If you are a senior who has transferred ownership of your home to your wholly owned corporation, you cannot transfer the home's base-year value to a comparable replacement residence in the same county, the Second District Court of Appeal ruled March 15.
The ruling is a loss for David Grotenhuis, who transferred his home on Padaro Lane in Carpinteria to his 100 percent owned corporation in 1999. The corporation sold the home in 2005 and purchased a lower-value dwelling in Montecito on Ten Acre Road. Mr. Grotenhuis contends that he is the "true owner" of the dwelling, and that under state law, he should be allowed to transfer the property's base-year value. A Santa Barbara trial court agreed.
However, the Court of Appeal rejected Mr. Grotenhuis' arguments and overturned the trial court's decision, saying that "the trial court's theories, premised on equitable considerations, are inapposite in the property tax context."
Further, the appellate court added: "The trial court also erred in ruling that Grotenhuis could transfer the base year value of the Padaro Lane property to the Montecito residence. In tax matters, a corporation and its stockholders are deemed separate entities. … In order to transfer the tax basis of the Padaro Lane property, it has to be the principal residence of a person over the age of 55 years who was the owner of record 'at the time of the sale of original property.' (Revenue and Taxation Code Section 69.5, subd. (g)(1).) It is stipulated that the corporation, as owner of record, sold the Padaro Lane property on June 18, 2004 and purchased the Montecito residence on October 8, 2004."
The State Board of Equalization filed an amicus brief against the taxpayer's position in this case.
The court's decision was written by Justice Kenneth Yegan. Presiding Justice Arthur Gilbert and Justice Paul Coffee concurred.
The case is David W. Grotenhuis as Trustee v. County of Santa Barbara, No. B212264.
Cal-TaxReports, March 22, 2010
© 2010 California Taxpayers'
Association.
All Rights Reserved.