Termination of a Joint Tenancy to Tenancy-in-Common between family members, even if proportional interests are transferred between the same parties, will result in property tax reassessment.

In Benson v. Marin County Assessment Appeals Bd., 162 Cal.Rptr.3d 498 (Cal.App. 1 Dist., 2013), the California Courts of Appeal upheld the reassessment of a property where the property owner had transferred his interest in his property that he owned with his brother from a joint tenancy to a tenancy-in-common, even though he and his brother continued to hold the same percentage interest in the property before and after the transfer.

The property owner claimed that this transaction was excluded from reassessment under the general definition of change in ownership set forth in Revenue and Tax Code (“R&T”) Section 60 and that no change in ownership occurred when he terminated his joint tenancy and created a tenancy-in-common with his brother.  The taxpayer also took the position that the property should be excluded from reassessment pursuant to R&T Section 62(a)(1) because he and his brother held the same proportional interest before and after the transfer.  The Assessment Appeals Board agreed with the property owner.

The County of Marin challenged the decision of the Appeals Board and the Court upheld the reassessment.  The Court went into a lengthy and thorough analysis of the complex legislative history, multiple revisions of the pertinent sections of the Revenue and Tax Code and attempts by various agencies to clarify the law.  Ultimately, the Court concluded that “the creation of a family joint tenancy does not result in a change in ownership, but termination of such a joint tenancy does.”

The Court cited the opinions of the State Board of Equalization, the agency tasked with interpreting the applicable statutes, and found that the Board had a consistent history of treating the termination of a family joint tenancy as a change of ownership.  The Court also found that in reviewing the statutory scheme “in its entirety, it is apparent family joint tenancies are not embraced within the change in the method of holding title exception set forth in section 62, subdivision (a)(1).”  The Court found that the statutory provisions specifically applicable to family joint tenancies are R&T Section 61(e), 62(f), and 65(b) through (e).  It held that 62 (a)(1) does not apply to the termination of family joint tenancy.  The Court’s position in this opinion is that the legislature had allowed the use of a joint tenancy as an estate planning tool and that families using this tool received the advantages upon the creation of a joint tenancy since no change in ownership is deemed to have occurred.  However, states the Court, the “price for that property tax break, so to speak, was a change in ownership when the family joint tenancy was terminated.”

“This information is for educational purposes only and not intended to constitute legal advice. Every project and property is unique. Please seek legal counsel for advice specific to your project.”