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Exclusions from Real Property Reappraisal- Prop 58 and 193

Family PlanningIn California, real property is reassessed at market value every time there is a transfer of title (sold or transferred)  or a new certificate of occupancy is issued by the local planning office after major construction. The state of California has several propositions in place, which allow for real property to be excluded from reassessment upon transfer. Here we will explore Propositions 58 and 193, which allow for Transfers Between Parent and Child & Grandparent and Grandchild respectively. Both events which are excluded from reassessment if certain conditions are met and the proper application is timely filed.

What are Propositions 58 and 193?

Proposition 58, effective November 6, 1986, is a constitutional amendment approved by the voters of California which excludes from reassessment transfers of real property between parents and children. Proposition 58 is codified by section 63.1 of the Revenue and Taxation Code.

Proposition 193, effective March 27, 1996, is a constitutional amendment approved by the voters of California which excludes from reassessment transfers of real property from grandparents to grandchildren, providing that all the parents of the grandchildren who qualify as children of the grandparents are deceased as of the date of transfer. Proposition 193 is also codified by section 63.1 of the Revenue and Taxation Code.

Which transfers of real property are excluded from reassessment by Propositions 58 and 193?

  • Transfers of primary residences (no value limit)
  • Transfers of the first $1 million of real property other than the primary residences. The $1 million exclusion applies separately to each eligible transferor.
  • Transfers may be result of a sale, gift, or inheritance. A transfer via a trust also qualifies for this exclusion. For property tax purposes, we look through the trust to the present beneficial owner. When the present beneficial ownership passes from a parent to a child, this is a change in ownership that is eligible for the parent-child exclusion.

Who are considered eligible children under Proposition 58 and grandchildren under Proposition 193?

A “child” for purposes of Proposition 58 includes:

  • Any child born of the parent(s).
  • Any stepchild while the relationship of stepparent and stepchild exists.
  • Any son-in-law or daughter-in-law of the parent(s).
  • Any adopted child who was adopted before the age of 18.

Spouses of eligible children are also eligible until divorce or, if terminated by death, until the remarriage of the surviving spouse, stepparent, or parent-in-law.

An eligible “grandchild” for purposes of Proposition 193 is any child of parent(s) who qualify as child(ren) of the grandparents as of the date of transfer.

(Proposition 58) Transfer between Parent and Child Eligibility Requirements

  • The real property must be owned by the eligible transferor who is either the parent or child.
  • You must be a parent or child. A child may be a son, daughter, son-in-law, daughter-in-law, stepchild, or child adopted before the age of 18. Spouses of eligible children are also eligible until divorce or, if terminated by death, until the remarriage of the surviving spouse, stepparent, or parent-in-law.
  • You must complete a Claim for Reassessment Exclusion for Transfer between Parent and Child form for a gift or purchase of real property between parent and child.

(Proposition 193) Transfer from Grandparent to Grandchild Eligibility Requirements

  • The real property must be owned by the eligible transferor who is the grandparent.
  • You must be a grandchild whose parent(s) qualify as the deceased child(ren) of the grandparents as of the date of transfer, and you must be the decedent’s child.
  • You must complete a Claim for Reassessment Exclusion for Transfer from Grandparent to Grandchild form for a gift or purchase of real property from grandparent to grandchild.

For parent-child transfers (Proposition 58):

Claim for Reassessment Exclusion for Transfer Between Parent and Child, Form BOE-58-AH. Los Angeles County Form (OWN-88).   Claim forms are available from several sources. Check with your local county assessor’s office.

For grandparent-to-grandchild transfers (Proposition 193):

Claim for Reassessment Exclusion for Transfer Between Grandparent and Grandchild, Form BOE-58-G. Los Angeles County Form (OWN-143). Claim forms are available from several sources. Check with your local county assessor’s office.

What are the time filing requirements of Propositions 58 and 193?

Generally, to get relief retroactive to the date of transfer, a claim must be filed with the county assessor’s office by the earliest of the following:

  • Within three years of the transfer
  • Prior to transferring to a third party

If a notice of supplemental or escape assessment is mailed after the deadline for either of these periods has passed, then the transferee has an additional six months from the date of the notice to file a claim. For example, if a taxpayer received a Notice of Supplemental Assessment for a parent-child transfer dated January 1, 2003, and then received a Notice of Proposed Escape Assessment dated April 1, 2006, the taxpayer would have six months from April 1, 2006 to file a claim with the assessor.

 I still have questions about Propositions 58/193. Where can I find more information?

You must choose which exclusion you wish to apply your base year value. If you sell the property to your child and choose to transfer your base year value using the parent-child exclusion, then the base year value is no longer yours to transfer to a replacement property (Prop 60).

If you still have questions about Propositions 58/193, you may find the answers in Letter To Assessors No. 2008/018 or you may call the Assessment Services Unit at 916-274-3350.

For expanded definitions of Prop. 58 & 193, see Revenue and Taxation (R & T) Code Section 63.1. It is available online at www.leginfo.ca.gov.

Please also feel free to contact us directly as we have successfully transferred tax basis under both Prop 58 & 193 and we would be delighted to share from our personal experience.

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Useful Links

http://www.boe.ca.gov/proptaxes/faqs/propositions58.htm#1

http://assessor.lacounty.gov/extranet/guides/prop58.aspx

http://assessor.lacounty.gov/extranet/list/forms.aspx

 

The content provided does not constitute legal/tax advice and is not intended to constitute advertising or solicitation for legal/tax services. Nothing in this Site should be construed by you as a source of legal/tax advice. You should not rely or act upon the contents of this Site without seeking advice from your own attorney/tax specialist. This information is provided for general information purposes only. IRS Circular 230 notice: In order to comply with requirements imposed by the IRS, we must inform you that any U.S. federal tax advice contained in this blog is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter that is contained in this blog.

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