11-002802 Jorge Ramos vs. Department Of Revenue Status: Closed Recommended Order on Friday, June 1, 2012.

Summary: Warranty Deed transfer is change in ownership because there was no consideration or purchaser. Therefore, documentary stamp taxes are not owed.

TATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

JORGE RAMOS , )

)

Petitioner , )

)

vs. ) Case No. 11 - 280 2

)

DEPARTMENT OF REVENUE , )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case

on March 9, 2012, by video teleconference, with Jorge Ramos

appearing in Miami, Florida, and the Department of Revenue

appearing in Tallahassee, Florida, before June C. McKinney, a

duly - designated Administrative Law Judge of the Division of

Administrative Hearings, who presided in Tallahassee, Florida.

APPEARANCES

For Petitioner: Juan C. Zorrilla, Esquire

Zorrilla and Associates, P.L.

Penthouse 10

2600 Douglas Road

Coral Gables, Florida 33134

For Respondent: Timothy E. Dennis , Esquire

Assistant Attorney General

Office of the Attorney General

The Capital, Plaza Level 01

Revenue Litigation Bureau

Tallahassee, Florida 32399 - 1050

STATEMENT OF THE ISSUE

Whether the Petitioner is liable for documentary stamp taxes

and interest to the Respondent totaling $80,405.54, plus

additional interest accruing fro m the date of the assessment, as

reflected in the Notice of Proposed Assessment dated January 24,

2011.

PRELIMINARY STATEMENT

The Department of Revenue ("Respondent" or "Department")

issued Jorge Ramos ( " Petitioner " or " Ramos " ) a Notice of Proposed

Assessm ent dated January 24, 2011, assessing him for unpaid

documentary stamp taxes of $61 , 983.00, plus interest for the

period of October 23, 2007, to January 24, 2011, or $18,422.54,

for a total of $80,405.54. Petitioner denied liability and

requested an admin istrative hearing.

The case was referred to the Division of Administrative

Hearings on June 3 , 2011. The presiding A dministrative L aw J udge

set the final hearing for August 19, 2011 , at 9:00 a.m. After

several continuances, the final hearing was held by video

teleconference on March 9, 2012, in Tallahassee and Miami ,

Florida.

At the final hearing , 1 / Petitioner testified on his own

behalf and presented the testimony of David Coven. Petitioner

also offered Exhibits numbered 1 through 16 that were admitte d

into evidence. Respondent presented two witnesses: Christopher

Maxwell, Auditor III; and Charles Phillips, Revenue Program

Administrator I. Respondent also offered Exhibits 1 through 11

that were admitted into evidence.

The proceeding was recorded a nd transcribed. The Transcript

was filed on March 27, 2012. Both parties filed timely Proposed

Recommended Orders, which have been considered in the preparation

of this Recommended Order.

FINDING OF FACTS

Based on the agreed to issues of fact, oral and documentary

evidence presented at the final hearing and on the entire record

of this proceeding, the following findings of fact are made:

1. Soleil Lake Condom i ni um, LLC ("Soleil") is a Florida

limited liability company that formed in 2005.

2. Upon forma tion, Soleil was comp osed of two managing

members. Ramos was a managing member of Soleil with 50 percent

interest in Soleil's assets , and Abelardo Rivera ("Rivera") ,

Ramos' partner in Soleil, owned the other 50 percent membership

interest .

3. On or about September 9, 2005, Soleil purchased a n

apartment building in Miami - Dade County , which it converted to

240 condominium units.

4. The property was transferred to Soleil by warranty

deed. 2 / D ocumentary stamp taxes in the amount of $154,500.00 were

paid on t he warranty deed when it was recorded with the Miami -

Dade Clerk of Courts.

5. Contemporaneously with the transfer of the land, Soleil

also executed a m ortgage on the property and secured a loan with

FirstBank Puerto Rico ("FirstBank") for $25,637,822.00 . The date

final payment matured for the loan was September 8, 2007. 3 /

6. By 2007, Soleil had sold 110 of the condominium units.

7. The real estate condominium market slowed down and 130

condominiums units remained unsold. Eventually, unit s ales came

to a halt.

8. Ramos and Rivera decided that the condominium sales

market was no longer viable and that it was in the company's best

interest to terminate the sales efforts , distribute the remaining

units equally between them , and then dissolve Soleil .

9. S oleil called a special meeting 4 / and determined that

each member would be responsible for the payment of 50 percent of

the outstanding loan amount to FirstBank. Ramos and Rivera

agreed that each partner would enter into loan agreements before

the distribu ti on of the remaining units to give them the cash

needed to pay off their respective obligations regarding the

remainder of Soleil's $25,637,822.00 preexisting mortgage .

10. Ramos ' share of the preexisting loan was $4 ,000,000. 00 ,

for which he was persona lly liable .

11. On Octo ber 17, 2007, Ramos executed a First Mortgage

Deed 5 / over the 65 condominium units in favor of HBAR Realty LLC 6 /

conveying a "Collateral Mortgage Interest" to secure a

$4,000.000 .00 promissory note . The HUD closing document

indicat ed a disbursement date for the monies of October 17, 2007,

to Jorge Ramos, a married man. 7

12. On October 18, 2007, Ramos and Rivera executed a

"Certificate of Incumb a ncy and Resolution of the Members of

Soleil Lake C ondominium, LLC ," authorizing the conv eyance of 65

of the 130 condominium units to Ramos " as a distribution. " 8 /

13. On October 18, 2007, Soleil contemporaneously executed

a W arranty D eed 9 / to Ramos transferring his 50 percent interest,

the 65 condominium units.

14. The Warranty D eed specif ically disclaims documentary

stamp tax liability on its face, stating:

WHEREAS NO NEW CONSIDERATION IS BEING GIVEN

FOR THIS DEED AN D THIS DOCUMENT IS THEREFORE

EXEMPT FROM DOCUMENTARY TAX PURSUANT TO F.S.

Chapter 201, as this instrument is solely a

distrib ution to a Member of his share of

company assets and no additional stamps are

due.

15. On October 23, 2007, the First Mortgage Deed,

Certificate of Incumb a ncy, and Warranty D eed were recorded in the

Miami - Dade County Public Records . O nly minimal documen tary stamp

taxes (60 cents) were paid on the Warranty Deed .

16. On or about January 25, 2008, Soleil filed Articles of

Dissolution for a Limited Liability Company ("Articles"). 10 / The

Articles state: "All deb ts, obligations and liabilities of the

limit ed liability company have been paid or discharged."

17. On February 6, 2008, FirstBank executed a Satisfaction

of the Mortgage , releasing the September 2005 mortgage on the

property held by Soleil.

18. In 2010, the Department initiated an audit of the Ramos

October 1 7, 2007 , Warranty D eed. Chris Maxwell ("Maxwell" or

"auditor" ) was assigned to perform the audit.

19. To ascertain Petitioner's documentary tax liability for

the W arranty D eed, Maxwell evaluated public records because Ramos

never provided the information to Maxwell for the audit as he had

agreed during the only successful contact Maxwell had with

Petitioner .

20. Maxwell chose the mortgage value $4,000,000.00 as a

basis for his audit because the mortgage was recorded one day

before the W ar ranty D eed was executed . Therefore, Maxwell

determined that Ramos took title to the 65 units subject to the

$4,000,000.00 HBAR Mortgage and concluded it was the encumbrance

at the time of transfer.

21. During his audit, Maxwell determined the beneficia l

interest amount for his calculations by using as a base the 2009

assessed valued amount for the 65 condominium units obtained from

the Miami - Dade Property Appraisers Office , because he did not

receive any information from Ramos regarding the transaction .

22. Maxwell started his calculation with the 2009 values ,

by taking the condominium units and assign ing value according to

the Property Appraiser's valuation . Maxwell then adjusted the

amount downward by three percent 11 / to arrive at an estimation of

the parcels ' value in 2008 , and the 2008 amount was then adjusted

downward by another three percent to arrive at an estimation of

the 2007 fair market value of $7,806,334. 00.

23. Maxwell next took the mortgage amount of four million

dollars and subtracted it from the 2007 fair market value,

leaving a balan ce of $ 3,806,334 .00 and divided that amount by two

since Ramos had obtained only one - half of the condos , which came

to an equity determination of $1,903,167.00.

24. Next, Maxwell valued the taxable conside ration by

adding the assumed value of the mortgage $4,000,000.00 and the

estimated value of the equity or beneficial interest transferred

of $1,903,167.00 for a total of $5,903,167.00 .

25. Maxwell then used the Miami - Dade surtax for deeds of 45

cents per $100 for a total of $26,564.40. 00.

26. On or about December 20, 2010, the Department issued a

" Notice of Intent to Make Audit Changes " ("Notice of Intent") to

Ramos with its determination and basi s for determination that

$61,983.00 in documentary stamp t axes plus interest was due.

27. On or about January 24, 2011, the Department issued its

" Notice of Proposed Assessment " , reasserting the original tax

that was noticed from the Notice of Intent and calculating an

additional interest in the amount of $ 18,42 2.54.

CONCLUSIONS OF LAW

28. The Division of Administrative Hearings has

jurisdiction over the subject matter of this proceeding and of

t he parties thereto pursuant to s ections 72.011, 120.569, and

120.57(1), Florida Statutes.

The Parties ' Burden of Proof

29. Section 120.80(14)(b)2 . provides that, in an

administrative proceeding initiated pursuant to s ection

72.011(1), Florida Statutes, "the applicable department's burden

of proof, except as otherwise specifically provided by general

law, shall be limited to a showing that an assessment has been

made against the taxpayer and legal grounds upon which the

applicable department made the assessment."

30. Once the Department has satisfied its burden of

establishing the factual and legal basis for its assessm ent, the

burden shifts to the taxpayer to prove by a preponderance of the

evidence that the assessment is incorrect. See Dep ' t of

Rev. v. Nu - Life Health and Fitness Center , 623 So. 2d 747,

751 - 52 (Fla. 1st DCA 1993); § 120.57(1)(j), Fla . Stat.

The Statut e of Limitations

31. Section 95.091 provides t he statute of limitations

applicable in actions to collect taxes and reads in pertinent

part:

(3)(a) With the exception of taxes levied

under chapter 198 and tax adjustments made

pursuant to ss. 220.23 and 624.50921 , the

Department of Revenue may determine and

assess the amount of any tax, penalty, or

interest due under any tax enumerated in s.

72.011 which it has authority to administer

and the Department of Business and

Professional Regulation may determine and

assess the amount of any tax, penalty, or

interest due u nder any tax enumerated in s.

72.011 which it has authority to administer:

1.a. For taxes due before Ju ly 1, 1999,

within 5 years after the date the tax is due,

any return with respect to the tax is due, or

such return is filed, whichever occurs later;

and for taxes due on or after July 1, 1999,

within 3 years after the date the tax is due,

any return with respect to the tax is due, or

such return is filed, whichever occurs later;

b. Effective July 1, 2002, notwithstanding

sub - subparagraph a., within 3 years after the

date the tax is due, any return with respect

to the tax is due, or such return is filed,

w hichever occurs later;

* * *

(4) If administrative or judicial

proceedings for review of the tax assessment

or collection are initiated by a taxpayer

within the period of limitation prescribed in

this section, the running of the period is

tolled dur ing the pendency of the proceeding.

Administrative proceedings include taxpayer

protest proceedings initiated under s. 213.21

and department rules.

32. S ection 213.345 further provides the parameters when

the statue of limitations can be tolled and reads in pertinent

part:

213.345 Tolling of periods during an audit. Ï

The limitations in s. 95.091 (3) and the

period for filing a claim for refund as

required by s. 215.26 (2) shall be tolled for

a period of 1 year if the Department of

Revenue has, on or after July 1, 1999, issued

a notice of intent to conduct an audit or

investigation of the taxpayerÓs account

within the applicable period of time. The

department must commence an audit within 120

days after it issues a notice of intent to

conduct an audit, unless the taxpayer

requests a delay. If the taxpayer does not

req uest a delay and the department does not

begin the audit within 120 days after issuing

the notice, the tolling period shall

terminate unless the taxpayer and the

department enter into an agreement to extend

the period pursuant to s. 213.23 .

33. Petitioner raised the statute of limitations in this

proceeding and thus made it an issue in this matter. However ,

t he Department presented credible evidence that the audit was

commenced within the three - year statute of limitation s and that

the assessment was issued within four years of the warranty deed.

Therefore, the audit period is proper and the statute of

limi tations has not expired regarding the time period for the

assessment at issue.

Other Relevant Statutes

34. Documentary stamp tax is an excise tax due on a

document. Section 201.01 , Florida Statutes (2007) , provides that

"documentary stamp taxes shall be paid on all recordable

instruments requiring documentary stamp tax according to law,

prior to recordation."

35. In s ection 212.02 (2007) , the Florida Legislature set

the parameters for tax on deeds and other instruments conveying

an interest in real pr operty, which reads in pertinent part :

(1) On deeds, instruments, or writings

whereby any lands, tenements, or other real

property, or any interest therein, shall be

granted, assigned, transferred, or otherwise

conveyed to, or vested in, the purchaser or

any other person by his or her direction, on

each $100 of the consideration therefor e the

tax shall be 70 cents. When the full amount

of the consideration for the execution,

assignment, transfer, or conveyance is not

shown in the face of such deed, instru ment,

document, or writing, the tax shall be at the

rate of 70 cents for each $100 or fractional

part thereof of the consideration therefor e .

For purposes of this section, consideration

includes, but is not limited to, the money

paid or agreed to be paid; the discharge of

an obligation; and the amount of any

mortgage, purchase money mortgage lien, or

other encumbrance, whether or not the

underlying indebtedness is assumed. If the

consideration paid or given in exchange for

real property or any interest th erein

includes property other than money, it is

presumed that the consideration is equal to

the fair market value of the rea l property or

interest therein.

36. The Supreme Court held that "t he transfer of property

between a grantor and its wholly owned grantee absent any

exchange of value, is without consideration or a purchaser and

thus not subject to the documentary stamp tax in section

201.02(1)." Crescent Miami Ct r . , LLC, v D ep't of Revenue , 903

So . 2d 913 ( Fla. 2005 ).

37. As in Crescent , Petition er did not give anything of

value in exchange for the 65 condominium units distributed to him

by the Warranty Deed on October 18, 2007 . The record

demonstrates that Soleil consisted of two managing members, Ramos

and Rivera, who each held a 50 percent int erest in Soleil's

assets. In 2007, w hen Soleil's unit sales stopped and 130

condo minium units remained as the company's assets, Ramos ' 50

percent interest was 65 condominium units . Subsequently, when

Soleil decided to dissolve the company and distribute the

remaining 130 condominium units, Petitioner's ownership remained

a 50 percent share in Soleil's assets, 65 condominium units.

Hence, the October 18, 2007, Warranty Deed transferring the 65

condo minium units to Ramos only changed Petitioner's ownership

form.

38. T he Department's contention that the Warranty Deed

provided an additional 50 percent interest in the 65 condominium

units, which Petitioner did not already possess as a half - owner

of Soleil , and therefore transferred Ramos a beneficial intere st,

which constituted consideration is not persuasive. In this

matter, t he Warranty Deed transfer is only a change in ownership

because there was no consideration or purchaser in the

transaction as required by section 201.02. As such, the Warranty

Deed i s not taxable.

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, Warra nty 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. McK INNEY

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 Administra tive Hearings

this 1st day of June 2012 .

ENDNOTE S

1 / Of note, the Department attempted to change its position on

the assessment and provide a new assessment the morning of the

final hearing with out proper notice to Petitioner. The

undersigned found the new assessment prejudicial and did not

allow the Department to use the new reassessment in this matter.

2 / Respondent's Exhibit 2.

3 / Respondent's Exhibit 1.

4 / Petitioner's Exhibit 1.

5 / Respondent's Exhibit 3.

6 / Ramos claimed that he pledged additional properties including

a shopping center and his residence to secure the $4,000,000 loan

from HBAR. His testimony regarding such is not found to be

credible based on the First Mortgage D eed specifically excluding

his residence and the Settlement Statement for the transaction

only listing the 65 condominiums units.

7 / Petitioner's Exhibit 5.

8 / Petitioner's Exhibit 10.

9 / Respondent's Exhibit 7.

10 / Respondent's Exhibit 8.

11 / Maxwell used a three percent base each year because homestead

allows properties to increase by three percent a year , so he used

the same amount to decrease the amount yearly.

COPIES FURNISHED :

Nancy Terrel, General Counsel

Department of Revenue

Post Office Box 6668

Tallahassee, Florida 32314 - 6668

Lisa Vickers, Executive Director

Department of Revenue

Post Office Box 6668

Tallahassee, Florida 32314 - 6668

Juan Carlos Zorrilla, Esquire

Zorrilla and Associates, P.L.

Penthouse 10

2600 Douglas Road

Coral Gables, Florida 33134

[e-mail]

Timothy E. Dennis , Esquire

Assistant Attorney General

Office of the Attorney General

The Capital, Plaza Level 01

Revenue Litigation Bureau

Tallahassee, Florida 32399 - 1050

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.