfer the property from himself, as sole owner, to himself and his wife, Petitioner Tina Blume. On June 19, 1992, as part of the refinancing transaction, Petitioner Kenneth Blume transferred his individual mortgage with PNC Mortgage Servicing Company to Foundation Financial Services, Inc. which paid off Petitioner Kenneth Blume's original mortgage. On June 19, 1992, Petitioner Kenneth Blume gave Petitioner Tina Blume a legal interest in the property by transferring half of the encumbered property to her by quit claim deed. Petitioner Kenneth Blume executed the deed in the presence of Cheryl Scott, a notary public and an employee of Advance Title, Inc. Said deed lists Petitioner Kenneth Blume as grantor and Petitioner Kenneth Blume and his wife, Petitioner Tina Blume, as grantees. On June 19, 1992, as part of the refinancing transaction, Petitioners created a new first mortgage on the subject property in favor of Foundation Financial Services, Inc. This mortgage is the obligation of both Petitioners. The quit claim deed was prepared by Advance Title, Inc. on Petitioners' behalf. The quit claim deed showed that the consideration paid for the transfer of the encumbered property was $10. On June 24, 1992, Advance Title, Inc. went to the Clerk of the Circuit Court's Office to record the quit claim deed. As a condition precedent to the recordation of any deed transferring an interest in real property, Section 201.022, Florida Statutes, requires that the grantor, grantee, or agent for the grantee, execute and file a return with the Clerk of the Circuit Court. The return is identified as a Form DR-219, Return for Transfer of Interest in Real Property. On June 24, 1992, Advance Title, Inc. filled out and signed the Form DR-219, Return for Transfer of Interest in Real Property, as the agent of Petitioners. Advance Title, Inc., as Petitioners' agent, did not disclose the full amount of consideration on Form DR-219 as required by question 3. Instead, Advance Title, Inc. wrote that the property was sold for $10. Advance Title, Inc. did not disclose the extinguished or refinanced mortgage on Form DR-219. In response to the question whether the sale was financed, Advanced Title, Inc. did not check the "yes" box on Form DR-219. Form DR-219 defines the word "consideration", in pertinent part, as follows: the purchase price of the property or the total amount paid or to be paid for the transfer of any interest in real property. Consideration includes: cash; new mortgages placed on the property to finance all or part of the purchase; existing mortgages on the property either assumed or taken subject to; mortgages that are cancelled, satisfied or rendered unenforceable, settled by the sale or transfer or in lieu or foreclosure . . . . This definition is consistent with the Legislature's definition of consideration set forth in Section 201.02(1), Florida Statutes (1991), applicable here. Advance Title, Inc., as Petitioners' agent, stated on Form DR-219 that documentary stamp tax in the amount of $.60 was due on the subject transfer of interest in real property. On June 24, 1992, Advance Title, Inc. presented the quit claim deed to the Clerk of the Circuit Court for recordation together with the Form DR-219. The Clerk recorded the quit claim deed and collected $.60 in documentary stamp tax based on information that Advance Title, Inc. provided on the Form DR-219. The Clerk did not tell Advance Title, Inc. or Petitioners that additional documentary stamp taxes were due on the transfer. Respondent conducted a routine audit of the Clerk's records and determined that additional documentary stamp taxes were due on the deed transferring an interest in the encumbered property to Petitioner Tina Blume. The record contains no competent substantial evidence to show that Petitioners fall within an exception to or exemption from paying the additional documentary stamp tax in question here. Moreover, there is no competent persuasive evidence that an agent of the state of Florida or Santa Rosa County misrepresented a material fact on which Petitioners relied to their detriment. Petitioners have not met their burden of proving by a preponderance of the evidence that they do not owe additional documentary stamp taxes on the real estate transaction at issue here.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is recommended that Respondent enter a Final Order upholding its assessments as revised in a Notice of Reconsideration dated January 9, 1995, of documentary stamp tax, plus applicable interest and penalties against Petitioners Kenneth and Tina Blume. RECOMMENDED this 23rd day of October, 1995, in Tallahassee, Leon County, Florida. SUZANNE F. HOOD, Hearing Officer Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of October, 1995. APPENDIX The following constitutes the undersigned's specific rulings pursuant to Section 120.59(2), Florida Statutes, on all proposed findings of fact submitted by the parties to this case. Petitioners' Proposed Findings of Fact Petitioners' proposed recommended order for the most part is a memorandum of law and does not designate proposed findings of fact. However, the undersigned rules as follows on statements of fact contained within Petitioners' memorandum: Accept that Petitioner Kenneth Blume chose to sign the quit claim deed. No competent persuasive evidence regarding the Clerk of the Circuit Court's directions to Advance Title, Inc. or Petitioners. Uncorroborated hearsay evidence. Accept that Petitioners were not aware of Respondent's hotline service at the time of the conveyance; however, irrelevant. Reject that Petitioners made prudent and reasonable attempts to learn the requirements of Section 201.02, Florida Statutes. Petitioners had constructive notice of the published statutes and rules which were in effect at the time of the conveyance. Reject that the "system" deceived Petitioners. No competent persuasive evidence to support this fact. Reject that the "system" or "state" failed to disclose the law controlling taxes on real estate transactions. Applicable statutes and rules read together with the definition of consideration set forth on the Form DR-219 constitute sufficient notice to Petitioners. The "system" or "state" did not draft the language in the quit claim deed; therefore, the state was not required to include any language relating to the cost of the transaction. The Form DR-219 included a definition of consideration which is consistent with the language in the applicable statutes and rules. Reject that the state added new terms or changed the terms of the agreement memorialized in the quit claim deed. The state was not a party to the agreement between Petitioners. Reject that the system failed to inform Petitioners of "all" the terms in the contract as "offered" by the state. Respondent's assessment does not involve a contractual relationship between Respondent and Petitioners with the Respondent as a "seller" and Petitioner Kenneth Blume as a "buyer." Respondent's Proposed Findings of Fact The undersigned accepts the substance of Respondent's Proposed Findings of Fact 1-28 as modified in Findings of Fact 1-23 of this Recommended Order. COPIES FURNISHED: Nancy Francillon, Esquire Mark T. Aliff, Esquire Office of the Attorney General The Capitol - Tax Section Tallahassee, FL 32399-1050 Kenneth and Tina Blume 159 W. 29th Court Fayetteville, AR 72701 Linda Lettera, Esquire Department of Revenue 204 Carlton Building Tallahassee, FL 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100
Recommendation Based upon the findings of fact and conclusions of law recited above, it is recommended that the assessments made by respondent for additional documentary stamp surtaxes and the corresponding penalties be upheld. Respectfully submitted and entered this 27th day of February, 1976, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32399-1550 COPIES FURNISHED: Mr. J. Ed Straughn Executive Director Department of Revenue The Capitol Tallahassee, Florida
