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Change in Ownership under the Revenue and Taxation Code in California

In California, the Revenue and Taxation Code sets the rules and regulations for how ownership changes are treated for tax purposes. A change in ownership can occur in many different ways, including long-term leases, sales of ground leased assets, and legal entity transfers. It's important to understand how these changes are treated, as it affects the property tax liability of the new owner.

Long-Term Leases A long-term lease is a rental agreement between a property owner and a tenant for a period of time that exceeds 35 years. In California, a long-term lease is treated as a transfer of ownership for tax purposes if the tenant is granted the right to possess, use, and control the property for the duration of the lease. This means that the tenant is responsible for paying property taxes on the property during the lease period.

Sales of Ground Leased Assets A sale of ground leased assets occurs when the owner of a building sells the building and retains ownership of the land. In California, this type of transaction is treated as a change in ownership for tax purposes. The new owner of the building is responsible for paying property taxes on the building, while the old owner continues to pay property taxes on the land.

Legal Entity Transfers A legal entity transfer occurs when ownership of a property is transferred from one legal entity to another, such as from a corporation to a limited liability company. In California, a legal entity transfer is treated as a change in ownership for tax purposes if the new entity has a different tax status than the old entity. This means that the new entity may be subject to different property tax rates, exemptions, or assessments than the old entity.

Possessory Interest Analysis A possessory interest analysis is a process used to determine the property tax liability of a tenant who has a long-term lease on a property. In California, the Revenue and Taxation Code sets out the criteria for determining if a tenant has a possessory interest in a property. The criteria include the length of the lease, the degree of control and possession granted to the tenant, and the type of property being leased.


Legal Exemptions In California, certain types of property may be exempt from property taxes, such as churches, schools, and government buildings. Legal exemptions are determined by the Revenue and Taxation Code and can be complex to understand and navigate. Our team has extensive experience advising clients on the various legal exemptions available in California, and can help you determine if your property may be exempt from property taxes.

Conclusion Change in ownership under the Revenue and Taxation Code in California can be complex and confusing, but with over 20 years of experience, our team can help you understand how long-term leases, sales of ground leased assets, legal entity transfers, and other complex issues are treated for tax purposes. Whether you're looking to lease a property, sell a building, or transfer ownership of a property, our team can provide you with the expertise and guidance you need to make informed decisions.


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