Legal Question in Real Estate Law in California

Re: Buying a Home with a Parent to adopt their property tax rate

One can't keep a low property tax assessment by "selling" the property at an artificially-low price, such as $120K when the fair market value is $500K. The law provides for reappraisal at full market value, and the selling price is only one indicator of value.

You are, however, apparently overlooking the exemption for certain transfers of property between parent and child. If your mother transfers her present house to you at any price, or as a gift, it retains its present assessment if certain other conditions are met.

Then, as to the second transaction, in which the two of you become co-owners of a $480,000 house, you are looking to use a second kind of property tax break, one that makes a property tax rate portable.

The problem with your analysis is that when your mother sells (or gives)the first house to you, she is no longer the beneficiary of a Prop. 13 tax-value hold-down; you are. The purpose of the portability feature is to allow older folks to retire into smaller houses or senior communities without losing their property tax benefits. It was not designed or intended to allow the benefit to be cloned.

Your concept is ingenious, and I can't point to specific language in any tax law that demonstrates why it wouldn't work, but I'm pretty sure it will not, for the reason stated - that when the tax-reduction benefit is passed to you, you hod the benefit and your mother has nothing upon which to claim a tax-reduction benefit as to the newly-acquired home.

Re: Buying a Home with a Parent to adopt their property tax rate

First of all, you have not provided info as to where the two properties are located, and not all counties allow the property tax basis transfer, (for example, Los Angeles does, Riverside does not, etc.) Secondly, if the two properties were in qualifying counties, your mother would have to purchase with title exactly as it was on the old house, not with co-owners. Lastly, there would have had to have been a bona find escrow wherein your mother relinquished title to a buyer, not a "sweetheart" sale to a family member. Your mother can always transfer her old house to you without increasing her taxes there, as transfers between parent and child are exempt from reassessment.

Re: Buying a Home with a Parent to adopt their property tax rate

Both Mr.Whipple and Ms. Deming have thoroughly answered your question.

Because of the complexities, I think it behooves you to see a competent real estate and/or tax attorney. An error here could cause major financial reverberations for you and your mother.