Laws, Regulations & Annotations

Property Taxes Law Guide – Revision 2013

Property Tax Annotations

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Annotation 625.0156

625.0156 Partnership Dissolution. Husband (H) and Wife (W) owned a principal residence as community property. H and W transferred the property to a general partnership in which the partnership interests were held by H and W as partners. The partnership agreement did not provide for a continuation of the partnership on the death of a partner. Subsequently, H and W created a revocable living trust. H and W then transferred their respective partnership interests to the trust. Later, W died. Following W's death, the revocable trust became irrevocable (irrevocable trust). H became the sole present beneficiary of the irrevocable trust during his lifetime, and the children of H and W (children) became the remainder beneficiaries. H died. The trust corpus was then distributed to the children.

When W died, the partnership dissolved 90 days after the date of death by operation of law because there was no agreement between H and W that provided for the continuation of the partnership. At that time, H held the real property in the trust indirectly as an individual, not as an interest in a legal entity. Thus, any transfers from the trust that occurred 90 days after W's death were transfers of real property, not partnership interests. When H died, the children became the present beneficial owners of the property held by the irrevocable trust. Since the children were the remainder beneficiaries of the irrevocable trust, the transfers should be treated as coming from H and W (as trustors of the trust). The transfer of the property from the irrevocable trust to the children will qualify for the parent-child exclusion under section 63.1, if all the filing requirements have been met, since it was a transfer of a principal residence from H and W to their children. C 5/16/2007.