Court of Appeal Holds Transfer Tax Applies to Legal Entity Changes in Ownership

BA Realty LLLP (“BA Realty”) owned 100 percent of 926 North Ardmore Avenue LLC (“Ardmore”), which owned an apartment building in Los Angeles. In 2008, the partners in BA Realty transferred 90 percent of their partnership interests to two trusts (45 percent each). The transfers resulted in a change in ownership and reassessment of the apartment building for Proposition 13 (“Prop 13”) purposes under R&TC § 64(d).²

The Los Angeles County Registrar-Recorder imposed a documentary transfer tax (“DTT”) under the standard California Documentary Transfer Tax Act (“DTTA”) that only applies to “realty sold,”³ claiming that a Prop 13 change in ownership is sufficient evidence of “realty sold” subject to transfer tax.

The DTTA allows counties to pass an ordinance that imposes a DTT on “each deed, instrument, or writing by which any lands, tenements or other realty sold within the county shall be granted, assigned, transferred, or otherwise conveyed to, or vested in, the purchaser or purchasers ….”⁴ Los Angeles County has adopted this DTTA language verbatim in the Los Angeles County Code § 4.60.020.

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1. Los Angeles County Super. Ct. No. BC476670 (September 22, 2014).
2. Under R&TC § 64(d), if there have been cumulatively more than 50 percent of the interests in an entity transferred by any of the original co-owners, there is a re-assessable change in ownership of the entity’s property that was previously excluded from reassessment under R&TC § 62(a)(2).
3. R&TC §§ 11911-11930. Under the DTTA, counties and general law (non-charter) cities may enact transfer tax ordinances but must conform them to the standard provisions in the DTTA.
4. R&TC § 11911.