Friday, September 27, 2013
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C.A. Sides With Assessor, SBE on Joint Tenancy Issue
By a MetNews Staff Writer
The termination of a family joint tenancy in a piece of real estate was a “change in ownership,” triggering reassessment under Proposition 13, even though the actual owners of the property did not change, the First District Court of Appeal ruled yesterday.
Div. One reversed a Marin Superior Court judge’s ruling in favor of James D. Mikkelsen. The Mill Valley property owner resident challenged the county assessor’s determination that his conversion of the ownership of property he owned with his brother, from a joint tenancy to a tenancy in common, fit the change-in-ownership definition in Revenue and Taxation Code Sec. 60.
The effect of the reassessment was to increase the value of the property from about $100,000 to about $525,000 and increase the taxes by more than $2,600 annually.
Mikklesen’s brother acquired the property by right of survivorship when their mother died in 1997. She had created the joint tenancy after inheriting the property from her husband in the 1950s.
Peter Mikklesen subsequently transferred the property to himself and James Mikklesen as joint tenants. But in 2007, James Mikklesen executed and recorded a grant deed severing the joint tenancy, so that he and his brother were thereafter tenants in common, each owning a 50 percent undivided interest.
The county assessment appeals board and Superior Court Judge Faye D’Opal agreed with James Mikklesen that since he and his brother continued to each own an equal share, there had been no change in ownership and no Proposition 13’s limit on assessment increases to two percent per year continued to apply.
Justice Kathleen M. Banke, writing for the Court of Appeal, saw it differently, siding with the assessor and his amicus, the State Board of Equalization.
She cited a task force report explaining the reason why the passing of property from a joint tenancy to a surviving joint tenant is not treated as a change in ownership—at the time Proposition 13 was enacted, joint tenancies were commonly used so that parents could pass property to their children at their deaths without going through probate. The Legislature, she said, reasoned that the use of such a device should be treated the same as if the property was passed by will.
“While the wisdom of the policy reason for that differential treatment—to accommodate the use of joint tenancy as an estate planning tool—may be a matter of debate, it was within the Legislature’s prerogative to craft the change in ownership statutes accordingly,” the justice wrote. “What Mikkelsen, the Board and the trial court overlooked was that Mikkelsen got the advantage of this policy when his brother created the joint tenancy and no change in ownership was deemed to have occurred. The price for that property tax break, so to speak, was a change in ownership when the family joint tenancy was terminated.”
The case is Benson v. Marin County Assessment Appeals Board (Mikkelsen), A134340.
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