Financial News From Tally

I am pleased to report that the Florida Department of Revenue has concurred in FAR’s (Florida Association of Realtors) request for a Technical Assistance Advisement on application of documentary stamp tax to “short sales.”  Specifically, FAR had argued to the Department that the documentary stamp tax law requires payment of tax based upon the purchase price paid by the purchaser without regard to any discharge of debt by the lender.  An employee of the Department initially opined that tax was due on an amount that included discharge of a debt by the lender.  However, following extensive discussions with the agency, including Executive Director, Lisa Echeverri, and General Counsel, Marshall Stranburg, the Department concurred in FAR’s interpretation of the law.  The attached Technical Assistance Advisement was issued by the Department on September 23, 2008. 

The Department agreed that because the transactions at issue are arms-length and the purchaser has no control over whether the lending institution does or does not decide to discharge a portion of the mortgage debt, the discharge of debt was not “consideration” for the transfer of the real property and thus was not subject to tax.   The Department has distinguished shorts sales from those situations in which debt is discharged because property is transferred subject to outstanding mortgage debt or is transferred subject to the purchaser’s agreement to assume the debt.  Under the latter circumstances, the discharge of debt will continue to be treated as consideration for the transfer of the real property and thus subject to tax.