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COUNTY OF SAN MATEOInter-Departmental Correspondence |
County Counsel |
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DATE: |
December 5, 2003 |
BOARD MEETING DATE: |
January 13, 2004 |
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TO: |
Honorable Board of Supervisors |
FROM: |
County Counsel |
SUBJECT: |
Claim for Property Tax Refund Submitted by Lori Ann Pearce and Roger Pearce (209 Ryder Street, San Mateo, APN 033-241-520) |
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Recommendation |
Deny the claim of Lori Ann and Roger Pearce for refund of property taxes paid in the amount of approximately $11,071.25 for the 1999-2000, 2000-2001, 2001-2002 and 2002-2003 tax years for the property located at 209 Ryder Street, San Mateo, APN 033-241-520. |
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Background |
Lori Ann and Roger Pearce are the current owners of a single family residence located at 209 Ryder Street in San Mateo. Before the Pearces became the owners of the property, it was owned by the Joan F. Stennett 1992 Revocable Trust (the "Trust"), a revocable trust established by Lori Ann Pearce's mother, Joan Stennett. Ms. Stennett died in April 2000. The agreement governing the Trust provided that, upon Ms. Stennett's death, Ms. Pearce and her seven siblings would be beneficiaries of the Trust estate and that the Pearces would be entitled to purchase the Ryder Street property from the estate for $320,000. |
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In May 2000, the Pearces purchased the Ryder Street property from the Trust. The Assessor determined that the purchase/transfer constituted a change in ownership of 87.5 percent of the ownership interests in the Ryder Street property (i.e., the extent to which the interest in the Ryder Street property transferred to the Pearces exceeded Ms. Pearce's one-eighth pro rata share of the Trust estate). |
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The Pearces filed with the San Mateo County Assessment Appeals Board an application for reduced assessment on the grounds that their purchase of the Ryder Street Property from the Trust was a parent-child transfer of property exempt from change in ownership reassessment pursuant to section 63.1 of the California Revenue and Taxation Code. The Assessment Appeals Board disagreed and denied the Pearces' application. The Pearces timely filed the instant claim for property tax refund on the same grounds. |
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Discussion |
Under California law, property is subject to reassessment when a change in ownership of the property occurs. California law also provides that a change in ownership of property transferred to a revocable trust does not occur until the trust becomes irrevocable, such as where the trustor with the power to revoke it dies. Cal. Rev. & Tax. Code § 61(h); Cal. Code Regs., tit. 18, § 462.160(b)(2). Here, by its terms, the Trust became irrevocable when Ms. Stennett died in April 2000, and a change in ownership of the Trust's property therefore occurred at that time. |
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In support of their claim that she is entitled to a tax refund, the Pearces cite section 63.1 of the California Revenue and Taxation Code, which provides that "a purchase or transfer between parents and their children" of the parents' principal residence is not a change in ownership. However, in order to establish eligibility for a complete exemption from change in ownership reassessment for the Ryder Street property, the Pearces must establish that they took ownership of the property pursuant to a transfer between Ms. Stennett and themselves. |
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As the Assessment Appeals Board found, the facts of this case do not support such a contention. The Trust agreement provided that, upon Ms. Stennett's death, the Trust estate would be divided equally among Ms. Stennett's eight children, subject to Ms. Pearce's right to purchase the Ryder Street property from the Trust for a set price. Simply put, the Pearces assumed ownership of the property not through operation of the Trust agreement at Ms. Stennett's death, but rather, through a purchase from the Trust of the property, a Trust asset, subsequent to Ms. Stennett's death. The Assessor and the Assessment Appeals Board correctly determined that the Ryder Street property is ineligible for a parent-child transfer exemption from reassessment (beyond the extent to which Ms. Pearce is a beneficiary of the Trust estate), and the instant claim should therefore be denied. |
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Vision Alignment |
The recommended action furthers the County's commitment to responsive, effective and collaborative government and the goal of ensuring that County decisions be based on careful consideration of future impact, rather than temporary relief or immediate gain. |
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Fiscal Impact |
No fiscal impact is anticipated, unless the claim for refund is granted. |