Laws, Regulations & Annotations

Property Taxes Law Guide – Revision 2017

Property Tax Annotations

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Annotation 625.0125

625.0125 Limited Liability Company—Dissolution. Husband and Wife formed a Trust and conveyed real property to the Trust. Upon Husband's death, Wife became the sole present beneficiary of the Trust. Later, Wife, as co-trustee of the Trust, transferred property to a California limited liability company (LLC) that was owned by the Trust. The Operating Agreement of the LLC required that upon the occurrence of the death of any Member or other specified events, the LLC was to dissolve unless all of the remaining Members consent to the continuation of the business of the Company. Subsequently, Wife died. Thereafter, the LLC was formally dissolved and title to the property was conveyed back to the Trust.

Even though an event may have triggered dissolution of an LLC, the Corporations Code sets up a scheme where the dissolution is but the first step in a process that may or may not lead to the end of the company's separate legal existence. Corporations Code section 17354 states that the company continues in existence after dissolution for purposes of winding up and disposing of and conveying its property. Even if the LLC dissolved at Wife's death, the LLC continued to exist after the date of Wife's death and throughout its winding up period until the filing of a certificate of cancellation of the articles of organization with the Secretary of State upon the completion of the winding up of the affairs of the LLC. As such, the transfer on the date of Wife's death to the remainder beneficiaries that occurred for property tax purposes was of the LLC membership interests held by the Trust, and not the Property. The parent-child exclusion is unavailable as Revenue and Taxation Code section 63.1(c)(8) provides that the exclusion does not apply to transfers of legal entity interests. Therefore, at Wife's death, 100 percent of the original co-owner interests in the LLC transferred to the beneficiaries, resulting in a change in ownership of the property under section 64(d), because legal entity ownership interests representing cumulatively more than 50 percent of the total interests in the legal entity were transferred by the original co-owners. C 6/19/2012.