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AMBRECHT & BRITTAIN, LLP

Determining when a
"Change in Ownership"
(Reassessment) Occurs

By Dibby Allan Green, CLAS


Chart #1 applies to transfers of real property. See Chart #2 below for situations in which real property is owned by a legal entity (partnership, corporation, LLC, and including trusts) and a change in ownership (reassessment) may occur because the owners (or trust beneficiaries) change.


Chart #1 -- Transfers of Real Property

(c) Dibby Allan Green 1998
Real Property Owned by
Transfer to
Change in Ownership (Reassessment)?
Available Exclusions
Percent Reassessed
Individual(s) solely, as tenants in common, or as community property Other individuals, tenants in common, joint tenancy, or community property Yes Spousal; parent/child; leasehold % transferred
Individual(s), per above Individual, with transferor retaining a life estate No N/A N/A
Individual(s), per above Individual, with life estate given to third party Yes Spousal; parent/child; leasehold % transferred
Individual(s), per above Revocable trust No, if all the sole present beneficiaries (including sprinkling powers) are the transferors; otherwise, yes Spousal; parent/child; leasehold % transferred
Individual(s), per above Irrevocable trust No, if all the sole present beneficiaries (including sprinkling powers) are the transferors; otherwise, yes Spousal; parent/child; leasehold; retaining proportional ownership interests % transferred
Individual(s), per above Trust not exceeding 12 years; transferor retaining the reversion No N/A N/A
Individual(s), per above Partnership, corporation, LLC Yes Retaining proportional ownership interests; leasehold % transferred
Individual(s) with life estate Upon death of person holding life estate Yes Spousal; parent/child; leasehold % owned
Joint tenants Transfer in which no "original joint tenant" remains on title Yes Spousal; parent/child; leasehold 100% of property formerly held in joint tenancy
Joint tenants Transfer in which an "original joint tenant" remains on title No N/A N/A
Trustee of revocable or irrevocable trust Sole present beneficiary(ies) No N/A N/A
Trustee of revocable or irrevocable trust Other than present beneficiary(ies) Yes Spousal (settlor of trust = transferor); parent/child (settlor of trust = transferor); leasehold % transferred
Where lessee has 35+ years remaining on lease (including options to renew) From owner/ lessor to lessee No N/A N/A
Creation of a lease with term of 35+ years (including options) From owner/ lessor to lessee Yes Spousal; parent/child % leased
Partnership, corporation, LLC Owners Yes Retaining proportional ownership interests; leasehold % transferred
Partnership, corporation, LLC Other than owners Yes Leasehold % transferred

NOTE: Other exclusions from a change in ownership may be applicable in certain instances, for example, from a parent or guardian to a disabled child (R&T 62(n)); intrafamily transfer of eligible dwelling to minor children pursuant to court order on death of parents (R&T 62(m)); for replacement property application to eminent domain proceedings, acquisitions, or judgments of inverse condemnation (R&T 68); contributing real property to, or distribution from, an employer benefit plan (R&T 66); and others. Also, for homeowners over 55 years of age or severely disabled, the base year value may be transferred upon purchase of a new residence or new construction in some instances (check with your county) (R&T 69.5).


Chart #2 -- Change in Ownership of Entities

(c) Dibby Allan Green 1998
Entity
Ownership Change
Change in Ownership (Reassessment)?
Available Exclusions (i.e., not included in the more-than-50%
Percent Reassessed
Partnership, corporation, LLC (any other legal entity) -- as to real property which was transferred after 3/1/75 and received proportional interest exclusion Each transfer of ownership interest in the entity is counted until more than 50% has been transferred (transfers of interest among spouses are not included in the count) Yes, reassessment occurs when more than 50% cumulative interests have been transferred [but therafter changes are determined by the next rule below] Leasehold; spousal; qualified trust; proportional ownership 100% of real property owned by entity
Partnership, corporation, LLC (any other legal entity) -- as to all other real property Whenever one owner gains control, defined as a more than 50% ownership interest Yes Leasehold; spousal; qualified trust; proportional ownership 100% of real property owned by entity

 

Updated November, 1998.

The contents of this publication are for information purposes only and are not meant nor should be construed to be legal advice. Note, also, the date of the document. Laws are constantly changing, and are subject to differing interpretations. We, therefore, urge you to do additional research or to contact your own legal or tax counsel before acting on the information contained herein.

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