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AMBRECHT & ASSOCIATESNotes for those attending |
Other items which might be useful: This is a form for a disclaimer of an income interest under a trust income sprinkling power. The link to LTA 2009/042 which has the second draft of new Assessors' Handbook Section 401, Change in Ownership, is at http://www.boe.ca.gov/proptaxes/pdf/lta09042.pdf. BOE has also put out a new publication, California Property Tax, An Overview (August, 2009) at http://www.boe.ca.gov/proptaxes/pdf/pub29.pdf. I mentioned that the Notices of Supplemental Assessment do not tell you what the 100% value for the reassessment is, and that usually you have to call the appraiser to get that information. In addition, this link is to an Excel spreadsheet which can calculate it. I mentioned the possibility of the cost of living index going down in 2010, and this link is an article with more details. Several of the Revenue & Taxation Code sections and Property Tax Rules have been re-numbered or re-lettered over the years, which makes it hard to follow the older cases. This chart is a list of the changes over the years. I mention in the talk a March 2009 letter we did pertaining to planning in a recession and it is linked here. In addition, this link is to materials from a presentation I gave in Santa Barbara in May 2009, and it includes a chart so you can see how the numbers work with a Prop. 8 temporary adjustment versus a reassessment; it also has some of the other items we briefly touched on in San Diego, plus some recent law updates and some common mistakes that I see being made over and over. Citations for cases I mentioned not in the materials in the binder: Pacific Southwest Realty Co. v. County of Los Angeles (1991) 1 Cal.4th 155, 2 Cal.Rptr.2d 536, 820 P.2d 1046, sale lease-back; history of Task Force, Revenue & Taxation Code section 60 three prongs; dicta re life estate and estate pur autre vie not worth very much. Auerbach v. Assessment Appeals Board [re Northern Trust] (2006) 39 Cal.4th 153, 49 Cal.Rptr.3d 774, 173 P.3d 951, application of parent/child claim applied to improvements on leasehold estate (less than 35 years), owned by lessor during lease but by trust at end of lease; also excellent review of history of Task Force, Revenue & Taxation Code section 60 three prongs. Reilly vs. City and County of San Francisco (2006, First Dist.) 142 Cal.App.4th 480, 48 Cal.Rptr.3d 291, rehearing denied; the case which stated that the second prong of Revenue & Taxation Code section 60 (beneficial use) can be either income interest or use of the property. Note re step-transaction doctrine: Shuwa Investments Corporation v. County of Los Angeles (1991, Second Dist.) 1 Cal.App.4th 1635, 2 Cal.Rptr.2d 783, applied the step transaction doctrine to a sale, lease-back; analyzed under the three-part federal test for a step transaction (in Shuwa all three tests applied; did not discuss whether all three were required or not). McMillin-BCED/Miramar Ranch North v. County of San Diego (1995, Fourth Dist.) 31 Cal.App.4th 545, rev. denied, held that only one of the three tests was required in order for the step transaction to apply. Aden v. Lynch (1990) 270 Cal.Rptr.270 174, not officially published, rev. denied, held that for the step transaction doctrine to apply there must be no valid economic or business purpose, but if there is such purpose the motive of tax savings is unimportant; recites testimony stating that the LA Co. Assessor's office had an unwritten policy that after six months would not consider a step transaction (court determined this to be arbitrary and unfairly applied). Prop. 13 History To get a better understanding of the history, Task Force Report, and Revenue & Taxation Code section 60 which defines a "change in ownership," I recommend reading the discussions of the CA Supreme Court in Pacific Southwest Realty and Auerbach cited above. These cases, and the many that follow them, and the entire intent of the Task Force Report, show that the definition of "change in ownership" in section 60 was meant to be the only test of what constitutes a change in ownership (except for statute-made exemptions, like the spousal and parent-child exclusions). The Task Force added sections 61 and 62 as examples to illustrate the test of section 60. The Task Force Report stated, "It is important that the specific statutory examples be consistent with the general test. [Section 60.] The entire statutory design would be destroyed by providing statutory treatment for specific transfers which are inconsistent with the general test." I mentioned there was a mistake in this regard which was picked up in some of the cases. We find cases saying that section 60 is only a guidepost, or that if a transfer was not covered by sections 61 or 62 then section 60 was a catch-all of sorts. Similarly people will take a literal approach to sections 61 or 62 and completely ignore the general principle of section 60. There is where we have people saying, for example, that a revocable trust became irrevocable and then necessarily there is a change in ownership. This is completely wrong – there is only a change in ownership if the test of section 60 is met – the trust might have become irrevocable but is for only 10 years, which does not meet the test. I found that the goofs in the cases (all inconsistent with the CA Supreme Court's analysis) all stem from the October 29, 1979, "Implementation of Proposition 13, Volume I, Property Tax Assessment, An Analysis of the Provisions of Legislation Enacted in 1979 Which Provide and On-Going System of Property Tax Assessment Under Proposition 13," prepared by Staff of the Assembly Revenue and Taxation Committee. On page 19 they did not get it right when, after mis-quoting Section 60, they then said, "As conceived by the Task Force . . . , the general definition would be controlling in all cases where a more specific provision to the contrary was absent." Wrong. The Task Force Report said that section 60 is controlling in all cases, and if any of the statutory examples of sections 61 and 62 were not interpreted consistently with section 60 that it would "destroy" the "entire statutory design." This incorrect statement of the Assembly Report has found its way through the cases and into BOE publications. Here is the chain:
You all were brave to come to the workshop with a last-minute speaker. Thanks for filling up the room! |