CHIEF JUSTICE: WE HAVE THE LAST CASE . CRESCENT MI AMI C E NTER VER SUS FLORIDA DEPARTMENT OF REVENUE.MR. GOLDBERG. GOOD MORNING. MAY IT PLEASE THE COURT. FRED GOLD BERG ON BE HALF OF PETITIONER CR ESCENT MIAMICENTER. IN THIS C ASE , THE GRANT OR CRESCENT RE ALTY , TRANSFERRED CERTAIN REAL PROPERTY TO ITS WHOLLY OWNED SUBSIDIARY MIAMI CENTER.

CAN YOU GIVE US A LI TTLE PRIMER ON TRANSACTIONS INVOLVING REAL PROP ERTY, IN T ERMS OF WHEN THERE IS A SALE AND WHEN THERE IS A GIFT AND WHAT OTHER KINDS OF TRANSACTIONS THERE ARE, AND LEADING UP TO WHAT YOU BELIEVE TO BE THE INTENT BEHIND THE STATUT ORY SCHEME THAT CA LLS FOR DOC STA RPS ON TRANSACTIONS BUT COULD YOUSTART WITH WHAT KINDS OF TRANSACTIONS ARE THERE OUT THERE IN THE WO RLD , AND THEN LET'S TALK ABOUT WHAT KIND OF COVERED BY THE DOC STAMPLAW. W OULD YOU MIND ADDRESSING ITTHAT WAY.

SU RE. I WOULD BE GLAD TO. YOUR HONOR, THE DEPARTMENT OF REVE NUE 'S POSITION IN THIS CASE IS THAT THERE ARE TWO TYPE S OF TRANSACTIONS. THERE ARE GIFTS, WHICH ARE NOT TAXABLE , AND THERE ARE PURCHASES , WHICH ARE ALL, EVE AND EVERYONE , TAXABLE , UNLESS THEY FALL WITHIN AN EXPRESS EXEM PTION OR EXCEPTION WITHIN THE TAXING STATUTE . OUR CONTENTION IS THAT THAT IS NOT IN ALIGNMENT WITH THE EXPRESS LANGUAGE OF SECTION 201.02.

COME BACK AND TELL ME, AGAIN , WHAT KINDS OF TRANSACTIONS ARE THERE. WHAT IS ON THE RAINBOW OUT THERE, OR DO WE START OVER HERE? D O WE HAVE GIFTS , AND OVER HERE, DO WE HAVE A ST RICT HANDS-OFF SALE , YOU KNOW , BETWEEN TWO PART IES , AND WHAT HAVE WE GOT IN THE MIDDLE?

I WOULD SUPPOSE, YOUR HONOR, THAT O N ONE E ND OF THE SPECTRUM , THAT WOULD BE THE GI FT FOR LOVE AND AFFECTION, SUCH AS WAS DEALT WITH B Y THIS COURT IN , I BELIEVE , CULBREATH VERSUS REED . ON THE FAR END OF THE S PECTRUM IN THE OTHER DIRECTION, WOULD BE THE STANDARD TRANSACTION. CASH.

PURCHASE AND SALE AGREEMENT.

YES. AND SOME WHERE IN THE MI DDLE WOULD BE A SITUATION SUCH AS WE HAVE HERE , WHERE WE HAVE PROPERTY TRANSFERRED FR OM A PARENT CORPORATION TO A SUBSIDIARY , PARENT BUSINESS ENTITY TO A SUBSIDIARY .

NO DOC STAMPS ON GIFTS?

THERE ARE NO DOC STAMPS ON GIFTS, YOUR HO NOR. THAT IS EXPRES SED WITHIN THE REGULATIONS OF THEDEPARTMENT OF REVENUE.

BUT ISN'T JUST TAKING THE FIRST SENTENCE OF THE STATUTE , IT I S PRE TTY ALL ENCOMPASSING, IS I T NOT? IT SAYS , O N DE EDS , STRULTS , OR W RITING - - INSTRUMENTS, OR W R ITING WHER EBY ANY LANDS , TENEMENTS OR ANY OTHER PROPERTY OR ANY INTE REST THERE IN S HALL BE GR ANTED OR TRANSFERRED OR OTHERWISE CONVEYED, I MEAN THAT, IS VERY BROAD, COR RECT? I MEAN , ANY TRANSFER FOR V ALUE .

YOUR HONOR , IT IS THE REMAINDER OF THAT SENTENCE WHICH HAS GIVEN RISE TO MU CHOF THE CASE LAW WHICH HAS BEEN GENERATED BY THIS AND THE LOWER COURTS , AND THE REMAINDER OF THAT SENTENCE IS THAT THE TAX IS , THE PURCHASER OR OTHER PE RSON BY HIS OR HER DI RECTION ON E ACH $100 OF THE QRTION BEFORE $100 OF THE CONSIDERATION , THERE FOR THE TAX SHALL BE 70 CENTS. THE COURT HAS UNIFORMLY IN THE PA ST, INTERPRETED THIS STATUTE AS REQUIRING, BOTH,THAT THERE BE A PURCHASER AND THAT THERE BE CONSIDERATION PAID A S PREREQUISITE TO ANY TAX BEING DUE.THE COURT HELD T HAT WAY I N DUVORY VERSUS GAY AND PALMER VERSUS GREEN AND THEDEPARTMENT OF REVENUE

S O YOUR POSITION IS, AS I UNDERSTAND, IS THAT , EVEN THOUGH THERE WAS THIS AMENDMENT IN 1990 , THAT SEEMED TO ATTEMPT TO CLARIFY THE CONSIDERATION PO RTION OF THIS , THAT THERE , ST ILL , IS NO DEFINITION EXPR ESSLY IN THE STATUTE , OF THE WORD "PURCHASER ". IS THAT S I MPLY PUT, WHEREYOU ARE?

YES. IN PAR T, YOUR HONOR.

AND THAT YOU HAVE TO GO BACK TO DAMERIA , IN OR DER TO G ET TO PURCHASER.

YES. EVEN THE STATUTE DOES NOT CONTAIN A DEFINITION OF EVEN THE WORD CONSIDERATION. IT GIVES EXAMPLES OF WHAT IT CONSTITUTES CONSIDERATION, BUT IT DOES NOT SAY WHAT CONSIDERATION IS.

WHAT WAS THE INTENT BEHIND THE 1990 AMENDMENT TO THIS STATUTE?

YOUR HONOR , THE LEGISLATURE IS PRESUMED TO HAVE KNOWN AND AD OPTED PRIOR JUDICIAL DECI SIONS INTERPRETING EX ISTING STATUTES, WHEN IT AMENDS A STATUTE. THIS COURT HEL D, IN THAT FASHION, IN HOLLYWOOD VERSUS LOMBARDI IN , FOUR YEARS AGO. THE AMENDMENT, ITSELF , EVIDENCED A HIGH DEGREE OF FAMILIARITY WITH THIS COURT 'S CASE LAW. THE AMEN DMENT ADDED TO SECTION 201.02 SUBS ECTION 1 , TWO SENTENCES. AND THEY READ, FOR PURPOSES OF THIS SECTION , CONSIDERATION INCLUDES BUTIS NOT LIMIT TODD , MONEYPAID OR AG REED TO BE PAID, THE DISCHARGE OF AN OBLIGATION, THE AM OUNT O F ANY MORTGAGE , PURCHASE M O NEY MORTGAGE LIEN OR OTHER ENCUMBRANCE , WHETHER OR NOTTHE UNDER LYING INDEBTEDNESS IS ASSU MED . NOW , THAT AFFECTS THIS COURT'S DECISION IN DAMERIA. IN DE MARIA THE SITUATION WAS THAT A PIECE OF PROPERTY WAS TRANSFERRED BY AN OWNTORY A WHOLLY OW NED BUSINESS EN TITY .

AND THEY ONLY GOT , I UNDERSTAND, BUT WHAT DO YOU , WHAT IS YOUR POSITION ON WHAT THE LEGISLATURE WAS INTENDING T O DO , BY THE TOTAL LANGUA GE THAT WAS PUTIN THE STATUTE, BY THAT AMENDMENT?

THE LEGISLATURE , BY ADDING THESE TWO SENTENCES , WAS INTENDING TO CLARIFY THE LANGUAGE IN LIGHT OF THE VARIOUS OPINIONS W HICH HAVE BEEN ISSU ED BY THIS AND OTHER COURTS.

BUT WHAT SITUATION THAT WASN'T COVERED BEFORE , BECAUSE THEY RE FER IN THE LEGISLATIVE HI STORY , TO LOOP HOEPS HOLES , S O T O LOOPHOLES, SO YOU ARE SAYING IT DIDN'T PLUG UP EVERYTHING , SO THAT EVERYTHING OTHER THAN A GIFT IS TAXABLE , BUT WHERE DID IT M O VE THE LAW TO? WHAT IS COVERED AFTER 1990, THAT WASN'T COVERED BEFORE?

THAT IS FOUND IN THE SECOND SENTENCE OF THE A MENDMENT TO SUBSECTION 1. IF THE CONSIDERATION PAID OR BEGIN IN EXCHANGE FOR REAL PROPERTY OR ANY INTEREST THERE IN INCLUDES PROPERTY OTHER THAN MONEY, THEN IT GIVES RISE TO THIS PRESUMPTION. THAT SENTENCE ADD RESSES THIS COURT'S HOLD ING IN D E VORE VER SUS GAY, IN WHICH THE GRANTEE PROMISED F UTURE RENTS TO THE GRANT OR.

WOULD THAT INCL UDE STOCK ?

IT WOULD . IT WOULD INCLUDE STOCK, IF THE GRANT O R RECEIVED SOMETHING WHICH IT DID NOT OWN BEF ORE .

WOULD IT INCLUDE INFLATED VALUE OF STOCK?

IT WOULD DEPEND UPON THE CIRCUMSTANCES.

HELP ME , NOW , WITH , WE ARE ON THE S PECTRUM , AND YOUSAY IT IS NOT A GIFT .

YES, YOU ARE .

AND S O WE NOW ARE TRYING TO FI GURE OUT WHAT IT IS, IN TERMS OF APPLYING THE STATUTE THERE . AND S O W E HAVE CONVEYANCE OF THIS REAL E STATE FROM ONE CORPORATION TO AN OTHER COR PORATION, IS THAT CORRECT?

THAT IS AN IN ES SENCE CORRECT.

AND NOW THE OWNERS OF THE CORPORATION THAT CONV EYED IT, ARE THEY, AL SO, THE OWNE RSOF STOCK IN THE CORPORATION THAT THEY CONVEYED IT TO?

YES , YOUR HONOR. CRE SCENT MIAMI CENTER IS A WHOLLY -OWNED SUBSIDIARY OF THE GRANT OR.

SO BY CONVEY ING THIS PROPERTY TO THE SECOND CORPORATION , HAVEN'T THEY INCREASED THE STOCK V ALUE IN THE SECOND CORP ORATION , AND THEREFORE THEIR INTEREST IN THAT CORPORATION?

YOUR HONOR , THAT QUESTION ADDRESSES A FINE LINE ACCOUNTING DISTINCTION WHICH THE DEPARTMENT OF REVENUE I S ATTEMPTING TO D RAW HERE. BEFORE THE TRANSACTION , THE GRANT OR OWNED PROPERTY AND INTERESTS IN THE GRANT E ERX THE LLC. AND AFTER THE TRANSACTION, THE GRANTOR OWNED THE LLCWITH THE PROPERTY IN IT , BEFORE AND AF TER THE TRANSACTION. THE GRANTOR HAD THE SAME BALL OF ASSET S AS I T HADAFTERWARD.

SO IT IS YOUR POSITION THAT THERE CAN BE FREE MOVEMENT OF ASSETS , WITHIN WHOLLY -O WNED CORPOR ATIONS , SUBSIDIARIES , WHAT EVER , AS LONG AS THE SAME STOCKHOLDERS ARE INVOLVED , AND WITHOUT ANY TAX CONSEQUENCES .

I WOULD NOT SAY WITHOUT T AX CONSEQUE NCES. THERE MAY BE INCOME TAX CAPITAL GAIN CONSEQUENCES , BUT WITH RES PECT TO THE DOCUMENTARY STAMP TAX , YES , THAT IS OUR POSITION. OUR POSITION IS THAT, UNDER THAT CIRCUMSTANCE , THERE IS NEITHER A PURCHASER NOR CONSIDERATION, ASSUMING , OFCOURSE, THAT, AS HERE , THE TRANSACTION DID NOT INV OLVE A CONVEYANCE OF PROPERTY SUBJECT TO A MORTGAGE OR DID NOT INVO LVE ANY ASSUMPTION OF THAT

WOULD YOUR, IF YOU WERE IN THE SITUATION IN THE F IRST DIST RICT CASE , WHERETHERE WAS A S LIGHT DIFFERENCE IN OWNERSHIP , ONE-HALF OF ONE PE RCENT , WOULD THAT MAK E A DIFFERENCE ?

YES, YOUR HONOR.

THE WH OL E TRANSACTION.

IT WOULD MAKE

WHY IS THAT?

YOUR HONOR , IN THE MUBEN-LAMAR CASE , THE SITUATION WAS THAT THE GRANTTEE WAS NO T THE SAME AS THE GRANT A THE TORE , THAT AS THE GRANT OR , THAT LAMAR HAD INTEREST IN THE GRANTEE, HADPAID FOR ITS PARTNERSHIP INTEREST, AND THAT PARTNERSHIP INTEREST CONSTITUTES INTENTIONAL

WHERE DO YOU FIND THAT DISTINCTION IN THE LANGUAGE OF THE STATUTE?

THE DIST INCTION IS SI MPLY IN TERMS OF WHETHER THERE IS A PURCHA SER AND WHETHER THERE IS CONSIDERATION. IN THE CASE OF MUBEN-LAMAR , THERE IS A PURCHASER ANDTHERE IS CONSIDERATION , BECAUSE WHAT THE GRANTORRECEIVES IS INTEREST , IS DIFFERENT FROM WHAT IT HAD BEFORE THE TRANSACTION. IT GOT SO METHING , THE GRANTOR GOT SO METHING IT DIDN'T HAVE BEF ORE. IT GOT AIN'T REST IN A PARTNERSHIP, WHICH INVOLVED A PARTNER SEPARATE AND AP ART, A THIRD PARTY THAT HAD NO INTEREST PRIOR TO THE TRANSACTION , TO THE REAL PROPERTY.

WHAT I AM B OTHERED BY , IS WHAT MISCHIEF CAN COME ABOUT HERE, IN ALL OF THESE VARIOUS ENTITIES AND TRANSACTIONS . AND IT WOULD SE EM TO ME, THAT FO LLOW ING THE LO GIC OF YOUR POSITION , THAT IF IOWNED A PIECE OF PROPERTY AND WAS INTERESTED IN BRINGING INTO THE OWNERSHIP OF THE PROPERTY , JUSTICE LEWIS AND JUSTICE CAN TERO , AND I TRANSFERRED IT DIRECTLY T O THEM AND THEY PURCHASED IT, THEN I WOULD HAVE TO PAY DOC STAMPS.

THAT'S CORRECT.

BUT IF I TRANSFERRED IT TO A CORPORATION AND THEN THEY BOUGHT SHARES IN THE CORPORATION , I WOULDN'T HAVE TO PAY DOC STAMPS. IS THAT RIGHT?

YOU WOULD HAVE TO PAY THE MINIMUM DOC STAMP TAX.

OF 70 CE NTS.

YES, YOUR HONOR .

NOW , THAT SEEMS TO ME THAT COULDN'T BE WHAT THE LEGISLATURE INTENDED.

IT IS WHAT THE LEGIS LATURE WR OTE INTO THE STATUTE HO WEVER . IN THE SITUATION WHICH YOU HAVE JUST POSTED , THE POSITED , THE DOCUMENTARY STAMP TAX THAT , LIABILITY W OULD INCUR ON A SUBSEQUENT TRANSFER, FROM , OF THEPROPERTY BY YOUR SELF AND YOUR FE LLOW JUSTICES, TO SOME OTHER THIRD PARTY .

LET ME DRAW ANOTHER FACTUAL SITUATION THAT IS SIMILAR BUT A LITTLE BIT DIFFERENT , THAN IS WE HAVE A CORPORATE SITUATION IN WHICH JUSTICE WELLS AND I OWN STOCK , AND IT IS AN EX ISTING CORPORATE ENTITY , AND WE TRANSFER OUR PROPERTY , PROPERTY WE BOTH OWNED , INTO THAT NEW CORPORATION , UNDER YOUR THEORY THERE WOULD BE NO TRANSFER, CORRECT?

THAT IS CORRECT.

IF WE HAD AN EXI STING CORPORATION BUT JUSTICEWELLS AND I DID NOT HAVE STOCK AND WE TRANSFERRED THE PROPERTY INTO THE CORPORATION AND THEN OBTAIN STOCK , THEN IN CONSIDERATION, WOULD WE NOT R E CEIVE THE STOCK B AC K ? AND THAT WOULD BE THE CONSIDERATION.THE STOCK FOR THE TRANSFER OF THE PROPERTY.

IF I UNDERSTAND THE HYPOTHETICAL , YOUR HONOR, THE PROPERTY IS TRANSFERRED TO A CORPORATION WHICH YOUR H ONOR DID NOT POSSESS AN OWNERSHIP INTEREST .

RIGHT. NEITHER ONE OF US POSS ESSED AN OWNERSHIP. WE HAVE A CORPORATE ENTI TY. WE DON'T HAVE STOCKHOLDERS INITIALLY.

IN THAT CASE, THE RE WOULD BE CONSIDERATION.

THERE WOULD BE CONSIDERATION. SO THE SAME TRANSACTION JUST STRUCTURED DIFFERENTLY, AND THAT IS GETTING B A CK TO , I THINK, JUSTICE WE LLS'S POINT , IS THAT THE MA NNER IN WHICH IT IS STRUCTURED DOES CHANGE , W HETHER THERE IS CONSIDERATION OR NOT, THEN.

YES.

CHIEF JUSTICE: JUSTICE QUINCE.

I UNDERSTO OD PART OF YOUR ARGUMENT WAS THAT THERESHOULDN'T BE ANY DOC STAMPS HERE BECAUSE, REALLY , THE SAME PERSON OWNS EX ACTLY WHAT HE HAD BEFORE AND AFTER THE TRANSACTION. CORRECT?

THAT'S CORRECT.

BUT AS I UNDERSTOOD THIS CASE, THAT THIS TRACT O F LAND WAS CONVEYED TO TRANSFER TO CMS BY C RESCENT , CORRECT ?

CR ESCENT MIAMI CENTER , YES.

AND CRESCENT IS LI KE A REAL ES TATE , IT IS CRESCENT REAL ESTATE GROUP , IS THAT WHAT THIS IS?

YES.

SO THEY TRANSFER THE LAND TO CMS , W HICH WAS SOME KIND OF CENTER, MEDICAL CENTER , CRESCENT MEDICAL CENTER OR SOMETHING?

NO. CRESCENT MIAMI CENTER .

BUT CRESCENT MIAMI CENTER HAD BEEN , WAS IN ES SENCE , GIVEN TO CRESCENT FUNDING, CORRECT , OR WAS TRANSFERREDTO CRESCENT FUNDING. WHICH IS ANOTHER CORPORATION . WHICH IS NOT JUST OWNED PIE CRESCENT BUT IS OWNED BY SOME OTHER GRO UP CA LLED CRESCENT , LET'S SEE , CRE. SO I AM TRYING TO GET HERE .

CRESCENT REAL ESTATE MANAGEMENT. I AM SORRY, YOUR HONOR.

SO IT SEEMS TO ME THAT WHAT WE EN D UP HAV ING HERE , IS THAT THE PROPERTY NOT J UST WENT BACK TO CRESCENT BUT WENT BACK TO CRESCENT , WHICH I CONSIDER CRESCENT TO BE CRESCENT REAL ESTATE GROUP, BUT CRESCENT REAL ESTATE GROUP AND ANOTHER CRESCENT GROUP . NOW , ALL OF THESE , ALL , OWNED BY ONE INDIVIDUAL ?

ALL OF THEM OWNED BY THE SAME ENTITY , THE GRANTOR.

IS THAT THE SAME INDIVIDUAL? ARE THERE OTHER INDIVIDUALSTHAT ARE INVOLVED IN CRE?

WELL

BECAUSE WHEN I LOOK BACK TO ALL OF THESE TRANSFERS , IT LOO KS LIKE THERE ARE TWO ENTITIES HERE WHO NOW HAVE THIS PROPERTY, AS OPPOSED TO ONE ENTITY THAT HAD IT AT THE BEGINNING. AM I NOT CORRECT OR AM I CONFUSING COMPANIES?

FOR WHAT EVER REASON NOT CLEAR FROM THE RECORD, CRESCENT TRANSFERRED ITS INTERESTS INC ESTENT M IAMI CENTER , TO - INTERESTS INCESTENT MIAMI CENTER, TO CRESCENT FUN DING , AND ULTIMATELY TH OSE ENTITIES , WHICH ARE WHOLLY-OWNED SUBSIDIARIES OF CRESCENT , ENDED UP OWNING CRESCENT MIAMI CENTER, AT THE TIME OF THE REAL ESTATE TRANSFER.

CHIEF JUSTICE: YOU ARE IN YOUR REBUTTAL , I F YOU WOULDLIKE TO SAVE SOME TI ME.

YES, I WOULD. THA NK YOU. YOUR HONOR.

GOOD MOR NING. MAY IT PLEA SE THE COURT . MY NAME IS CHARLES CATANZARO. I AM AN ASSISTANT ATTORNEY GENERAL. I REPRESENT THE RESPONDENT , THE FLORIDA DE FT REVENUE . THIS CASE IS ABOUT THE RESPONSIBILITIES THAT FOLLOW FROM DOING BUSINESS THROUGH A SE PARATE LEGAL ENTITY. UNITED STATE SUPREME COURT OBSERVED , IN MOLINE PROPERTIES, ACCUSING TO DO BUSINESS THROUGH A CORPORATION REQUIRES THE ACCEPTANCE OF TAX DISADVANTAGES FORM THEFLORIDA FIRST DIST RICT COURT OF AP PEALS

LET ME ASK YOU THIS . NOW , W OULD YOU SAY THAT , IF THIS TRANSACTION HAD OCCURRED PRIOR TO 19 90 , THAT OUR TWO CASES , PALMER AND DEMARIO CASE, THAT UNDER THOSE CASES THERE WOULDN'T BE ANY DOC STAMPS OWED?

THAT IS PROBABLY CORRECT.

OKAY. NOW , WHAT IN THE 1990 AMENDMENT CHANGED THAT?

THE

WHAT SPECIFIC LANGUAGE? ANOTHER SPEC IFIC LANGUAGE WAS CONSIDERATION AND WILL INCLUDE THE , WILL BE VALUED AGAINST THE FAIR MARKET V ALUE OF , THE STATUTE CREATED THE PRESUMPTION THAT, IF THE CONSIDERATION ISN'T REFLECTED ON THE FACE OF THE DEED, THEN IT WILL BE VALUED WITH RESPECT TO THE FA IR MARKET VALUE YOUTHFUL THE PROPERTY DEEDED . NOW , THE REASON WHY PALMER FLORIDA WAS CORRECT , WAS , AND I THINK IN DE VORE FROM 1999 , THE HO LDING WAS THECONSIDERATION IN THIS CASE WAS NOT REASONABLY DETERMINEABLE, AND THE REASON THAT THE CONSIDERATI ON WAS NOT REASONABLY DETERMINEABLE , WAS THAT THE STATUTE DID NOTPROVIDE THE MEANS OR THE CRITERIA O R THE STANDARD BY WHICH TO MEA SURE THAT CONSIDERATION. THE AME NDMENT SPECIFICALLY CLOSED WHAT HAD BACK LOOPHOLE, BECAUSE IN THE PAST , DEEDS WOULD HAVE BEEN CONVEYED BETWEEN A THIRD PARTY AND THEN , A S BUSINESS BECAME MORE SOPHISTICATED , T IERED ORGANIZATIONS WERE CREATED , AND DEEDS, WELL , ANY KIND OF BUSINESS WAS DONE BET WEEN THESE TI ERED ORGANIZATIONS WI TH THE SAME OWNERS.

WHAT DO YOU MAKE OF THE LANGUAGE, THOUGH , IN DE MA RIA , IN WHICH, THE ESSENCE OF THAT CASE , ON THE $25,000 E QUITY IN REAL PROPERTY , WAS EXEMPTED FROM DOC STAMP TAXATION , BECA USE THERE WAS A MERE CHANGE IN THE FORM OF THE STOCKHOLDERS ' EQUITY IN THE CORPORATION.

THAT GETS RIGHT TO THEHEART OF THE MA TTER , SIR . W ITH ALL DUE RESPECT TO THE COURT IN DEMARIA, THAT STATEMENT IS ERROR. THE

WELL , WAS THAT ER ROR CORRECTED BY THE 1990 AMENDMENT?

NO . NO. IT GOES WIT HIN THE CHARACTERIZATION OF WHAT IS EQUITY . ON A BA LANCE S HEET , A CORPORATION HAS ITS ASS ETS , AND THOSE ARE INDIVIDUALLY IDENTIFIED IT EMS OF PROPERTY. EQUITY IN A CORPORATION , ISN'T INDIVUATED. IT IS J UST A GROSS NUMBER THAT REPRESENTS THE DIFFERENCE BETWEEN THE VALUE OF THE ASSETS AND THE LIABILITY OF THE COMP ANY . FOR EXAM PLE , A VERY S I MPLE EXAMPLE, A CORPORATION, IF ITS BALANCE SH EET SHOWS A SSETS WO RTH 100 AND ON THERIGHT SIDE OF BALANCE SHE ETIT WILL SHOW LIABILITIES OF 40. YOU TAKE 1 ON 0 ON THE ASSET S IDE. SUBTRACT 40 FROM THE LIABILITY SIDE. YOU HAVE OWNERS EQ UITY , WHICH IS 60. IT IS JUST A DO LLAR FIGURE.

BUT IT SEEMS TO ME THAT WHAT THAT OPINION IS REFERRING TO , THERE , IS WHEN IT IS CITE ING TO GR EEN , BACK TO , I HAVE BEEN REFERRING TO E ARLIER , IS THE FI NA L SEN TENCE IN THAT CASE , IT SAYS IT WAS MERE BO OK TRANSACTION AND WAS IN NO SENSE A SALE TO A PURCHA SER . NOW , WASN'T THAT WHAT THE DEMARIO LINE WAS FOLLOWING? I MEAN , IT WAS TRYING TO MAKE THIS , THIS DISTINCTION THAT, WHER E ALL THIS IS , IS A CHANGE ON THE BOOKS THAT THAT IS NOT WHAT DOC STAMPS , IT INTERPRETED, THIS COURT INTERPRETED DOC STAMPS IS INTENT INTE NDED TO COVER. ISN 'T THAT IS INTENDED TO COVER. ISN'T THAT RI GHT? ISN'T THAT WHA T THE COURT .

NO, SIR. RESPECTFULLY, FIR ST I WOULD SUBMIT THAT IN PALMER FLORIDA, WHERE THEY U SE D THE T ERM "MERE BOOK TRANSACTION",THERE ARE TWO- WAYS TO LOOK AT THAT PHRASE , AND I AM NOT BEING GLIB, BECAUSE THEY ARE ANTITHETICAL. EVERYTHING IS A TRANSACTION. EVERY TIME ONE DOES BUSINESS , THE ECON OMIC BUSINESS E VENT IS GOING TO BE REFLECTED ON THE BOOKS.I THIN K THE BETTER ANSWER , BEGIN THAT YOU BILK WIT , THE BETTER THAT U BIQUITY , THE BETTER THING IS THERE IS NO SUCH THING AS A BOOK TRANSACTION.

BUT WHEN WE SAY BOOK TRANSACTION , DON'T WE MEAN IT DOESN'T INVO LVE ANY OUTSIDE ENTITY. IT IS JUST AN ACCOUNT ING AND OFFER? THAT IS WHAT WE MEAN BY BOOK TRANSACTION.

JUSTICE CANT ERO , I DON'T KNOW WHAT THE WORD BOOK TRANSACTION MEANS. I WOULD SAY THAT IT IS BEING PROFFERED AS A LEGAL TERM OF ART THAT HAS N O BASIS IN THE LAW, AND LET ME , PLEASE , PRO VIDE TWO EXAMPLES . WHEN I SAY THE WORD , THE LEGAL TE RM OF ART , EV ERYONE WILL UNDERSTAND M URDER . YOU SEE THAT WORD. YOU K NOW THERE HAS BEEN AN UNLAWFUL TAKING OF A H UMAN LIFE, AND THAT TAKING WAS DONE WITH INTENT. YOU HEAR THE WORD NEGLIGENCE, YOU KNOW THERE WAS DUTY, BREACH, CAUSE , INJURY. YOU HEAR THE WORD BOOK TRANSACTION , AND YOU GET INTO A VERY VA GU E , IT IS PRESENTED

LE T'S BE A LI TTLE MOR X AND TR Y TO GET OURSELVES DOWN TO WHAT W E HAVE HERE. I F WE HAVE PEOPLE THAT DECIDE THAT THEY ARE GOING TO FORM A BUSINESS ENTITY AND THEY MAKE A DECISION AT THE OU TSET TO DO THIS, WHAT WE ARE GOING TO DO IS FORM NOT ONE BUT TWO , AND NOW W E ARE GOING TO CAPITALIZE THESE TWO CORPS RELATIONS, AND THEY OWN THESE TWO CORPORATIONS, AND TH EY OWN SOME REAL ESTATE, AND THEY MAKE DECISION THAT WE AREGOING TO PUT THE REAL ESTATE , ALL , I N CORPORATION A , ALL RIGHT

YES.

AND " B" , NOW , REALLY HAS VIRTUALLY NO CAPITALIZATION. WHATEVER THE MINI MUM IS THAT THEY HAVE TO DO, IN ORDER TO CREATE IT , PERHAPS , BUT , AND SO THEY ARE SAYING , WELL , NOW WE MADE A BUSINESS DECISION THAT IT PROBABLY WOULD BE BETTER FOR THE REAL ESTATE THAT WE USED TO CAPITALIZE " A" SHO ULD BE OWNED BY "B" . THE SAME OWNER OR OWNERS OF "A" AND "B" AND ALL OF THE STOCK AND EVERYTHING , AND SO THEY MOVE THE REAL PROPERTY F ROM CORPORATION A TO CORPORATION B.

OKAY. YES.

FOR THEIR , NOW , THE CORPORATE LAWS A LLOW THEM TO FORM TWO CORPORATIONS LIKE THAT , AND NOW , WHY SHOULD THAT TRANSACTION BE TAXED , BECAUSE IT IS WHO LLY WITHIN THESE TWO CORPORATE ENTITY THAT THEY ARE AL LOWED TO CREATE , AND IT , REALLY , AFFECTS NO ONE OUTSIDE THE P EOPLE THAT OWNED THE STOCK IN THE TWO CORPORATIONS , REALLY , ARE IN THE SAME PLACE THEY WERE BE FORE, IN TERMS OF EQUITY OR INTEREST OR WHAT EVER , THE VALUEURE , SO WHY SHOULD THE VALUE, SO WHY SHOULD THAT TRANSACTION HAVE TO PAY DOC STAMPS ? BECAUSE I WOULD ASSUME YOU WOULD SAY IT DOES.

YES.

OKAY. THEN WHY

DEFINITELY.TWO REASONS.

WHY SHOULD THAT TRANSACTION HAVE TO PAY DOCSTAMPS, IF THEY SA ID, W E MADE A M I STAKE IN OUR BUSINESS JUDG MENT, ABOUT HAVING IT IN CORPORATION A , AND WE REALLY WANT TO MOVEIT TO CORPORATION B. IT WILL SUIT OUR PURPOSES BETTER . NOW , WHY SHOULD THAT TRANSACTION BE SUBJECT TO DOC STAMPS BECAUS E IT IS WHOLLY WITHIN THESE TWO ENTITIES AND ONLY A FFECT THE PERSONS THAT OWN EVERYTHING IN BOTH ENTITIES , ANYWAY , ALL RIGHT , SO I AM TRYING TO SET UP A SIMPLE EXAMPLE OF , PERHAPS , WHAT IS A BOOK TRANSACTION OR WHATEVER, OR AT LE AST THE W A Y THAT IT HAS BEEN TALKED ABOUT , BUT WHY SHOULD THAT TRANSACTION , BECAUSE AS WE ORDINARILY UNDERSTAND COMMERCIAL TRANSACTIONS OUT THERE , IN REALIZING , PERHAPS, IT IS N'T THE MO DEL OF THE PURCHASE AND SALE AGREEMENT FROM TWO TOTAL STRANGERS , YOU KNOW, THAT ONE GIVES $100,000 FOR TEN AC RES O R SOMETHING, WHY SHOULD THAT TRANSACTION BE SUBJECT TO DOC STAMPS?

SIR , IMPLICIT , THE ANSWER IS IMPLICIT IN THE QUESTION. HIS HONER MADE THE STAT EMENT THEY ARE NOT TWO DIFFERENT PEOPLE. O N THE CONTRARY , THEY AREEXACTLY TWO DIF FERENT PEOPLE. CORPORATIONS, THE LAW RES PECTS THEM AS COMPLETELY SEPARATE LEGAL ENTITI ES, ONEFROM THE OTHER. THAT TRANSACTION WHERE CORPORATION A TRANSFERRED PROPERTY TO CORPORATION B , IS THE SAME AS IF I WERE TRANSFERRING PROPERTY TO MY SUPERVISOR.

CAN I AS K YOU JUST A QUESTION? I MEAN , CERTAINLY THESTATEMENT THAT YOU JUST MADE IS CORRECT, BUT THAT IS NOT THE WAY THE STAT UTE IS WORDED, IS IT? THIS HAS BEEN GOING ON -.

YES, IT IS .

NO. IT WORDED IN T ERMS OF PURCHASER.IT SWORDED I N TERMS OF CONSIDERATION.IT IS NOT WORDED THAT ANY TRANSFER OF ANY TRANSFER OF ANY INTEREST IN PROPERTY , SHALL PAY DOC STAMP EQUAL TO ITS FAIR MA RKET VALUE. WHY COULDN'T THE LEGISLATURE SIMPLY DO. THAT IF YOU WANT T O TAX IT ON ANY TRANSFER , YOU CAN SAYSO, BUT THIS IS I N TERMS OF PURCHASER , CONSIDERATION , AND THOSE KINDS OF THINGS, AND THAT IS WHAT TRUNLS ME IS THAT YOUR TROUBLES ME , IS THAT YOUR STATEMENT IS ABSOLUTELY TRUE. THEY ARE SEPARATE LEGAL ENTITIES, BUT THE STATUTE DOESN'T SAY THAT. IT IS AL WAYS PURCHASE ER AND CONSIDERATION.

I BEG TO DIFFER WITH THAT , AND WHEN YOU HAVE PURCHASER AND CONSIDERATION, TH OSE ARE WORDS THAT CONE NOTE THE COMMERCIAL TRANSACTION, TO DISTINGUISH IT BETWEEN , TO DISTINGUISH IT FROM A GIFT.

JUSTICE BELL HAS A QUESTION.

SO WHERE IS THE DEFINITION FOR PURCHASER. IS IT JUST , IS IT THE DIFFERENCE IN THE LEGAL ENTITIES? BECAUSE IT DOESN'T SAY GRANTOR/GRANTEE. THE STATUTE DOESN'T D E FINE PURCHASER . ISN'T THAT WHERE THE KEYPROBLEM IS?

I CAN'T THINK O F THE CASE THAT WE HAVE C ITED BUT THEREIS A CASE. ALL TERMS IN T HE STATUTE DON'T HAVE TO BE DEF INED . IF A TERM ISN'T DEFI NED , IT DOESN'T RE NDER THE STATUTE USELESS . IN T HE DEM ARIA CASE , YOU CANNOT SEPARATE THE TWO WHEN YOU HAVE ONE FROM THE OTHER.

SO IN YOUR DEFINITION OFMR. AND MRS. SCHWARTZ OWN A GROCERY STORE AND THEY ARE ADVISED BY THEIR TAX COUNSELOR TO FORM A CHAPTER S CORPORATION , FEDERAL GOVERNMENT CHANGES THE C HAPTER S LAW AND FOR OTHER REASONS THEY DECIDE TO UNDO THAT TRANSACTION , SOMEWHAT LIKE JUSTICE ANSTEAD WAS ASKING, BUT MOM AND P OP OWN A GROCERY STORE. THEY FORM A CHAPTER S CORPORATION AND CONVEY THEPROPERTY TO THAT CORPORATION.IT IS YOUR POS ITION THAT DOC STAMPS WOULD BE DU E ON THEFAIR MARKET VALUE ?

THEY OWNED THE PROPERTY IN THEIR OWN NAMES?

YEAH. THEY OWNED THEIR OWN GROCERYSTORE IN THEIR OWN NAMES , AS HUSBAND AND WI FE, AND THEY ASSIGNED IT TO THE CORPORATION.

YES.

AND THEN THEY TRY UNDO THAT TRANSACTION LA TER AND CONVEY IT BACK TO THEMSELVES AS HUSBAND AND WIF E, THEN THEY WOULD PAY DOC STAMPS AGAIN.

NO.

ONCE THE CONSIDERATION

NO. YOUR HONOR , I WOULD THINK , IN THAT SITUATION , THE HYPOTHETICAL CONT AINS ANUMBER OF F ACTS THAT R AISE THE SP ECTER OF E RROR , OF , WELL , WE WILL JUST GO WITH ERROR.

WHY AREN'T THEY DIFFERENT PURCHASERS? FOR CONSIDERATION.

I AM SOUR I .

YOU N THE DIFFER ENCE. I AM SORR Y?

I DON'T UNDERSTAND THE DIFFERENCE.

YOU SATISFIED IF THEY MADE A MISTAKE.

NOT A MISTAKE. THE LAW CHAN GED FOR FE DERAL TAX PURPOSES AND THEY DECIDE TO CONVEY IT BACK TO THEMSELVES. MY PO INT IS , ARE THEY TRULY PURCHASERS ? BY YOUR DEFINITION , IT SEEMSTHAT THEY WOULD BE .

IF THEY CONVEYED PROPERTY TO THE CORPORATION , THEN ON DAY ONE, THEY HAD OWNED REAL PROPERTY. ON DAY TWO, THEY OWNED STOCK IN A CORPORATION. THE CHARACTER OF THE ASSET CHANGED COMP LETELY . Y EAH. THEY ARE PURCHASERS . NOW , ONE VERY IMPORTANT THING , SIR , YOU MENTIONED SUBS CORPORATIONS . I AM GETTING AN I DE A THAT,IN THE BACK OF HIS HONOR'S M IND , THE IS SUE O F BEING A TAX COND UIT , HAS SOME SORT OF A BE ARING ON THIS . NOW , THAT IS WHAT WAS AR GUED IN COMM ITTEE IN CONNECTICUT , AND THE CONNECTICUT COURT DI DN'T REACH THAT AND THIS SU BSTANT YATES THE DEPARTMENT'S POSITION.

BUT IN THIS CASE THAT , IS ALL WE LL AND GO OD A BOUT SUBCHAPTER S CORPORATIONS , BUT IN THIS CASE, VERY SIMPLY, WHO IS THE PURCHASER , AND WHAT IS THE CONSIDERATION?

CRESCENT MIAMI PURCHASED THE PROPERTY BY R A ISING THE VALUE OF THE ASSETS FROM, IT DOESN'T MA TTER IF IT WAS $1 MILLION ON DAY ONE TO $2 MIL LION ON DAY TWO OR FROM ZERO ON DAY ONE T O $1 MILLION ON DAY TWO. CRESCENT OWNED THE REAL PROPERTY. THAT WAS THE ONLY PE RSON ON DAY ONE THAT COUL D HAVE DEEDED THE REAL PROPERTY TO ANYONE ELSE. ON DAY TWO

WHAT D ID THEY GET I N EXCHANGE, THEN, FOR THEPURCHASE?

MORE VALU ABLE AND TANGIBLE PERSONAL PROPERTY.

EXCUSE ME?

MORE VALUABLE TA NGIBLE PERSONAL PROPERTY.

BUT IF THEY ARE THE ONES THAT ARE CONVEY ING THE PROPERTY , I AM ASKING YOU WHAT DID THEY GET IN EXCHANGE FOR THE PROPERTY?

THAT'S IT . EXCHANGE OF PROPERTY. BECAUSE ON DAY TWO , FOLLOWSTHE EXCHANGE , IF THAT PROPERTY WERE TO BE DEED AGAIN , THEN CRESCENT COULD NOT EXECUTE THE DEED. IT COULD ONLY BE EXECUTED BY CRESCENT MIAMI , A SEPA RATE LEGAL ENTITY .

CHIEF JUSTICE: JUSTICE BELL, DID YOU WANT TO FINISH W ITH YOUR LINE OF QUESTIONING? JUSTICE CANT ERO.

I THINK WE ARE ALL TRYING TO ASK THE QUESTION THROUGH DIFFERENT ANGLES. LET ME ASK YOU FROM THIS ANGLE ON THIS SI DE. LET'S SAY THAT I OWN ACCOMPANY CA LLED R GC IN C. , AND I OWN A L OT OF DIFFERENT ASSETS. I OWN ENTERT AINMENT AND BUSINESSES AND SOME REAL ESTATE, AND I SAID I AM GOING TO CREATE SUBSIDIARIES. I AM GOING TO CREATE R JC ENTERTAINMENT , RGC REAL E STATE AND RGC BUSINESS. WHOLLY - OWNED SUBSIDIARIES OF RGC INC.. AND I DO SO AND SIX MONTHS LATER TRANSFER MY BUSINESS PROPERTIES TO RGC BUSINESS AND ALL OF MY REAL ESTATE HOLDINGS TO RGC REAL ESTATE. ARE THOSE TANGIBLE ASSETS?

I DON'T KNOW ABOUT THEOTHER ONES, BUT THE ONES GOING TO RGC REAL ESTATEWOULD BE.

WHY IS THAT?

BECAUSE PREVIOUSLY YOU OWN REAL PROPERTY.

WHAT IS THE CONSIDERATION?

THE VALUE, THE INCREASE IN THE VALUE YOUTHFUL STOCK. IT WENT FROM ZERO THEINCREASE IN THE VALUE OF STOCK. IT WENT FROM ZERO TO $1 MILLION. THAT IS THE CONSIDER ATION. IT HAPPENS AS A NECESSARY CONSEQUENCE .

SO YOUR POSITION IS ANY TRANSFER OF ANY ASSET FROM ANY ENTITY TO ANY OTHER ENTITY IS SUBJECT TO DOC STAMPS.

NO.NO.

THERE WILL ALWAYS BE AN INCREASE IN OWNERSHIP.

NO. YOUR HONOR SAID ANY ASSET. NO. THE DOC STAMP APPLIES TO TRANSFERS OF INTERESTS IN REAL PROPERTY.

OKAY. THEN I STAND CORRECTED. ANY TRANSFER OF REAL ESTATE F ROM ANY ENTITY TO ANY OTHER ENTITY, WOULD, THEN , BE SUBJECT TO DOC STAMPS.

IF IT IS A COMMERCIAL TRANSACTION , Y ES.

SO OTHER THAN A GI FT , I MEAN, GOING BACK TO THE DEPARTMENT 'S POSITION IS FAIRLY ABSOLUTEIES, WHICH I S THAT, UNLESS IT IS A GIFT , I F IT A TRANSFER OF REAL ESTATE , IT IS SUBJECT TO DOC STAMPS.

SO MY QUESTION IS

EXEMP TIONS , YES.

WHY DOESN'T THE STATUTE JUST SAY SIMPLY IN TERLSES OF ANY TRANSFER OF REAL PROPERTY. IT IS VERY SIMPLE. IT WOULDN'T TAKE TWO LONG SENTENCES. IT WOULD TAKE ONE SIMPLE ONE. IT SAYS ANY TRANSFER SUBJECT TO DOC STAMPS .

SUBJE CT TO MORE WORDS. THAT IS THE PROBLEM. ANOTHER TAXES ON DEEDS WITH INTEREST IN REAL PROPERTY SHALL BE .

CAN CORPORATIONS MAKE GIFTS, ONE TO THE OTHER?

NO.WELL , I DON'T WANT TO BE THAT ABS OLUTE . MICROSOFT , SURE , MICROSOFT COULD MAKE A GIFT TO THE RED CROSS , OF R EAL PROPERTY.

BUT IT CAN'T MAKE A GIFT FROM ONE CORPORATE ENTITY TO ANOTHER CORPORATE ENTITY THAT IS WH OLLY OWNED BY THE SAME STOCKHOLDERS ?

NO. THAT IS A LEGAL POSSIBILITY. IT HAS N O BA SI S IN FE DERAL GIFT TAX OR IN STATE TAX.

I AM NOT TALKING, INOTHER WORDS, IS IT AN I LLEGAL TRANSACTION?

NO. IT WOULDN'T BE ILLEGAL.

CORPORATION A DE CIDES TO GIVE A PARCEL OF REAL PROPERTY TO CORPORATION B .

IT WO ULDN'T BE ILLEGAL. THEY COULD DO THE DEED. HOWEVER , THAT DEED WOULD BE SUBJECT TO TAX .

AND S O GIFTS ARE SUBJECT TO THE TAX , TOO .

A GIFT FOL LOWS , THERE ARE C ERTAIN CRITERIA BY WHICH A GIFT MIGHT BE , BY W HICH A TRANSFER IS CONSIDERED A GIFT, THROUGH DISINTERESTED , LOVE AND AFF ECTION.

WHERE DO THOSE FACTORS COME FROM? CASE LAW?

DUBERSTEIN.

FROM THE DEPARTMENT OF REVENUE ? WHERE DO THEY COME FROM?

COMES FROM THE FEDERAL GIFT TAX.

NO W YOU ARE TALKING ABOUT FEDERAL GIFT TAX LAW , RIGHT? YOU ARE NOT TALKING ABOUT THE POWER OF THE STATE OF FLORIDA OR THE STATUT ORY SCHEME OF THE STATE OF FLORIDA , WITH RE FERENCE TO DOC STAMPS . O KAY. SO A G IF T CANNOT BE MADE FROM A PARENT CORPORATION TO A SUBSIDIARY IN FLORIDA , WITHOUT INCUR ING DOC STAMPS.

THERE IS NO SUCH THING AS A GIFT, SIR, BECAUS E IF A CORPORATION MAKES IT TO ANOTHER CORPORATION, THE N THE ONE'S ASSETS, THEN , WOULD , I WOULD GUESS , WOULD BE A CONTRIBUTION TO CAPITAL , AND THE ONE WOULD GET MORE VALUABLE STOCK AS A RESULT OF IT.

SO IT I S THE I N FLATION IN THE STOCK VALUE THAT OCCURS.

YES.

EVEN THO UGH IT IS THE SAME PEOP LE.

YES. BECAUSE IT IS NOT THE SAME

THE ASSETS, THEY DON'T HAVE ANY INFLATED VALUE. RIGHT? THEY HAVE LOST OVER H ERE.

NO. THEY HAVEN'T LOST ANYTHING.

IF CORPORATION A

YES.

TRANSFERS IT TO CORPORATION B, PRESUMABLY THERE IS STOCK IN CORPORATION A THAT HAS GONE DOWN, NOW. ALL RIGHT. BECAUSE THEY DON'T HONE OWEN THAT REAL ESTATE THAT THEY THEY DON'T OWN THAT REAL ESTATE THAT THEY HAD BEFORE , RIGHT? YOU JUST SAID THAT CORPORATION B , ITS STOCK HAS BEEN INFL ATED BECAUSE IT G ETS THE REAL ESTATE , BUT CORPORATION

NO. NO. NO. NO. NO. CORPORATION A 'S STOCK IN B IS INCREASED. CORPORATION B ON , IT SHOWS ON ITS BA LANCE SH EE T ITS ASSETS ARE INCREASED.

BUT THE COMMON OWNERS , THEY HAVE LOST

THEY HAVEN'T LOST ANYTHING. THAT IS THE PO INT IN A COMMERCIAL TRANSACTION, IS NET WORTH DOES NOT CHANGE. WHEREAS IN A GIFT , IT DOES CHANGE .

IF IT DOESN'T CHAN GE, WHERE IS THERE A COMMERCIAL TRANSACTION?

THE CHANGE IN THE PROPERTY .

WITH OUR HELP , YOU HAVE USED UP YOUR T IME , AND TH ANK YOU VERY MUCH.

THANK YOU VERY MUCH .

CHIEF JUSTICE: MR. GOLDBERG. THREE AND-A-HALF MINUTES.

WOULD YOU COME BACK AND ADDRESS , JUSTICE WELLS'S INQUIRIES , ABOUT THE CON CERNS THAT, REALLY , EVEN THOUGH THE SPECTER OUT THERE IS PERHAPS NOT DEFINEABLE BY THIS PA NEL, THAT THERE , R EALLY , IS A CONCERN WITH REFERENCE TO AVOID ING DOC STAMPS , WHEN THEY SHOULD BE IMPOSED BY THE ABILITY OF USING THE CORPORATE FORM , AND THAT THERE IS A GENUINE CONCERN THERE, AND WOULD YOU