Proposition 13 Property Tax Issues

Proposition 13 Property Tax Issues: Property tax issues often arise in California due to (i) comparatively high real estate values, and (ii) the complexities of the 1978 Proposition 13 property tax law. Increased real estate valuations and property tax increases, often arise because of changes-in-ownership (“CIO”). Palm Desert property tax lawyers Sanger & Molever can help avoid a CIO. CIO’s and increased property taxes often arise where a death occurs and estates/trusts are involved, and (a) where the ownership of interests in entities (like partnerships, LLC’s, corporations) that own real estate, transfer.

To hopefully avoid a possible CIO and increased property taxes, you need to consult Sanger & Molever to make a careful analysis of how you hold legal title to your real property. The firm’s pre-death and post-death trust/probate administration planning, and careful analysis of transfers of interests in entities, can possibly help you avoid a CIO, and make the difference between a huge property tax increase, and no tax increase.

Example: Legal title to Blackacre stands in the name of “X and Y, as 50-50 tenants-in-common”. Blackacre’s assessed value for property tax purposes is $200, and the annual property tax is $2. Blackacre’s current FMV is $2,000,000. If you purchase X’s 50% TIC interest, instead of you paying $1 (i.e. 50% of the current $200 appraised value) of annual property tax, you will have to pay 1% of $1,000,000 (i.e. half of the $2,000,000 FMV), or a $10,000 annual property tax. With Sanger & Molever’s guidance, were you to convert X&Y’s TIC title to a partnership title, and then you purchased X’s 50% partnership interest, your property tax would remain unchanged at $1 annually. Revenue &Taxation Code §64.

To further complicate the analysis, when the real estate is owned in an entity such as a corporation, partnership, or limited liability company, the Palm Desert property tax lawyers Sanger & Molever firm must educate you about the issue of control of the entity. In addition, often the entity itself is held within a trust, and that fact can require even more Sanger & Molever firm analysis of the facts and the law. If you own real estate in a partnership, in an LLC, or in a corporation, to hopefully avoid a CIO and a huge increase in property taxes, call Sanger & Molever, to discuss the entity CIO rules.

An improper analysis or an incorrect filing with the Board of Equalization can cause severe consequences for the taxpayer. Traps for the unwary abound in the area of property taxes and CIO’s, often with significant amounts of tax at stake. Look for experience. Contact either Howard Sanger or Jeff Molever, who have had direct experience with complex property tax issues.