STATE BOARD OF EQUALIZATION (916) 324-6.593 .

.
STATE
OF CALIFORNIA
STATE
1020
BOARD
N STREET,
OF EQUALIZATION
SACRAMENTO,
(P.0. BOX942879.
cAtlFoRf4tA
SACRAMENTO,
(916)
CALIFORNIA
324-6.593
CONWAY
” COLL,!
Second D~tncf. to, Angeles
94279-0001)
ERNEST 1. DRONENWRG.
.’
hrd
JR
Son Dicgc
Dktrict.
pout CARPENTER
Fourth Dirtrici. Lcr Angele,
March
17,
1989
GRAY
Controller,
CINDY
Er~~tirr
--_-
Dear
7
This
is in response
to your
letter
dated
February
13,
1989,
in
to
review
a
series
of
proposed
transactions
which
you ask u’s
The facts
as set
forth
for
change
in ownership
implications.
and
as
verbally
represented
to
me
by
telephone
in your letter,
as follows:
can be summarized
1.
partnership
California
general
Amrealco,
individuals
holding
(“Amrealco”)
ts
composed
of three
therein
of
70
interests
respective
partnership
20
percent
and
10
percent.
percent,
2.
limited
partnership
60.7
percent
Amrealco
owns
a
interest
in The Oakbrook
Company,
a California
limited
20
percent
Amrealco
The
partnership
(“Oakbrook”).
interest
in
3.22
percent
directly
owns
a
partner
and the 70 percent
Amrealco
partner
directly
Oakbrook,
Except
as set
owns a 1 percent
interest
in Oakbrook.
own,
partners
the
Amrealco
none
of
forth
herein,
either
directly
or
indirectly,
any
interest
in
the
Oakbrook
partnership.
3.
owns
real
Oakbrook
including
California,
Santa
Clara
County,
letter.
4.
Amrealco
plans
to liquidate
and
For- business
purposes,
60.7
percent
the
assets,
including
its
distribute
its
Oakbrook,
to
interest
in
partnership
limited
basis
in
accordance
with
their
partners
on a pro
rata
in
interests
partnership
percen,tage
respective
Amrealco.
5.
limited
percent
60.7
Amrealco’s
As
a
result,
in
Oakbrook
will
be
transferred
partnership
interest
property
in
that
certain
the
which
is
State
the
real
property
subject
of
of
in
your
DAVIS
socroms”rv
RAMBO
Dwecmr
’
-2-
March
17,
1989
.’
and assigned
and
partners
in
the
same
respective
partnership
70, 20 and 10 percent).
allocated
percentages
interests
to,
among,
the
Amrealco
as
such
partners’
in
Amrealco
(i.e.,
You have
expressed
an o,pinion
that
these
transfers
will
be
excluded
from the change
of ownership
provisions
set
forth
in
section
64
of
the
Revenue
and
Taxation
Code
(all
section
references
contained
herein
are
to
the
Revenue
and Taxation
Code)
since
the distributions
to the Amrealco
partners
are
to
be in proportion
to their
ownership
interests
in Amrealco.
ANALYSIS
Section
64 provides
in
pertinent
part
as
follows:
Except
as provided
in subdivision
(h) of Section
(a)
61 and subdivisions
(c)
and (d)
of this
section,
tli2
purchase
or transfer
of
ownership
interests
in leg:!1
entities,
such
as . . . partnership
interests,
shall’
not
be deemed
to’ constitute
a transfer
of
the
real
property
of the legal
entity.
*
*
*
When a
corporation,
(cl
partnership,
other
legal
entity
or any other
person
obtains
control,
as defined
in Section
25105,
in any corporation,
or
obtains
a
majority
ownership
interest
in
partnership
or
any
other
legal
entity,through
the purchase
or transfer
of
corporate
stock,
partnership
interest,
or
ownership
interests
in other
legal
entities,
such
purchase
or
transfer
of
such
stock
or other
interest
shall
be a
change
of
ownership
of
owned
by
property
the
corporation,
partnership,
or
other
entity
in
legal
which the controlling
interest
is obtained.
Pursuant
to
rule
462(j)(4)(A)
of
the
Property
Tax Rules
of
Title
18 of
the
California
Code of
Regulations,
obtaining
a
majority
ownership
interest
in a partnership
within
the meaning
of
section
64(c)
is
effected
by obtaining
direct
or
indirect
ownership
or
control
of
more
than
50 percent
of
the
total
interest
in both partnership
capital
and profits.
Subdivision
cooperative
Subdivision
inapplicable.
the
largest
liquidation
(h)
of
section
61
deals
with
the
stock
of
housing
corporations
and
is
here.
inapplicable
section
64
also
seem
to
be
(c)
of
would
The partner
with
the 70 percent
interest
holds
the
On
Amrealco.
percentage
interest
’
such partner
zl.1
be assigned
a 42.49
of Amrealco,
-3-
percent
equals
interest
partnership
.4249.
in
March
Oakbrook
as
.70
17,
times
1989
.607
Since
such partner
otherwise
holds
only a 1 percent
interest
in
his
receipt
of the additional
42.49
percent
interest
Oakbrook,
constitute
will
not
the
obtaining
of
a majority
ownership
interest
therein
within
the meaning
of
section
64(c’)
or rule
Therefore,
it
would
seem that
the general
rule
462(j)(4)(A).
of
section
64
would
the
transfer
of
wherein
the
apply
partnership
interests
is not deemed to constitute
a transfer
of
the partnership’s
real
property.
However,
following
subdivision
exception:
(d)
of
said
section
64
sets
forth
the
If property
is
transferred
on or after
March 1,
(d)
1975,
to a legal
entity
in a transaction
excluded
from
change
in ownership
by paragraph
(2)
of
subdivisio::
(a)
of Section
62,
then the persons
holding
ownershj?
interests
in such
legal
entity
immediately
after
the
transfer
shall
be considered
the “original
coowners.”
interests
ownership
Whenever
shares
or
other
representing
cumulatively
more than 50 percent
of
the
total
interests
in the entity
are
transferred
by any
of the original
coowners
in -one
or more transactions,
a change
in ownership
of that
real
property
owned by
the legal
entity
shall
have occurred,
and the property
which was previously
excluded
form change
in ownership
under
the provisions
of
paragraph
(2)
of
subdivision
(a) of Section
62 shall
be reappraised.
The
date
of
transfer
of
individually
the interests
the
date
of
the
reappraisal
shall
be
representing
interest
the
ownership
or cumulatively
more than
50 percent
of
in the entity.
Amrealco
held
its
60.7
percent
Pursuant
to
the
above,
if
ownership
interest
in Oakbrook
as an “original
coowner”
within
then the transfer
by Amrealco
of
the meaning
of section
64(d),
absent
the application
of an
such
partnership
interest
would,
constitute
a change
in ownership
of some
applicable
exclusion,
or all
of Oakbrook’s
real
property.
even
instance,
however,
In
this
the exclusionary.
“original
coowner,”
would apply
as you have indicated.
pertinent
part as follows:
Change
in
ownership
shall
if
Amrealco
provisions
Said section
not
include:
such
were
of
section:
62 provides
an
62
in
(
.
March 17,
-4-
1969
/
*
*
*
transfer
individual
between
an
(a)(2)
Any
individuals
between
and a
legal
entity
or
1egaOf
entities,
such
as a cotenancy
to a partnership,
a
trust
to
a
partnership
to
a
corporation,
or
a
cotenancy,
in the
which results
solely
in a change
method of holding
title
to the real
property
and in
the
which
interests
of
ownership
proportional
represented
by
transferors
and transferees,
whether
stock , partnership
interest,
or otherwise,
in each and
remain the
every
piece
of real
property
transferred,
same after
the transfer.
. . .
In your letter,
you indicate
that the Amrealco
partners
will
receive
distributions
of the Oakbrook partnership
interests
in
This
being
the
proportion
to
their
ownership
of
Amrealco.
case,
any change in ownership
which otherwise
might be held I_.:
occur
would be excluded
pursuant
to the above-cited
exclusic;:
set forth
in section
62(a)(2).
As previously
advisory
only
county.
indicated,
and are
the views expressed
in this
letter
of
not binding
upon the assessor
Very truly
are
any
yours,
z4?!4~
Robert W. Lambert
Tax Counsel
RWL:wak
22828
cc:
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