All counties in California impose a documentary transfer tax of 55¢ per $500 of the fair market value of the transferred real property. The City of Los Angeles imposes an additional $4.50 per $1,000 of the fair market value of the transferred real property - ouch. The transfer tax exemptions usually relate to the fact that no consideration is given. The most common exemptions are in bold.
- Transferring grantor’s interest into a revocable living trust (R&T 11930) - “This conveyance transfers an interest into a living trust for the benefit of the grantor(s).”
- Changing manner in which title is held (such as a change from a tenancy in common to a joint tenancy) (R&T 11911) – “This conveyance confirms a change of name and the grantor and grantee are the same party.”
- Changing manner in which title is held (such as changing entity names and the parties hold same proportionate interest (except for in connection with a dissolution of a partnership) (R&T 11922(d)) – “Grantor(s) and grantee(s) are comprised of the same parties, and their proportional interest remains the same immediately following transfer.”
- Given for no value (gift)(R&T 11911) -“This conveyance is a bona fide gift and the grantor received nothing in return.”
- Confirming title in grantee’s name (R&T 11911) - “This conveyance confirms title to the grantee(s) who continue(s) to hold the same interest acquired on Date _____, Document No. ___, wherein $X Documentary Transfer Tax was paid.”
- Dissolution of marriage (R&T 11927) - “Dissolution of marriage.”
- To secure a debt (R&T 11921) – “This instrument secures a debt for collateral purposes only.”
- Upon satisfaction of a debt (R&T 11921) – “This is a reconveyance of realty upon satisfaction of a debt.”
- Court ordered and not pursuant to sale (R&T 11911) – “Court-ordered conveyance not pursuant to sale.”
- To establish sole and separate property of a spouse (R&T 11911) – “This conveyance establishes sole and separate property of a spouse.” or “It is the express intent of the grantor, being spouse of grantee, to convey all right, title and interest of the grantor, community or otherwise, in and to the herein described property, to the grantee as his/her sole and separate property.”
- To confirm a community property interest when property was purchased with community property funds (R&T 11911) – “This conveyance confirms a community property interest, which was purchased with community property funds.”
- To confirm a change of name (R&T 11911) – “This conveyance confirms a change of name and the grantor and grantee are the same party.”
- Easement or oil and gas lease where consideration and value is less than $100 (R&T 11911) – “This is a conveyance of an easement (or oil and gas lease) and the consideration and value is less than $100.”
- Where liens and encumbrances are equal to or more than the value of property and no further consideration is given (R&T 11911) - “Liened to full value.” or “The value of the property in this conveyance, exclusive of liens and encumbrances is $100 or less, and there is no additional consideration received by the grantor.”
- Agent acting for principal (R&T 11911) – “Agent to principal, funds of the grantee used to purchase the property.” or “The grantor in this conveyance is acting solely in his/her capacity as agency for the grantee, using the funds of the grantee and receives no consideration.”
- Conveyance to a governmental agency (including Fannie Mae and Freddie Mac foreclosures) (R&T 11922) – “Governmental agency acquiring title.”
- Conveyance under bankruptcy reorganization (R&T 11923) – “Conveyance under bankruptcy, Federal Case No. _________.”
- Conveyance terminating a partnership (R&T 11925(b)) – “This conveyance confirms a dissolution or termination of a partnership.”
- Conveyance of a partnership interest to a new partnership (R&T 11925(a) – “This is a conveyance from a partnership to a continuing partnership.”
- Deed in lieu of foreclosure (R&T 11926) – “Trustee’s deed upon sale or deed in lieu of foreclosure. The grantee was/was not the foreclosing beneficiary. The amount of consideration paid by grantee is $X. The amount of debt with interest is $X.”
The rules surrounding California real property tax changes in ownership and documentary transfer taxes are complex and a simple misstep can be costly. As such, it is essential to fully understand the exemptions and avoid unintentional taxes. A full list of all of the documentary transfer tax exemptions can be found at California Revenue and Taxation Code §§ 11901-11934. Please call the Law Office of Thomas F. Caldwell if you need guidance and wise counsel on these issues.
The information in this article is intended to be a general description of tax laws and is not advice as to any transactions, nor is this article advice to any person or to any client and should not be relied upon as such. If you or your client desire to receive specific legal or tax advice on a specific transaction, then please call the Law Office of Thomas F. Caldwell at (818) 992-3104.