The purchase of property may increase or decrease your tax liability.
In California, the transfer of real property or the transfer of an interest (greater than 50%) in an entity that owns real property is a reappraisal event, the most important issue with transfers is the distinction between leasehold and fee interests.
Most taxpayers in California assume the consideration paid is automatically the new taxable basis referred to as Proposition 13. This is incorrect and more times than not results in higher than anticipated property taxes.
The taxable value of a transfer of real property is the unencumbered fee interest or its full cash value equivalent. Consequently, a complete reconciliation of a transaction must be done to ascertain the new unencumbered taxable value.
Once the full cash value is determined or reconciled to the consideration paid and relative market parameters, it is necessary to determine any non taxable components such as enterprise or services income otherwise referred to as intangibles. However, intangible includes more than goodwill; it includes income derived from services versus rental income.
DePasquale, Kelley & Company consistently reduces Proposition 13 assessments by an average of 20%. This returns permanent tax savings for California properties for the time frame property is owned.
