The California Supreme Court ruled that a corporation’s transfer of its ownership of two Los Angeles supermarkets to a trust that already owned 92.8% of the corporation’s stock was a “change in ownership,” permitting the revaluation of the supermarkets’ real property. Article XIII A of the California Constitution, added by Proposition 13, strictly limits increases in the assessed value of real property unless the property undergoes a “change in ownership.” However, there is no “change in ownership” when the transaction involving a legal entity that “results solely in a change in the method of holding title to the real property and in which proportional ownership interests of the transferors and transferees, whether represented by stock, partnership interest, or otherwise, in each and every piece of real property transferred, remain the same after the transfer.” The Court gave an example of the change in ownership exclusion: two individuals that own two equal shares of real property and then transfer those shares to a corporation in which they each own each shares. In this case, the taxpayers argued there was no change in no ownership because the trust, to whom the real property was transferred, already held all the corporation’s voting stock. But, the transfer resulted in nonvoting stockholders losing any interest in real property.The Court rejected the taxpayer’s argument, holding that a change to nonvoting stock ownership means the proportional ownership interests do not qualify for the exception to a change in ownership. Thus, the Court ruled that a change in ownership had occurred, and a revaluation was permissible.
Prang v. Los Angeles Cnty. Assessment Appeals Bd., 15 Cal. 5th 1152 (2024).