A transfer of real property by P, A, B, or C to any of the other three corporations would not be a change in ownership.
Example 1: Any transfer by C (wholly owned by A and B) to B (wholly owned by A and P) would not be a change in ownership because of those relationships and because P owns 100 percent of A.
If real property is transferred between non-affiliated corporations, only the property transferred shall be deemed to have undergone a change in ownership.
Examples of Transfers of Real Property in Legal Entities:
Example 2: A transfer of real property from A and B, as equal co-tenants, to Corporation X where A and B each take back 50 percent of the stock. No change in ownership. However, if A and B each take back 49 percent of the stock and C receives 2 percent of the stock then there will be a change in ownership of the entire property.
Example 3: A transfers Whiteacre to Corporation X and B transfers Blackacre (equal in value to Whiteacre) to Corporation X. A and B each take back 50 percent of the stock. Change in ownership of 100 percent of both Whiteacre and Blackacre.
Example 4: Corporation X owns Blackacre and Whiteacre (both are of equal value). A & B each own 50 percent of Corporation X's shares. X transfers Whiteacre to A and Blackacre to B. Change in ownership of 100 percent of both Blackacre and Whiteacre. However, if Corporation X transfers Whiteacre and Blackacre to both A and B as joint tenants or as equal tenants in common, there is no change in ownership.
Example 5: A transfer of real property from Corporation X to its sole shareholder A. No change in ownership, even if A is an "original co-owner," because interests in real property, and not ownership interests in a legal entity, are being transferred.
Upon the acquisition of such direct or indirect ownership or control, which may include any purchase or transfer of 50 percent or less of the ownership interest through which control or a majority ownership interest is obtained, all of the property owned directly or indirectly by the acquired legal entity is deemed to have undergone a change in ownership.
For purposes of this subdivision ((d)(2)), interspousal transfers excluded under Revenue and Taxation Code section 63, transfers between registered domestic partners excluded under Revenue and Taxation Code section 62, subdivision (p), transfers into qualifying trusts excluded under Revenue and Taxation section 62, subdivision (d), and proportional transfers excluded under Revenue and Taxation Code section 62, subdivision (a)(2) shall not be cumulated or counted to determine a change in ownership.
Examples of Transfers of Interests in Legal Entities:
Example 6: A and B each own 50 percent of the stock of Corporation X. Corporation X acquires Whiteacre from Corporation Y, an unaffiliated corporation in which neither A nor B has interests, and Whiteacre is reappraised upon acquisition. A transfers 30 percent of Corporation X's stock to C, and B later transfers 25 percent of Corporation X's stock to C. Upon C's acquisition of 55 percent of Corporation X's stock, there is a change in control of Corporation X under Revenue and Taxation Code section 64, subdivision (c) and a reappraisal of Whiteacre.
Example 7: Spouses H and W acquire as community property 100 percent of the capital and profits interests in an LLC which owns Blackacre. Each of H and W is treated as acquiring 50 percent of the ownership interests as defined in subdivision (c) of this rule and Revenue and Taxation Code section 64, subdivision (a). Since the selling members of the LLC are not original co-owners (because they did not transfer the property to the LLC under the Revenue and Taxation Code section 62, subdivision (a)(2) exclusion), no change in control of the LLC would occur under Revenue and Taxation Code section 64, subdivision (c) and no change in ownership of Blackacre under Revenue and Taxation Code section 64, subdivision (d).
Example 8: A and B, hold equal interests as tenants in common in Greenacre, a parcel of real property. A and B transfer Greenacre to Corporation Y and in exchange A and B each receive 50 percent of the corporate stock. No change in ownership pursuant to Revenue and Taxation Code section 62, subdivision (a)(2). Pursuant to Revenue and Taxation Code section 64, subdivision (d), A and B become original coowners. A transfers 30 percent of Corporation Y's stock to C (A's child), and B then transfers 25 percent of Corporation Y's stock to D (B's grandchild). Change in ownership of Greenacre upon B's transfer to D. Parent/child and grandparent/grandchild exclusions are not applicable to transfers of interests in legal entities. However, if the same transfers were made by A and B to their respective spouses, no change in ownership pursuant to Revenue and Taxation Code section 63 and Rule 462.220.
Examples of Excluded Proportional Interest Transfers:
Example 9: General Partnership (GP), which owns Whiteacre and in which A and B hold equal partnership interests, converts to Limited Partnership (LP) under the Revised Uniform Partnership Act of 1994 (California Corporations Code section 16100 et seq.). As a result of the conversion, A and B each hold 50 percent of the LP interests in capital and profits. No change in ownership of Whiteacre upon the conversion, because, under section 16909 of the Corporations Code, there is no transfer of Whiteacre. Revenue and Taxation Code section 62, subdivision (a)(2) does not apply. However, if A and B were "original coowners" in GP, they remain "original coowners" in LP.
Example 10: Following the conversion in Example 9, A and B each transfer 30 percent of their capital and profits interests in LP to Limited Liability Company (LLC), which is owned equally by A and B. Each retain an equal 20 percent interest in LP. No change in ownership of Whiteacre pursuant to Revenue and Taxation Code section 62, subdivision (a)(2) because A and B own 100 percent of both LP and LLC and their respective proportional interests remain the same after the transfer. Neither Revenue and Taxation Code section 64, subdivision (c) nor subdivision (d) applies to this transfer, although A and B become "original coowners" with respect to their interests in LLC.
Example 11: A limited partnership (LP), which owns Blackacre and in which C and D hold equal partnership interests, changes its form to a limited liability company (LLC), in which C and D hold equal membership interests, by statutory merger under the California Revised Limited Partnership Act (California Corporations Code section 15611 et seq.) and the Beverly-Killea Limited Liability Company Act (California Corporations Code section 17000 et seq.). No change in ownership of Blackacre upon the change in form because under section 17554 of the Corporations Code, there is not a transfer of property from LP to LLC. Revenue and Taxation Code section 62, subdivision (a)(2) does not apply. However, if C and D were "original coowners" in LP, they remain "original coowners" in LLC.
Cal. Code Regs. Tit. 18, § 462.180
2. Editorial correction deleting outdated chart and amending subsection (b)(2)(C) (Register 95, No. 51).
3. Change without regulatory effect amending chart filed 12-19-95 pursuant to section 100, title 1, California Code of Regulations (Register 95, No. 51).
4. Amendment of section and NOTE filed 3-9-99; operative 4-8-99 (Register 99, No. 11).
5. Amendment of subsection (d)(1)(B), new Example 7, renumbering of examples, and amendment of newly designated Example 10 filed 9-15-2003; operative 10-15-2003 (Register 2003, No. 38).
6. Change without regulatory effect amending section filed 12-24-2013 pursuant to section 100, title 1, California Code of Regulations (Register 2013, No. 52).
Note: Authority cited: Section 15606, Government Code. Reference: Sections 60, 61, 62, 63, 64 and 67, Revenue and Taxation Code; Sections 16909 and 17554, Corporations Code; and Section 1351, Civil Code.
2. Editorial correction deleting outdated chart and amending subsection (b)(2)(C) (Register 95, No. 51).
3. Change without regulatory effect amending chart filed 12-19-95 pursuant to section 100, title 1, California Code of Regulations (Register 95, No. 51).
4. Amendment of section and Note filed 3-9-99; operative 4-8-99 (Register 99, No. 11).
5. Amendment of subsection (d)(1)(B), new Example 7, renumbering of examples, and amendment of newly designated Example 10 filed 9-15-2003; operative 10-15-2003 (Register 2003, No. 38).
6. Change without regulatory effect amending section filed 12-24-2013 pursuant to section 100, title 1, California Code of Regulations (Register 2013, No. 52).