Legal Question in Real Estate Law in California
prop 13/58/193
grandparents have properties that were sold to my sister, myself and mother for one dollar. mothers should fall under prop 13, so as not to be reassessed, true or not true as it was primary residensce. the property consists of four homes on two lots. if one of the lots was now sold for one dollar to mothers child, would that also fall under prop 13, without being reassessed? if not what would need to be done to have this property transferred to child without being reassessed. also home that grandparents owned was sold to ''granddaughter'' for one dollar, can that be reassessed, or does it stay protected under prop 13. thanks
2 Answers from Attorneys
Re: prop 13/58/193
Selling a home for $1 is what is known as a "sham" transaction by the taxing authorities, and could raise some serious problems for you in the future. I am not sure what you were trying to accomplish, but the IRS could come back and assess a reasonable profit to your grandmother, assess taxes thereon, as well as penalties.
I would suggest you get ahold of an attorney right away to straighten this mess out. There are certain things you don't mess with, and taxes is one of them. Your Prop. 13 concerns will be minor compared to what the IRS and Franchise Tax Board might do.
Re: prop 13/58/193
On the other hand, a relative can make a gift of real property without offending any authorities, so why is a $1 sale necessarily bad? The real question is whether the transaction was accurately reported to the taxing authorities. If all the facts were honestly reported, and the taxing authorities did not challenge the capital gains taxes then paid, the likelihood of a future problem is low and diminishes with each passing year. If, on the other hand, there was a wilful failure to disclose, this is fraud and the liability for penalties will persist. In order to put your mind at ease -- or to rectify anything that could come back to haunt you later -- you should take all the particulars including copies of deeds and of the sellers' tax returns to a tax expert for review. The right expert at this stage is probably an accountant with a heavy tax practice. A lawyer is probably unnecessary unless/until the IRS or FTB initiates action.
Again, you could be 100% OK, but it is better to be sure than to harbor doubt.
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