[quote=bearishgurl]I stated that their families took advantage of a valuable tax loophole because they CAN! [/quote]
I would argue that it’s not a loophole if it was it’s own proposition. Not just that – it was a constitutional amendment. In other words it wasn’t an accident.
1.What is Proposition 58?
Proposition 58, effective November 6, 1986, is a constitutional amendment approved by the voters of California which excludes from reassessment transfers of real property between parents and children. Proposition 58 is codified by section 63.1 of the Revenue and Taxation Code.
2.What is Proposition 193?
Proposition 193, effective March 27, 1996, is a constitutional amendment approved by the voters of California which excludes from reassessment transfers of real property from grandparents to grandchildren, providing that all the parents of the grandchildren who qualify as children of the grandparents are deceased as of the date of transfer. Proposition 193 is also codified by section 63.1 of the Revenue and Taxation Code.
[quote=sdrealtor]Stupid Prop 13 question as I dont completely understand the details. Does the ability to pass a tax basis to heirs only exist for pre-1978 purchases or does it apply to all homes?[/quote]
It applies to all homes that are a primary residence. There are restrictions based on value – something about $1M. So many of your clients, sdr, may not get the full transfer value. There are details on the link above.
In general..
There are 4 propositions that were passed POST Prop 13 that tend to be lumped in with prop 13. Props 58 and 193 above. And props 60 and 90. Prop 60 allows a homeowner who’s over age 55 to transfer their tax basis within their county to a lesser valued home. In other words, downsizing when you become an empty nester won’t increase your tax rate. Prop 90 made it so that you could do this intra county if both counties were participating.
When I bought from my father we had to decide if we were going to use the prop 58 or the prop 60 tax treatment. It is a logical OR function, not a logical AND function. Since the house I was buying was of greater value by $200k, than the house he was buying, it made sense to use the prop 58 “loophole”.
