Multiple Properties – Tax Benefit of LLC (Pre-Death Planning Opportunity Only)

Under California Proposition 58, the Parent to Child Exclusion for transfer of the pre-exisiting Proposition 13 tax base is unlimited for one residential property, plus one million ($1,000,000.00) per parent spouse for non-residential property (maximum two million [$2,000,000.00] if two parents).

For an owner of an investment property or properties exceeding two million, tax planning for purposes of preserving the pre-exisiting Proposition 13 tax base can be accomplished through the use of a business entity, e.g. LLC or L.P.

The tax re-assessment rules for a business entity holding real property differs in that it depends on 1) a change of control of more than 50%; or 2) more than 50% of the original co-owners change.

Importantly, any Business Entity planning and structuring regarding the investment property is only possibly before the owner dies.

As time goes on there will be more LLCs created as more real properties will be worth one million or more and more tax assessment will catch up to that threshold.

For a consultation regarding this topic please contact the Law Offices of Hanlen J. Chang.

Disclaimer

Author: Hanlen Chang

The Law Offices of Hanlen J. Chang is located in San Francisco, California. Mr. Chang is a graduate of Southwestern Law School and UC Santa Barbara. Mr. Chang’s Legal Practice is focused on Estate Planning (with an international subspeciality), Business Law, and Real Estate. Mr. Chang is a member of the Bar Association of San Francisco – International Law & Practice Executive Committee.

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