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Real Property Ownership and Taxation

Protect what your clients have built. Get answers fast with this ideal desktop reference for common questions and issues involving commercial and residential real property ownership. Includes how to take title, how your client could be taxed during a transfer or sale, and how to appeal tax assessment.

“...an excellent resource for real estate lawyers and general practitioners facing common ownership and transfer taxation issues. Its virtually bullet point format provides an excellent 'jumping off' point to collect a quick, easy to grasp summary of the law, succinctly stated. After 20 years in real estate practice and armed with a tax degree, this volume allows me a speedy common sense review of easily forgotten code sections and authorities for issues often encountered in the slippery real estate/taxation crossover areas, allowing one to delve deeper if necessary or to move on quickly if not. It's a terrific resource for the small legal library."
David Fu, Esq., David Fu & Associates, Arcadia

The ideal desktop reference for common questions and issues involving commercial and residential real property ownership.

  • Forms of ownership: how to take title to property
  • Property taxation and assessment
  • Income taxation of property sales, transfers, and exchanges
  • Estate planning considerations, including estate and gift taxation
  • Highlights of escrow and recordation of property transfers
  • Insuring title to property
  • Insuring property interests against loss and damage
  • Lis pendens
  • Homesteads
  • Bankruptcy impact on title and sales
  • Impact of death on ownership and transfer of property
OnLAW RE94480

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$ 385.00
Print RE30480

1 looseleaf volume, updated January 2022

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“...an excellent resource for real estate lawyers and general practitioners facing common ownership and transfer taxation issues. Its virtually bullet point format provides an excellent 'jumping off' point to collect a quick, easy to grasp summary of the law, succinctly stated. After 20 years in real estate practice and armed with a tax degree, this volume allows me a speedy common sense review of easily forgotten code sections and authorities for issues often encountered in the slippery real estate/taxation crossover areas, allowing one to delve deeper if necessary or to move on quickly if not. It's a terrific resource for the small legal library."
David Fu, Esq., David Fu & Associates, Arcadia

The ideal desktop reference for common questions and issues involving commercial and residential real property ownership.

  • Forms of ownership: how to take title to property
  • Property taxation and assessment
  • Income taxation of property sales, transfers, and exchanges
  • Estate planning considerations, including estate and gift taxation
  • Highlights of escrow and recordation of property transfers
  • Insuring title to property
  • Insuring property interests against loss and damage
  • Lis pendens
  • Homesteads
  • Bankruptcy impact on title and sales
  • Impact of death on ownership and transfer of property

1

Forms of Ownership

Jeffrey C. Joy

  • I.  SCOPE OF CHAPTER
    • A.  Topics Covered in Chapter; Sources of Additional Information  1.1
    • B.  Terminology  1.2
  • II.  TYPES OF DEEDS
    • A.  Words of Conveyance  1.3
    • B.  Deeds in General  1.4
    • C.  Types of Deeds
      • 1.  Grant Deed  1.5
      • 2.  Form: Grant Deed—Statutory Form  1.6
      • 3.  Quitclaim Deed  1.7
      • 4.  Warranty Deed  1.8
      • 5.  Revocable Transfer on Death (TOD) Deed  1.8A
      • 6.  Trust Deed  1.9
      • 7.  Reconveyance Deed  1.10
      • 8.  Sheriff’s Deed  1.11
      • 9.  Gift Deed  1.12
      • 10.  Void Deeds  1.13
      • 11.  Voidable Deeds  1.14
    • D.  Formalities of Execution of Deeds
      • 1.  Acknowledgment  1.15
      • 2.  Form: Certificate of Acknowledgment of Notary Public  1.16
      • 3.  Recordation  1.17
  • III.  FORMS OF OWNERSHIP
    • A.  Absolute or Qualified Ownership  1.18
    • B.  Individual or Sole Ownership
      • 1.  Unmarried Persons  1.19
      • 2.  Separate Property of Spouses  1.20
    • C.  Joint Ownership; Ownership by Several Persons
      • 1.  Types of Joint Ownership  1.21
      • 2.  Tenancy in Common
        • a.  Tenancy in Common Described  1.22
        • b.  Form: Tenancy-in-Common Grantee Recitals  1.23
      • 3.  Joint Tenancy
        • a.  Joint Tenancy Described  1.24
          • (1)  Establishing Joint Tenancy  1.25
          • (2)  Severing Joint Tenancy  1.26
          • (3)  Death of Joint Tenant  1.27
        • b.  Form: Joint Tenancy Grantee Recitals  1.28
      • 4.  Community Property (Including Quasi-Community Property)
        • a.  Community Property and Quasi-Community Property Described  1.29
        • b.  Form: Community Property Grantee Recitals  1.30
      • 5.  Community Property With Right of Survivorship
        • a.  Community Property With Right of Survivorship Described  1.31
        • b.  Form: Community Property With Right of Survivorship Grantee Recitals  1.32
    • D.  Ownership by Entities
      • 1.  Trusts
        • a.  Trust Is Not a Legal Entity  1.33
        • b.  Deed Execution Requirements  1.34
        • c.  Other Considerations  1.35
      • 2.  Corporations
        • a.  Corporation as Separate Legal Entity  1.36
        • b.  Deed Execution Requirements  1.37
        • c.  Application to S Corporations and REITs  1.38
      • 3.  Partnerships and Limited Liability Companies
        • a.  Partnerships
          • (1)  General Partnerships  1.39
          • (2)  Limited Partnerships  1.40
        • b.  Limited Liability Companies  1.41
    • E.  Transfer Considerations to or From Certain Individuals
      • 1.  Minors  1.42
      • 2.  Persons With Disabilities Who Receive Government Assistance  1.43
      • 3.  Transfer of Property by Older Individuals—Protection for Elders and Dependent Adults  1.44

2

Estate Planning Considerations of Real Property Ownership, Including Estate and Gift Tax Issues

Jeffrey C. Joy

  • I.  ATTORNEY’S ROLE
    • A.  Assisting the Client  2.1
    • B.  Ethical Standards  2.2
  • II.  INCOME TAX BASIS
    • A.  Planning Considerations  2.3
    • B.  Income Tax Basis Rules at Death
      • 1.  Federal Basis Provisions  2.4
      • 2.  California Basis Provisions  2.5
      • 3.  Application of Basis Rules to Particular Forms of Ownership
        • a.  Joint Tenancy  2.6
        • b.  Community Property (Including Quasi-Community Property)  2.7
        • c.  Community Property With Right of Survivorship  2.8
        • d.  Tenancy in Common  2.9
        • e.  Separate Property  2.10
        • f.  Planning Considerations for Basis on Death  2.11
    • C.  Income Tax Basis Rules for Lifetime Transfers
      • 1.  Federal Basis Provisions
        • a.  General Rule—Carryover Basis  2.12
        • b.  Basis Increase for Gift Tax Paid  2.13
        • c.  Part Sale, Part Gift  2.14
        • d.  Transfers Incident to Divorce  2.15
      • 2.  California Basis Provisions  2.16
      • 3.  Planning Considerations for Lifetime Transfers  2.17
    • D.  Tax Basis Rules Applicable to Entities
      • 1.  Inter Vivos Revocable Trusts (Grantor Trusts)  2.18
      • 2.  Irrevocable Trusts  2.19
      • 3.  Corporations, Partnerships, and LLCs
        • a.  Corporations  2.20
        • b.  Partnerships and LLCs  2.21
  • III.  OTHER ESTATE PLANNING CONSIDERATIONS
    • A.  Overview  2.22
    • B.  Use of Revocable Trusts
      • 1.  What Is a Revocable Trust?  2.23
      • 2.  Why Use a Revocable Trust?
        • a.  Advantages  2.24
        • b.  Disadvantages  2.25
      • 3.  Transfer of Real Property Subject to Encumbrances
        • a.  Loans Secured by Residential Property  2.26
        • b.  Loans Secured by Commercial Real Property  2.27
      • 4.  Incomplete Real Property Transfers to Revocable Trust: Heggstad  2.28
    • C.  Use of Irrevocable Trusts
      • 1.  Differences From Revocable Trusts  2.29
      • 2.  Advantages and Disadvantages of Irrevocable Trusts
        • a.  Advantages  2.30
        • b.  Disadvantages  2.31
    • D.  Large Estates
      • 1.  Considerations  2.32
      • 2.  Transfer of Real Property to Entities—Advanced Techniques  2.33
      • 3.  Valuation Discounts
        • a.  Primary Discounts Used  2.34
        • b.  Recent Developments [Deleted]  2.35
    • E.  Title Insurance
      • 1.  Impact of Property Transfer  2.36
      • 2.  The Perils of Kwok  2.37
      • 3.  Checklist: Title Insurance—Advising Clients Transferring Real Property  2.38
    • F.  Same-Sex Spouses and Registered Domestic Partners
      • 1.  Checkered Legal History of Same-Sex Marriage in California  2.39
      • 2.  Post-Windsor Developments  2.40
      • 3.  Registered Domestic Partners  2.41
      • 4.  Estate Planning Considerations for Same-Sex Spouses and Registered Domestic Partners
        • a.  Same-Sex Spouses  2.42
        • b.  Registered Domestic Partners  2.43
  • IV.  CHART: METHODS OF HOLDING TITLE  2.44

3

Real Property Taxes and Assessments

Robert S. Miller

Brenna E. Moorhead

Lorraine K. Madera

  • I.  INTRODUCTION TO PROPERTY TAXATION
    • A.  Scope of Chapter  3.1
    • B.  Sources of Property Tax Law  3.2
      • 1.  Proposition 13  3.3
      • 2.  Proposition 8  3.4
      • 3.  Proposition 19  3.4A
    • C.  General Scheme and Concepts of Property Taxation  3.5
      • 1.  State Property Tax Agencies  3.6
        • a.  Board of Equalization (BOE)  3.6A
        • b.  California Department of Tax and Fee Administration (CDTFA)  3.6B
        • c.  Office of Tax Appeals (OTA)  3.6C
      • 2.  State Controller  3.7
      • 3.  County Assessors  3.8
      • 4.  County Auditors and Controllers  3.9
      • 5.  County Treasurer or Tax Collector  3.10
      • 6.  Board of Equalization: County Board of Supervisors or Assessment Appeals Board  3.11
      • 7.  Franchise Tax Board  3.12
    • D.  Determining Assessed Value  3.13
  • II.  TAXABLE PROPERTY AND EXEMPT PROPERTY
    • A.  Personal Property Subject to State Property Tax
      • 1.  Tangible Personal Property in California  3.14
      • 2.  Personal Property Exemptions  3.15
      • 3.  Tax Lien Date  3.16
      • 4.  Information Reporting  3.17
      • 5.  Fixtures  3.18
      • 6.  Exempt Organizations  3.19
    • B.  Real Property Subject to State Property Tax  3.20
    • C.  Real Property Exempt From Taxation
      • 1.  Exempt Real Property  3.21
      • 2.  Property Used for Charitable Purposes  3.22
      • 3.  Agricultural Preserves  3.23
  • III.  IMPLEMENTATION OF PROPERTY TAXATION
    • A.  Lien Date; Failure to Claim Exemption  3.24
    • B.  Real Property Assessment
      • 1.  Adjusted Base Year Value  3.25
      • 2.  Proposition 8 Reassessment  3.26
    • C.  Tax Rates
      • 1.  Basic Countywide Rate  3.27
      • 2.  Special and Direct Assessments  3.28
      • 3.  Bond Measures  3.29
    • D.  Assessments and Rolls
      • 1.  Regular Roll Bills  3.30
      • 2.  Supplemental Assessments  3.31
      • 3.  Escape Assessments  3.32
      • 4.  Assessment Rolls  3.33
        • a.  Correcting Assessment Roll  3.34
        • b.  Secured Roll  3.35
        • c.  Unsecured Roll  3.36
    • E.  Filing Requirements
      • 1.  Preliminary Change of Ownership Report (PCOR)  3.37
      • 2.  Change in Ownership Statement (COS)  3.38
      • 3.  Ninety-Day Filing Period for COS  3.39
      • 4.  COS Late Filing Penalties  3.40
      • 5.  Corporate or Other Entity Filings  3.41
      • 6.  Government Entity Filings  3.42
    • F.  Appeals and Refunds
      • 1.  Assessment Appeals  3.43
      • 2.  Appeals to Superior Court  3.44
      • 3.  Reversible Error  3.45
      • 4.  Refund Actions  3.46
      • 5.  Strict Interpretation of Exemption  3.47
  • IV.  CHANGE IN OWNERSHIP  3.48
    • A.  When Change in Ownership Occurs  3.49
    • B.  When Change in Ownership Does Not Occur  3.50
    • C.  Taxation on Transfers of Real Property
      • 1.  Fee Title  3.51
      • 2.  Life Estates  3.52
      • 3.  Remainder Interests  3.53
      • 4.  Condominiums  3.54
      • 5.  Mineral Rights  3.55
    • D.  Transfer of Property Between Spouses or Registered Domestic Partners
      • 1.  Interspousal Transfers and Transfers Between Registered Domestic Partners  3.56
      • 2.  Spousal Interests and Community Property  3.57
      • 3.  Transfer to Trust for Beneficial Use  3.58
      • 4.  Transfer in Connection With Dissolution  3.59
    • E.  Parent-Child Transfers
      • 1.  Transfer of Principal Residence  3.60
      • 2.  Transfer of Other Real Property  3.61
    • F.  Grandparent-Grandchild Transfers  3.62
    • G.  Joint Tenancy  3.63
      • 1.  Original Transferor Exceptions to Reassessment  3.64
      • 2.  Spouses Become Original Transferors  3.65
      • 3.  Termination of Joint Tenant’s Interest  3.66
      • 4.  Transfer After Joint Tenancy Created  3.67
      • 5.  Death of Joint Tenant  3.68
    • H.  Trusts: Irrevocable and Revocable
      • 1.  Transfer of Property to Trust  3.69
      • 2.  Transfer of Property to Irrevocable Trust  3.70
      • 3.  Third Party Beneficiary  3.71
      • 4.  Reversion of Beneficial Interest Within 12 Years  3.72
      • 5.  Assignment of Beneficial Interest  3.73
      • 6.  Income Beneficiaries With Remainder  3.74
      • 7.  Transfer From Joint Tenants to Irrevocable Trust  3.75
      • 8.  Transfer of Property to Revocable Trust  3.76
      • 9.  Revocable Trust Involving Spouses  3.77
    • I.  Business Entities  3.78
      • 1.  Transfer Between Individuals and Legal Entities  3.79
      • 2.  Exclusion of Proportional Ownership Interest Transfers  3.80
      • 3.  Transfer to Unrelated Entity  3.81
      • 4.  Purchase or Transfer of Corporate Stock  3.82
      • 5.  Transfer of Real Property From Partnership to Partner  3.83
      • 6.  Transfer of Real Property From Partnership to Tenants in Common  3.84
      • 7.  Adding Partners to Partnership  3.85
      • 8.  Affiliated Company Transfers  3.86
      • 9.  Affiliated Company Changes in Ownership  3.87
      • 10.  Original Co-Owners  3.88
      • 11.  Business Records  3.89
      • 12.  Applicability of Reassessment Change in Ownership Doctrines to Documentary Transfer Tax Law  3.89A
    • J.  Leases
      • 1.  New Lease  3.90
      • 2.  Lease Extension  3.91
      • 3.  Transfer of Lease  3.92
      • 4.  Sublease  3.93
      • 5.  Transfer of Real Property Subject to Lease  3.94
      • 6.  Sale and Leaseback  3.95
    • K.  Changes in Ownership Involving Taxable Possessory Interests
      • 1.  Possessory Interests  3.96
      • 2.  Possessory Interests of Governmental Entities Are Not Taxable  3.97
      • 3.  Taxable Possessory Interests  3.98
      • 4.  When Assessable  3.99
      • 5.  Sale and Leaseback of Publicly Owned Real Property  3.100
      • 6.  Other Changes in Ownership  3.101
      • 7.  Notice Regarding Possessory Interest Tax  3.102
      • 8.  Full Cash Value of Possessory Interest  3.103
      • 9.  No Change of Ownership Statement Required  3.104
    • L.  Other Transfers
      • 1.  Name Changes  3.105
      • 2.  Bare Legal Title  3.106
      • 3.  Correcting or Reforming Deed  3.107
      • 4.  Partition  3.108
      • 5.  Foreclosure  3.109
      • 6.  Easements  3.110
  • V.  STEP-TRANSACTION DOCTRINE  3.111
    • A.  When to Apply Doctrine  3.112
    • B.  Limitations on Reverse Step Transaction  3.113

4

Escrow and Recordation

Laura S. Lowe

JoAnne L. Dunec

  • I.  ESCROW
    • A.  Overview; Scope of Chapter  4.1
    • B.  “Escrow” Defined  4.2
    • C.  Who Can Be an Escrow Holder?  4.3
    • D.  Who Regulates Escrow Companies?  4.4
      • 1.  Independent Escrow Companies  4.5
      • 2.  Internet Escrow Agents  4.6
      • 3.  Parties Exempt From Escrow Law  4.7
    • E.  How Is Escrow Created?  4.8
    • F.  Northern California Versus Southern California Distinctions  4.9
  • II.  PARTIES TO ESCROW  4.10
    • A.  Escrow Officers  4.11
    • B.  Buyers and Sellers  4.12
    • C.  Attorneys  4.13
    • D.  Lenders  4.14
    • E.  Brokers  4.15
    • F.  Title Insurer  4.16
  • III.  FUNCTIONS AND DUTIES OF ESCROW HOLDER  4.17
    • A.  Residential and Commercial Transactions  4.18
    • B.  Limited Agency  4.19
    • C.  Fiduciary Responsibilities  4.20
    • D.  Disclosures to Parties  4.21
    • E.  Duty to Disclose Fraud  4.22
  • IV.  LIABILITY OF ESCROW HOLDER
    • A.  Liability to Parties to Escrow  4.23
    • B.  Liability to Nonparties  4.24
    • C.  Accommodation Recordings  4.25
  • V.  THIRD PARTY DEMANDS  4.26
  • VI.  ESCROW INSTRUCTIONS
    • A.  General Provisions  4.27
    • B.  Preparation of Escrow Instructions  4.28
    • C.  Property Description  4.29
    • D.  Deposit of Funds
      • 1.  Good Funds Law  4.30
      • 2.  Right of Escrow Holder to Commingle Funds  4.31
      • 3.  Interest on Deposits  4.32
    • E.  Drafting Documents  4.33
    • F.  Executing and Delivering Documents  4.34
    • G.  Closing; Closing Costs  4.35
    • H.  Prorations  4.36
    • I.  Rent  4.37
    • J.  Lender’s Instructions  4.38
  • VII.  CALIFORNIA AND FEDERAL WITHHOLDING TAX
    • A.  California Withholding Requirements  4.39
      • 1.  Individual Exemptions to Withholding Requirements  4.40
      • 2.  Nonindividual Exemptions to Withholding Requirements  4.41
      • 3.  No Waiver for Individuals  4.42
      • 4.  Buyer’s Obligations; Penalties  4.43
      • 5.  Late Penalties  4.44
    • B.  Federal Withholding Requirements: FIRPTA  4.45
  • VIII.  CLOSING THE DEAL
    • A.  Processing Documents; Disbursing Funds  4.46
    • B.  Real Estate Commissions  4.47
    • C.  Holdbacks  4.48
  • IX.  FAILED TRANSACTIONS
    • A.  Cancellation of Escrow  4.49
    • B.  Interpleader  4.50
  • X.  RECORDATION AS NOTICE
    • A.  Why Record?  4.51
    • B.  Effect of Recording  4.52
    • C.  Defects or Exceptions to Constructive Notice  4.53
  • XI.  PRELIMINARY CHANGE OF OWNERSHIP REPORT (PCOR)  4.54
  • XII.  RECORDING PROCEDURES
    • A.  Form of Instrument  4.55
    • B.  Acknowledgments  4.56
    • C.  Place of Recording  4.57
    • D.  Recorder’s Procedure
      • 1.  Collection of Statutory Fees  4.58
      • 2.  Indexing  4.59
    • E.  Timing of Recording  4.60

5

Title Insurance

Laura S. Lowe

JoAnne L. Dunec

  • I.  INTRODUCTION TO TITLE INSURANCE
    • A.  Overview; Scope of Chapter  5.1
    • B.  Title Insurance Described Briefly  5.2
    • C.  Title Insurance Is a Contract of Indemnity  5.3
    • D.  Title Policy and Preliminary Report Are Not a Representation of Title  5.4
    • E.  ALTA and CLTA Policy Forms  5.5
    • F.  Standard and Extended Coverage Policies  5.6
  • II.  OWNER POLICIES  5.7
    • A.  Owner Policies—Standard Coverage  5.8
      • 1.  Standard Policy Exceptions  5.9
      • 2.  Off-Record Matters  5.10
    • B.  Homeowner’s Policies  5.11
    • C.  ALTA Owner’s Extended Coverage Policy  5.12
  • III.  LOAN POLICIES  5.13
    • A.  Borrower Pays for Lender’s Policy  5.14
    • B.  Borrower Cannot Rely on Loan Policy  5.15
  • IV.  TITLE INSURANCE COMPANY OR UNDERWRITTEN TITLE COMPANY
    • A.  What’s the Difference?  5.16
    • B.  Closing Protection Letter  5.17
  • V.  ROLE OF ATTORNEY IN COMMERCIAL AND RESIDENTIAL TRANSACTIONS  5.18
    • A.  Title Industry Professionals  5.19
    • B.  Understand Title Insurance Limitations  5.20
    • C.  No Requirement to Issue Policy  5.21
    • D.  Inform Clients That Certain Matters May Not Be Disclosed  5.22
    • E.  Preliminary Reports, Commitments, and Pro Formas  5.23
    • F.  Removing or Limiting Exceptions  5.24
    • G.  Endorsements  5.25
    • H.  Review Title Policy  5.26

6

Property Insurance Basics

Mark E. Hellenkamp

Scott M. Koppel

Timothy R. Sullivan

Barron L. Weinstein

  • I.  OVERVIEW OF PROPERTY INSURANCE
    • A.  Nature of Property Insurance
      • 1.  Insurable Interest  6.1
      • 2.  First Party Coverage  6.2
      • 3.  Compare Third Party Coverage  6.3
      • 4.  Combined Coverage  6.4
    • B.  Standardized Versus Manuscript Policies
      • 1.  Standardized Policies  6.5
      • 2.  Manuscript Policies  6.6
    • C.  Common Policy Forms  6.7
    • D.  Other Relevant Policy Forms  6.8
    • E.  Obligations of Parties
      • 1.  Insured’s Obligations  6.9
      • 2.  Insurer’s Obligations  6.10
    • F.  Policy Producer  6.11
      • 1.  Insurance Agent  6.12
      • 2.  Insurance Broker  6.13
      • 3.  Authority to Act  6.14
  • II.  POLICY OF INSURANCE
    • A.  Policy Organization  6.15
    • B.  Primary and Excess Insurance  6.16
    • C.  Binders or Cover Notes  6.17
    • D.  Package Policies  6.18
    • E.  Covered Property Versus Property Not Covered
      • 1.  Importance of Determining Scope of Coverage  6.19
        • a.  Typical Covered Property
          • (1)  Homeowners Policy  6.20
          • (2)  Business or Commercial Policy  6.21
        • b.  Additional or Other Sources of Coverage  6.22
      • 2.  Typical Property Not Covered  6.23
        • a.  Homeowners Policy  6.24
        • b.  Business or Commercial Policy  6.25
    • F.  Coverage of Particular Types of Property
      • 1.  Property Acquired After Policy Inception
        • a.  Homeowners Policy  6.26
        • b.  Business or Commercial Policy  6.27
      • 2.  Building Structure and Related Coverage
        • a.  Building Structures  6.28
        • b.  General Exclusion for Land  6.29
        • c.  Treatment of Attachments to Covered Structure  6.30
        • d.  Cost of Complying With Current Building Codes or Ordinances  6.31
      • 3.  Contents Coverage  6.32
    • G.  Insuring Clauses and Covered Perils; Interpretation
      • 1.  Purpose of Insuring Clauses  6.33
      • 2.  All Risk Versus Named Peril Policies  6.34
      • 3.  Policies Covering Specific, Narrow Risks  6.35
      • 4.  Accident Requirement  6.36
      • 5.  Direct Physical Loss or Damage
        • a.  Need for Direct Physical Loss or Damage  6.37
        • b.  Court Interpretation and Examples
          • (1)  Court Interpretation  6.38
          • (2)  Examples
            • (a)  Damage Not Considered Direct Physical Loss
              • (i)  Electronic Data  6.39
              • (ii)  Diminution in Value  6.40
            • (b)  Damage Considered Direct Physical Loss  6.41
    • H.  Exclusions From Policy Coverage
      • 1.  Exclusions and Other Limitations Described  6.42
      • 2.  Exceptions to Exclusions  6.43
      • 3.  Use of Ensuing Loss Language to Limit Reach of Exclusions  6.44
      • 4.  Burden of Proof on Exclusions and Exceptions  6.45
  • III.  TRIGGER OF COVERAGE: DETERMINING WHEN LOSS OCCURS
    • A.  Trigger of Coverage Described  6.46
    • B.  Episodic Loss
      • 1.  Occurs at Specific Point in Time  6.47
      • 2.  Loss During Policy Period Required for Coverage  6.48
    • C.  Continuous or Progressive Loss; Determining Coverage
      • 1.  Distinction From Episodic Loss  6.49
      • 2.  Determining Coverage Under Manifestation Rule
        • a.  Importance of Policy Period  6.50
        • b.  What Constitutes Manifestation  6.51
        • c.  What Needs to Be Discovered (Damage and Its Cause Versus Coverage)  6.52
          • (1)  All Risk Policy  6.53
          • (2)  Named Peril Policy  6.54
        • d.  Different Causes With Different Damage; Multiple Policies  6.55
        • e.  Reasonable Diligence Required  6.56
        • f.  Absentee Owners  6.57
        • g.  Effect of Loss on Subsequent and Preceding Insurers
          • (1)  Sole Liability of Insurer When Loss Becomes Manifest  6.58
          • (2)  Loss in Progress Rule and Concept of Fortuity  6.59
    • D.  Loss After Policy Expires
      • 1.  Continuation of Previously Manifested Loss  6.60
      • 2.  Examples of Continuation  6.61
    • E.  Determining Efficient Proximate Cause When Loss Has Multiple Causes
      • 1.  Covered Peril Must Be Efficient Proximate Cause of Loss  6.62
      • 2.  Effect of Ins C §§530 and 532  6.63
      • 3.  Importance of Garvey Case  6.64
      • 4.  Peril Must Be Predominant and Not Remote  6.65
      • 5.  Peril Need Not Be Immediate Cause  6.66
      • 6.  Examples of Efficient Proximate Cause  6.67
      • 7.  Policy Provisions Affecting Efficient Proximate Cause Doctrine  6.68
  • IV.  CHECKLIST: INTERVIEWING THE CLIENT  6.69

7

Income Taxation of Real Property Transactions

Kathy Freeman

Matthew A. Mandel

Reed Schreiter

  • I.  TAXATION OF PROPERTY
    • A.  Income Taxes Due on Sale or Transfer  7.1
    • B.  Recognition of Gain or Loss on Property Transactions  7.2
  • II.  TAXABLE TRANSACTIONS
    • A.  Sale or Exchange of Real Property  7.3
      • 1.  Sale, Exchange, or Other Disposition  7.4
      • 2.  Definition of Property  7.5
    • B.  Realization of Gain or Loss
      • 1.  Realization Principle  7.6
      • 2.  Calculation of Realized Gain or Loss  7.7
        • a.  Amount Realized  7.8
        • b.  Adjusted Basis  7.9
          • (1)  Cost Basis  7.10
          • (2)  Basis in Property Received From Decedent  7.11
          • (3)  Basis in Property Acquired by Gift  7.12
          • (4)  Basis in Exchanged Property  7.13
          • (5)  Adjustments to Basis  7.14
    • C.  Recognition of Gain or Loss   7.15
      • 1.  Capital Losses  7.16
      • 2.  Bargain Sales  7.17
    • D.  Property Encumbered by Debt
      • 1.  Loans on Real Property—Recourse and Nonrecourse  7.18
        • a.  Recourse Loans  7.19
        • b.  Nonrecourse Loans  7.20
      • 2.  Additional Debt Transactions  7.21
        • a.  Typical Sale of Property With Satisfaction of Debt  7.22
        • b.  Sale With Assumption of Debt  7.23
          • (1)  When Property Value Exceeds Outstanding Loan Balance  7.24
          • (2)  When Outstanding Loan Balance Exceeds Property Value and Loan Is Nonrecourse  7.25
    • E.  Basis in Property Received as Payment  7.26
    • F.  Character of Gain or Loss  7.27
      • 1.  Capital Versus Noncapital Property  7.28
      • 2.  Property Held Primarily for Sale to Customers  7.29
  • III.  DEFERRAL TRANSACTIONS  7.30
    • A.  Like-Kind Exchanges of Real Property  7.31
      • 1.  Requirements to Receive Like-Kind Treatment  7.32
        • a.  Like-Kind Real Property; Vacation Property  7.33
        • b.  Interstate Exchanges  7.34
      • 2.  Tax Impact of Boot, Basis, and Encumbered Property  7.35
        • a.  Replacement Property Basis in Boot Transaction  7.36
        • b.  Mortgage Boot  7.37
      • 3.  Deferred or Starker Exchanges  7.38
        • a.  Additional Guidance on Deferred Exchanges  7.39
        • b.  Exchange Intermediaries  7.40
      • 4.  Reverse Starker Exchanges  7.41
    • B.  Involuntary Conversion of Property  7.42
      • 1.  Reinvestment in Like-Kind Property  7.43
      • 2.  Involuntary Conversion of Personal Residence  7.44
    • C.  Spousal and Divorce Transfers  7.45
    • D.  Foreign Investment in Real Property Tax Act of 1980 (FIRPTA)
      • 1.  Scope of Withholding Tax  7.46
      • 2.  United States Real Property Interest (USRPI)  7.47
      • 3.  Withholding Rates  7.48
    • E.  California Withholding on Real Property Dispositions  7.49

8

Lis Pendens

Gregory S. Nerland

  • I.  INTRODUCTION TO LIS PENDENS
    • A.  Overview; Scope of Chapter  8.1
    • B.  Purpose of Lis Pendens  8.2
    • C.  Impact of Failure to Record Lis Pendens  8.3
    • D.  Other Remedies Available  8.4
  • II.  NATURE AND EFFECT OF LIS PENDENS
    • A.  Constructive Notice of Pending Action
      • 1.  Notice Binds Subsequent Purchasers and Encumbrancers  8.5
        • a.  Actual Notice  8.6
        • b.  Constructive Notice Once Recorded  8.7
        • c.  Parties Subject to Constructive Notice  8.8
        • d.  Purchaser Is Not a Necessary Party  8.9
        • e.  Broad Interpretation of “Purchaser or Encumbrancer”  8.10
        • f.  Strict Interpretation of “Constructive Notice”  8.11
      • 2.  Recording Date of Notice Establishes Priority  8.12
    • B.  Duration of Lis Pendens  8.13
    • C.  Termination of Lis Pendens  8.14
  • III.  WHEN NOTICE IS AUTHORIZED OR REQUIRED
    • A.  Authorized in Action Asserting “Real Property Claim”
      • 1.  Statutory Requirements  8.15
      • 2.  Actions That Constitute Real Property Claims  8.16
      • 3.  When Real Property Claim Is Subject to Arbitration  8.17
      • 4.  Failure to Meet Statutory Requirements  8.18
    • B.  Authorized by Statute in Certain Actions  8.19
    • C.  Required by Statute in Certain Actions  8.20
    • D.  Actions for Which Lis Pendens Held Ineffective  8.21
    • E.  Use in Federal Actions  8.22
    • F.  Use in Other State Courts  8.23
  • IV.  CHECKLIST: PREPARING, MAILING, RECORDING, AND FILING NOTICE  8.24
  • V.  TERMINATION OF LIS PENDENS
    • A.  Expungement  8.25
    • B.  Alternatives for Expungement Relief  8.26
    • C.  Undertakings
      • 1.  Motion to Require Undertaking by Proponent of Lis Pendens—Will Not Expunge Lis Pendens  8.27
      • 2.  Undertaking by Property Owner in Lieu of Lis Pendens—Must Expunge Lis Pendens  8.28
      • 3.  Making an Undertaking
        • a.  Amount of Undertaking  8.29
        • b.  Supporting the Motion for Undertaking  8.30
        • c.  Contesting the Motion for Undertaking  8.31
    • D.  Withdrawal of Lis Pendens  8.32
  • VI.  FORM: NOTICE OF PENDENCY OF ACTION (LIS PENDENS)  8.33

9

Homesteads

Nancy B. Goldstein

  • I.  PURPOSE OF HOMESTEAD EXEMPTION  9.1
    • A.  Statutory Homesteads and Declared Homesteads  9.2
      • 1.  Statutory Homestead  9.3
      • 2.  Declared Homestead  9.4
      • 3.  Probate Homestead  9.5
    • B.  Eligible Amount; Protection of Sale Proceeds  9.6
    • C.  Examples of Application  9.7
    • D.  Homestead Exemption Liberally Interpreted  9.8
    • E.  Liens Not Impacted by Forced Sale Protections of Homestead Exemption  9.9
    • F.  Establishing Homestead  9.10
      • 1.  Dwelling Defined  9.11
      • 2.  Is Residency Continuous?  9.12
      • 3.  [Deleted]  9.13
      • 4.  [Deleted]  9.14
    • G.  Exemption of Sale Proceeds  9.15
    • H.  Advantages of Declared Homestead Over Statutory Homestead  9.16
    • I.  Impact of Bankruptcy
      • 1.  Judicial Lien Avoidable in Bankruptcy Court  9.17
      • 2.  Bankruptcy Cap  9.18
      • 3.  Homestead Exemption Fixed at Time of Bankruptcy Filing  9.19
  • II.  DECLARED HOMESTEAD
    • A.  Article 5 of Enforcement of Judgments Law  9.20
      • 1.  Contents of Declaration of Homestead  9.21
      • 2.  Execution and Acknowledgment  9.22
      • 3.  Additional Requirements  9.23
    • B.  Termination or Abandonment of Declared Homestead  9.24
      • 1.  Abandonment by Declaration  9.25
      • 2.  Abandonment by Operation of Law  9.26
      • 3.  Abandonment by Implication  9.27
    • C.  Effect of Death of Homestead Claimant
      • 1.  Continuation After Death  9.28
      • 2.  Protection Continues Even When Decedent Was Sole Owner  9.29
    • D.  Form: Declared Homestead  9.30
  • III.  STATUTORY HOMESTEAD
    • A.  Article 4 of Enforcement of Judgments Law  9.31
    • B.  Court Order of Sale Required in Most Instances  9.32
    • C.  Forced Sale  9.33
      • 1.  Checklist: Preparing to Seek Sale of Dwelling  9.34
      • 2.  Checklist: Writ of Execution  9.35
      • 3.  Checklist: Application for Court Order of Sale  9.36
    • D.  Hearing on Court-Ordered Sale  9.37
      • 1.  Burden of Proof at Hearing  9.38
      • 2.  Additional Matters Relating to Hearing  9.39
      • 3.  No Sale Allowed if Insufficient Bids Received  9.40
  • IV.  ATTACKING ASSERTION OF HOMESTEAD
    • A.  Successful Attacks on Assertion of Homestead  9.41
    • B.  Successful Attacks on Assertion of Homestead in Bankruptcy  9.42
    • C.  Unsuccessful Attacks on Assertion of Homestead  9.43

10

Bankruptcy Impact on Title and Sales

Monique D. Jewett-Brewster

  • I.  BRIEF BACKGROUND OF BANKRUPTCY LAWS
    • A.  Small Business Reorganization Act of 2019  10.1
    • B.  Bankruptcy Abuse Prevention and Consumer Protection Act of 2005  10.2
    • C.  Commencement of Bankruptcy Case
      • 1.  Voluntary Petitions  10.3
      • 2.  Involuntary Petitions  10.4
    • D.  Overview of Chapters 7, 11, and 13  10.5
  • II.  AUTOMATIC STAY
    • A.  Creation of Automatic Stay  10.6
    • B.  Effect of Automatic Stay on Creditors  10.7
    • C.  Effect of Automatic Stay on Foreclosure  10.8
    • D.  Duration of Automatic Stay; Termination as Matter of Law  10.9
    • E.  Obtaining Relief From Automatic Stay  10.10
      • 1.  Requesting Relief From Stay  10.11
      • 2.  Local Rules Govern Requests for Relief  10.12
      • 3.  Grounds for Relief From Stay  10.13
        • a.  Relief for Cause  10.14
        • b.  Bad Faith  10.15
        • c.  Lack of Adequate Protection  10.16
        • d.  Debtor’s Response: Adequate Protection  10.17
      • 4.  Insufficient Equity in Unnecessary Property  10.18
        • a.  Determining Whether Equity Exists  10.19
        • b.  Necessity of Property for Effective Reorganization  10.20
      • 5.  Single Asset Real Estate Bankruptcy  10.21
      • 6.  Fraud; Serial Filings  10.22
    • F.  Penalties for Violating Automatic Stay  10.23
      • 1.  Willful Violations  10.24
      • 2.  Damages for Violation
        • a.  Emotional Distress Damages  10.25
        • b.  Punitive Damages  10.26
        • c.  Attorney Fees  10.27
        • d.  Creditor Damages  10.28
      • 3.  Sanctions  10.29
  • III.  BANKRUPTCY ESTATE
    • A.  Creation of Bankruptcy Estate; Property of Estate  10.30
    • B.  Property Not Considered Property of Estate  10.31
    • C.  Debtor’s Exemptions  10.32
    • D.  Debtor in Possession or Trustee Authority  10.33
  • IV.  USE, SALE, OR LEASE OF ESTATE PROPERTY
    • A.  Sale in the Ordinary Course of Business—11 USC §363(c)  10.34
    • B.  Sale Out of the Ordinary Course of Business—11 USC §363(b)  10.35
    • C.  Sale Free and Clear of Liens and Interests—11 USC §363(f)  10.36
  • V.  TRUSTEE’S AVOIDANCE POWERS
    • A.  Overview of “Strong Arm” and Avoidance Powers  10.37
    • B.  Assignment of Avoidance Powers  10.38
    • C.  Statute of Limitations on Avoidance Actions  10.39
    • D.  Section 544’s “Strong Arm” Powers  10.40
      • 1.  Hypothetical Lien Creditor—Section 544(a)(1)  10.41
      • 2.  Hypothetical Creditor With Unsatisfied Execution—Section 544(a)(2)  10.42
      • 3.  Hypothetical Bona Fide Creditor—Section 544(a)(3)  10.43
      • 4.  Successor to Actual Unsecured Creditor—Section 544(b)  10.44
    • E.  Avoiding Preferential Transfers  10.45
    • F.  Avoiding Fraudulent Transfers  10.46
    • G.  Comparison of UVTA and 11 USC §548  10.47
    • H.  [Deleted]  10.48
    • I.  Foreclosure Sale: Fraudulent Transfer Litigation  10.49
      • 1.  Recovery of Transfers Under 11 USC §550  10.50
      • 2.  Statute of Limitations on Recovery of Avoidable or Fraudulent Transfers  10.51
  • VI.  TREATMENT OF UNEXPIRED LEASES
    • A.  When Tenant Files for Bankruptcy
      • 1.  Tenant Must Assume or Reject Lease  10.52
      • 2.  Effect of Assumption or Rejection on Rent Claims  10.53
      • 3.  Cap on Landlord’s Damage Award  10.54
      • 4.  Rent Reserved  10.55
    • B.  When Landlord Files for Bankruptcy
      • 1.  No Time Period for Assumption Specified in Bankruptcy Code  10.56
      • 2.  Consequence of Landlord’s Failure to Assume or Reject  10.57
  • VII.  TREATMENT OF OPTION CONTRACTS
    • A.  Definition of an Executory Contract  10.58
    • B.  Option Contracts May Be Executory  10.59
  • VIII.  LIEN STRIPPING  10.60

11

Impact of Death on Ownership and Transfer of Real Property

Anne Bruner Nash

Agnieszka K. Adams

  • I.  DEATH OF A PROPERTY OWNER  11.1
    • A.  Who Inherits  11.2
    • B.  Successor Under Deed; Survivorship  11.3
      • 1.  Joint Tenancy  11.4
      • 2.  Community Property With Right of Survivorship  11.5
      • 3.  Life Estate  11.6
      • 4.  Revocable Transfer on Death (TOD) Deed  11.7
        • a.  Purpose of Revocable TOD Deed  11.8
        • b.  Real Property Transferable by Revocable TOD Deed  11.9
        • c.  Beneficiaries of Revocable TOD Deed  11.10
        • d.  Requirements for Effective Revocable TOD Deed  11.11
        • e.  Effect on Ownership Rights During Transferor’s Lifetime  11.12
        • f.  What Is Transferred by Revocable TOD Deed  11.13
        • g.  Revocation  11.14
        • h.  Statutory Forms  11.15
        • i.  Failed or Revoked Transfers  11.16
    • C.  Beneficiary Under a Will or Trust  11.17
    • D.  Intestate Heirs  11.18
      • 1.  When Surviving Spouse Inherits Property  11.19
      • 2.  When Surviving Spouse Does Not Inherit Property  11.20
    • E.  Disqualified Persons  11.21
  • II.  METHODS OF TRANSFERRING TITLE  11.22
    • A.  Reporting Change in Ownership  11.23
      • 1.  Who Must Report  11.24
      • 2.  Form: Change in Ownership Statement—Death of Real Property Owner (BOE Form 502-D)  11.25
    • B.  Transfer of Ownership by Operation of Law  11.26
      • 1.  Joint Tenancy  11.27
        • a.  Requirements of Affidavit  11.28
        • b.  Form: Affidavit—Death of Joint Tenant  11.29
        • c.  Other Recording Requirements  11.30
      • 2.  Community Property With Right of Survivorship  11.31
        • a.  Form: Affidavit—Death of Spouse  11.32
        • b.  Other Recording Requirements  11.33
      • 3.  Life Estate  11.34
        • a.  Form: Affidavit—Death of Life Tenant  11.35
        • b.  Other Recording Requirements  11.36
    • C.  Transfer of Ownership Under Revocable Transfer on Death (TOD) Deed  11.37
      • 1.  Form: Affidavit—Death of Transferor (Revocable TOD Deed)  11.38
      • 2.  Other Recording Requirements  11.39
      • 3.  Additional Requirements   11.39A
      • 4.  Beneficiary’s Liability for Debts  11.39B
      • 5.  Doctrine of Cy Pres  11.39C
      • 6.  Errors in Revocable TOD Deed  11.39D
    • D.  Transfer of Ownership by Nonformal Probate Proceedings  11.40
      • 1.  Liability for Decedent’s Debts; 1-Year Limitation Period  11.41
      • 2.  Property Transfers in Small Estates  11.42
        • a.  Who May Use Summary Procedures  11.43
        • b.  What Property Is Excluded in Determining Valuation Limits  11.44
        • c.  Transfer by Small Estate Affidavit  11.45
          • (1)  Requirements to Use Affidavit  11.46
          • (2)  Preparation of Affidavit  11.47
          • (3)  Form: Affidavit re Real Property of Small Value ($55,425 or Less) (Judicial Council Form DE-305)  11.48
          • (4)  Attachments  11.49
          • (5)  Filing the Affidavit  11.50
          • (6)  Recording the Affidavit  11.51
          • (7)  Successor’s Liability for Decedent’s Debts  11.52
          • (8)  Restitution to Probate Estate  11.53
        • d.  Transfer by Petition to Determine Succession to Real Property  11.54
          • (1)  Requirements to Use Petition to Determine Succession  11.55
          • (2)  Preparation of Petition  11.56
          • (3)  Form: Petition to Determine Succession to Real Property (Estates of $166,250 or Less) (Judicial Council Form DE-310)  11.57
          • (4)  Attachments  11.58
          • (5)  Filing the Petition  11.59
          • (6)  Setting the Hearing; Notice; Order  11.60
          • (7)  Form: Order Determining Succession to Real Property (Estates of $166,250 or Less) (Judicial Council Form DE-315)  11.61
          • (8)  Recording the Order  11.62
          • (9)  Liability for Decedent’s Unsecured Debts  11.63
      • 3.  Spousal Property Petition  11.64
        • a.  Preparing the Petition  11.65
        • b.  Form: Spousal or Domestic Partner Property Petition (Judicial Council Form DE-221)  11.66
        • c.  Filing the Petition  11.67
        • d.  Setting the Hearing; Notice  11.68
        • e.  Order  11.69
        • f.  Form: Spousal or Domestic Partner Property Order (Judicial Council Form DE-226)  11.70
        • g.  Recording Order  11.71
        • h.  Liability for Decedent’s Unsecured Debts  11.72
      • 4.  Small Estate Set Aside  11.73
    • E.  Probate Administration  11.74
      • 1.  Appointment of Personal Representative  11.75
      • 2.  Personal Representative’s Letters and Bond  11.76
      • 3.  Administration Under Independent Administration of Estates Act (IAEA)  11.77
      • 4.  Distribution of Estate Property
        • a.  Distributions of Property Under Probate Administration  11.78
        • b.  Distributee’s Liability  11.79
    • F.  Trust Administration  11.80
      • 1.  Change of Trustee  11.81
        • a.  Form: Affidavit—Change of Trustee  11.82
        • b.  Selling or Distributing Real Property in Trust  11.83
        • c.  Beneficiary’s Liability for Decedent’s Debts  11.84
      • 2.  Section 850 Petition  11.85
        • a.  Notice  11.86
        • b.  Order  11.87
  • III.  SELLING PROPERTY DURING ADMINISTRATION
    • A.  Probate Sales  11.88
      • 1.  Power to Sell Real Property Without Court Confirmation  11.89
        • a.  Entering Into Listing Agreement  11.90
        • b.  Entering Into Purchase Agreement  11.91
        • c.  Giving Notice of Proposed Action
          • (1)  Who Receives Notice  11.92
          • (2)  Procedure for Giving Notice  11.93
          • (3)  Form of Notice  11.94
          • (4)  Contents of Notice  11.95
          • (5)  Objection to Notice of Proposed Action  11.96
      • 2.  Selling Probate Real Property With Court Confirmation  11.97
        • a.  Power to Enter Into Listing Agreement  11.98
        • b.  Notice of Sale  11.99
          • (1)  Publishing Notice of Sale  11.100
          • (2)  Form of Notice  11.101
        • c.  Entering Into Purchase Agreement  11.102
        • d.  Terms of Offers  11.103
        • e.  Notice of Court Confirmation Hearing  11.104
        • f.  Court Hearing to Confirm Sale  11.105
    • B.  Trust Sales  11.106
      • 1.  Entering Into Listing Agreement for Trust Property  11.107
      • 2.  Entering Into Purchase Agreement for Trust Property  11.108
      • 3.  Electing to Give Notice of Proposed Action  11.109
        • a.  Content of Notice  11.110
        • b.  How to Give Notice  11.111
    • C.  Income Tax Consequences of Property Sales  11.112
      • 1.  Basis Adjustment Under IRC §1014
        • a.  Basic Rule  11.113
        • b.  Exceptions to Basis Adjustment  11.114
        • c.  Basis Consistency  11.115
        • d.  Community Property Implications  11.116
        • e.  Documenting Value of Assets Sold  11.117
      • 2.  Withholding Income Tax on Sale of Property
        • a.  Calculating Withholding  11.118
        • b.  Real Estate Withholding Statement (FTB Form 593)  11.119
    • D.  Exemptions From Disclosure Requirements for Fiduciaries Under CC §1102.2  11.120

About the Authors

AGNIESZKA K. ADAMS, coauthor of chapter 11, received her J.D., cum laude, from the University of California, Hastings College of the Law, her LL.B. from the University of Southampton, and her B.A., summa cum laude, from Lee University. Ms. Adams is a partner with Roisman Henel + Adams LLP, Oakland. She is certified by the State Bar of California Board of Legal Specialization as a Specialist in Estate Planning, Trust and Probate law and was selected by her peers as one of Northern California’s “Rising Stars” from 2012 through 2021. She is a member of the Trusts and Estates Executive Committee of the California Lawyers Association (TEXCOM).

JOANNE L. DUNEC, coauthor of chapters 4 and 5, received her J.D. from the University of California, Hastings College of the Law, and her B.S., cum laude, from the University of Arizona. Ms. Dunec is Vice President and underwriting counsel with Old Republic Title Company, San Francisco. Before that, she was a shareholder at Miller Starr Regalia in Walnut Creek, where she specialized in real property transactions and land use regulation and development, with an emphasis on public and private partnership transactions. She is a frequent speaker and serves as an annual panelist and moderator of CEB’s program, Real Property Law Practice: Year in Review. Ms. Dunec was an advisor to CEB for California Easements and Boundaries: Law and Litigation (Cal CEB) and Ground Lease Practice (2d ed Cal CEB) and is an update author of California Real Property Sales Transactions (4th ed Cal CEB) and California Title Insurance Practice (2d ed Cal CEB).

KATHY FREEMAN, coauthor of chapter 7, received her M.S. in Taxation from Golden Gate University and her B.S. from California State University, Sacramento. Ms. Freeman is a Managing Director in PricewaterhouseCoopers (PwC) LLP’s National Tax Services practice, specializing in California corporate and personal income tax controversy. Before joining PwC, Ms. Freeman spent more than 20 years at the California Franchise Tax Board working in its Corporate Audit Bureau as a top technical specialist and in its Settlement Bureau resolving corporate and personal income tax disputes.

NANCY B. GOLDSTEIN, author of chapter 9, received her J.D. from the University of San Diego School of Law and her B.S. from the City University of New York, Lehman College. Ms. Goldstein is Principal of the Law Offices of Nancy B. Goldstein, Westlake Village, where she both litigates and documents complex real estate matters, including matters involving real property access issues, easements and boundaries, land use and development, and escrow issues. Ms. Goldstein speaks regularly for CEB and for the Solo & Small Firm Section of the State Bar of California, of which she is a past-Chair.

MARK E. HELLENKAMP, coauthor of chapter 6, received his J.D. from the University of San Diego School of Law and his B.A. from the University of Puget Sound. Mr. Hellenkamp is a partner in the San Diego office of Morris Polich & Purdy LLP, where he practices in the areas of insurance coverage and bad faith litigation and represents corporations and professionals in business litigation.

MONIQUE D. JEWETT-BREWSTER, author of chapter 10, received her J.D. from the University of Southern California Gould School of Law and her B.A. from the University of San Francisco. Ms. Jewett-Brewster practices law with Hopkins & Carley, San Jose. She represents creditors in business bankruptcies and in all other aspects of insolvency law, with a primary focus on representing secured and unsecured creditors in the restructuring and enforcement of complex loan and other commercial transactions. In addition to her financial institution and corporate clients, she also counsels a major metropolitan California city in bankruptcy matters. Ms. Jewett-Brewster has presented programs for CEB, the Business Law Section of the State Bar of California, the California Bankers Association, and other institutions. She is a member of the Executive Committee of the Business Law Section of the State Bar of California, a former Co-Chair of the Insolvency Committee of the Business Law Section of the State Bar of California, and a past member of the Bench/Bar Committee of the Bankruptcy Court for the Northern District of California.

JEFFREY C. JOY, author of chapters 1 and 2, received his LL.M. in Taxation from the New York University School of Law, his J.D. from Washburn University School of Law, and his B.S., cum laude, from the University of Kansas. Mr. Joy is a partner at K&L Gates LLP, Irvine, where he counsels high-net-worth individuals and the owners of closely held businesses on income tax and estate tax planning matters. He was previously an Attorney-Advisor to the U.S. Tax Court and regularly represents clients in tax controversies before the Internal Revenue Service, the U.S. Tax Court, the California Franchise Tax Board, the California State Board of Equalization, and various county real property reassessment appeal boards. Mr. Joy is certified by the State Bar of California Board of Legal Specialization as a Specialist in Taxation and in Estate Planning, Trust and Probate law. For several years he has been recognized by his peers as one of the Best Lawyers® in America and a Southern California “Super Lawyer.” He writes and lectures widely on matters of estate planning and taxation.

SCOTT M. KOPPEL, coauthor of chapter 6, received his J.D. from the University of San Diego School of Law and his B.A. from Hofstra University. He is admitted to practice in both New York and California. Mr. Koppel is the principal of Koppel Litigation and Mediation, P.C., Costa Mesa. His practice focuses on investigating suspect property and casualty claims, rendering coverage opinions, and providing mediation and arbitration services.

LAURA S. LOWE, coauthor of chapters 4 and 5, received her J.D. from the University of San Francisco School of Law and her B.S. from The Ohio State University. Ms. Lowe is underwriting counsel with Old Republic Title Company, San Francisco. In addition to her many years working as in-house counsel for the title industry, Ms. Lowe has worked as a litigation attorney for various firms in the Bay Area, most recently with Miller Starr Regalia. She is a member and past-Chair of the California Land Title Association (CLTA) Education Committee as well as a member of the Forms and Practices Committee. Ms. Lowe has presented programs for CEB, the Real Property Section of the State Bar of California, the National Business Institute, and the CLTA as well as various real estate companies, mortgage loan brokerages, and local real estate organizations. She is coauthor of two chapters in California Easements and Boundaries: Law and Litigation (Cal CEB) and coauthor of one chapter in California Real Property Sales Transactions (4th ed Cal CEB).

LORRAINE K. MADERA, update coauthor of chapter 3, is an Associate in Lubin Olson’s Real Estate and Business Practice Groups. Ms. Madera received her B.A. from the University of California, Los Angeles, and her J.D. from the University of California, Hastings College of the Law.

MATTHEW A. MANDEL, coauthor of chapter 7, received his LL.M. in Taxation from the New York University School of Law, his J.D. from the George Washington University Law School, his M.B.A. from the University of Pennsylvania, Wharton School of Business, and his B.A. from the University of Vermont. Mr. Mandel is a principal in the State and Local Tax (SALT) practice of PricewaterhouseCoopers LLP, San Francisco. He advises companies on state tax issues, including tax controversy, planning, and compliance. He has significant experience in various aspects of controversy issues, including complex income tax audit defense, reverse income tax audits, ruling requests, and related ASC 740/450 issues. Mr. Mandel was previously an adjunct professor at the Golden Gate University School of Law.

ROBERT S. MILLER, coauthor of chapter 3, received his J.D. from Harvard Law School and his B.S. from Princeton University. Mr. Miller is a partner at Lubin Olson & Niewiadomski LLP, Walnut Creek, where he represents businesses and individuals in all aspects of real estate business operations, including real property acquisitions and dispositions, entity issues, leasing, construction and related contract negotiation, financing, project development and entitlement, regulatory compliance, litigation management, and insurance and risk management. Mr. Miller has particular experience in the home building industry and homebuilding transactions and represents numerous homebuilders and residential developers in his practice. He is a frequent presenter on real estate issues and has authored numerous publications on real estate topics, including as an update author of Office Leasing: Drafting and Negotiating the Lease (Cal CEB). He is a past-Chair of the Executive Committee of the Real Property Section of the State Bar of California.

BRENNA E. MOORHEAD, coauthor of chapter 3, received her J.D. from the University of Southern California Gould School of Law, her M.A. from the University of Florida, and her B.A. from Stanford University. Ms. Moorhead practices law with Goodwin Proctor, LLP, San Francisco, where she specializes in real estate, with a focus on land use, development, and natural resources. She is experienced in transactional and permitting matters for large-scale residential and mixed-use projects. Before practicing law, Ms. Moorhead was an urban planner for private consulting firms in Florida and a board member on the City of Orlando’s Board of Zoning Adjustment. She is a member of the Stanford Professionals in Real Estate (SPIRE).

ANNE BRUNER NASH, coauthor of chapter 11, received her J.D. from the University of California, Berkeley, School of Law and her B.A., with distinction, from Stanford University. Ms. Nash practices law with Roisman Henel + Adams LLP, Oakland, where she focuses on estate planning, estate and gift taxation, and probate and trust administration. She is certified by the State Bar of California Board of Legal Specialization as a Specialist in Estate Planning, Trust and Probate law and has been selected by her peers as one of Northern California’s “Super Lawyers” each year since 2005. Ms. Nash is the author of a chapter in California Decedent Estate Practice (2d ed Cal CEB) and coauthor of a chapter in Complete Plans for Small and Mid-Size Estates (Cal CEB).

GREGORY S. NERLAND, author of chapter 8, received his J.D. from the University of California, Hastings College of the Law, and his A.B. from Dartmouth College. Mr. Nerland is a partner in LaPietra & Nerland, Walnut Creek. He specializes in business consulting and litigation involving business and real estate transactions, property management, and construction. He is an update author of California Real Property Remedies and Damages (2d ed Cal CEB).

REED SCHREITER, coauthor of chapter 7, received his LL.M. and his J.D. from the University of the Pacific, McGeorge School of Law, and his B.A. from Pepperdine University. Mr. Schreiter is a Director with PricewaterhouseCoopers LLP, Sacramento. He was formerly Supervising Tax Counsel at the California State Board of Equalization. Mr. Schreiter specializes in California tax law and tax controversies involving franchise and income tax, sales and use tax, property tax, and documentary transfer tax. He regularly speaks and writes for organizations such as Bloomberg BNA.

TIMOTHY R. SULLIVAN, coauthor of chapter 6, received his J.D. and B.A. from the University of Missouri. Mr. Sullivan is a partner with McCormick, Barstow, Sheppard, Wayte & Carruth LLP, Fresno, where he represents insurers, insureds, and agents in a variety of insurance-related matters, including personal injury, construction defect, bad faith and declaratory relief actions. He has been selected as a Northern California “Super Lawyer” since 2008. Mr. Sullivan is also an author of chapters in California Title Insurance Practice (2d ed Cal CEB); California Construction Contracts, Defects, and Litigation (Cal CEB); California Real Property Sales Transactions (4th ed Cal CEB); California Real Estate Brokers: Law and Litigation (Cal CEB); and California Property Insurance: Law and Litigation (Cal CEB). He is also a former member of the State Bar Real Property Section Executive Committee and is a past-President of the Fresno County Bar Association.

BARRON L. WEINSTEIN, coauthor of chapter 6, received his J.D. from the University of California, Hastings College of the Law, and his B.A. from the University of California, Berkeley. Mr. Weinstein is a partner with Meredith, Weinstein & Numbers LLP, Larkspur, where his practice focuses exclusively on representing insureds in complex insurance disputes, including litigation against insurers and brokers in state and federal courts. Mr. Weinstein has lectured on coverage issues in continuing legal education courses and at the annual National Conference of the Risk and Insurance Management Society. He also serves as a mediator in coverage dispute cases.

About the 2022 Update Authors

AGNIESZKA K. ADAMS is an update coauthor of chapter 11. See biography in the About the Authors section.

GERALD W. CHALMERS, update author of chapters 4 and 5, received his J.D. from the Santa Barbara College of Law and his B.A. from the University of California, Santa Barbara. He is Vice President and Assistant General Counsel with Placer Title Company and Mother Lode Holding Company in Roseville. Mr. Chalmers has a wealth of title and escrow knowledge with a background in title insurance underwriting. He is also an update author for California Title Insurance Practice (2d ed Cal CEB).

RENO F.R. FERNANDEZ III, the update author of chapter 10, received his B.A. from the University of California, Berkeley, and his J.D. from Golden Gate University School of Law. Mr. Fernandez is a partner at Macdonald Fernandez LLP, San Francisco, focusing on commercial litigation, business matters, restructuring and bankruptcy law, and is a Bankruptcy Law Specialist certified by the California Board of Legal Specialization.

JEFFREY C. JOY is the update author of chapters 1 and 2. See biography in the About the Authors section.

SIMON A. LEBLEU, an update coauthor of chapter 7, received his J.D. from the UOP McGeorge School of Law, his LL.M. from the University of San Francisco School of Law, and his B.S. from California State University, Sacramento. Mr. LeBleu is an associate with Wagner Kirkman Blaine Klomparens & Youmans LLP. His practice focuses on taxation, business planning, estate planning, and real estate law. Mr. LeBleu is also a licensed California Real Estate Salesperson.

LORRAINE K. MADERA is an update coauthor of chapter 3. See biography in the About the Authors section.

ROBERT S. MILLER is an update coauthor of chapter 3. See biography in the About the Authors section.

ANNE BRUNER NASH is an update coauthor of chapter 11. See biography in the About the Authors section.

GREGORY S. NERLAND is the update author of chapters 8 and 9. See biography in the About the Authors section.

TIMOTHY R. SULLIVAN is the update author of chapter 6. See biography in the About the Authors section.

CHELSEA J. SUTTMANN, an update coauthor of chapter 7, received her J.D. from Santa Clara University School of Law and her B.A. from the University of Michigan. Ms. Suttmann is a shareholder and managing director at Barulich Dugoni & Suttmann Law Group, Inc. Her practice focuses on estate planning clients with high net worth, estate and trust administration, and inter-family business succession planning. Ms. Suttmann is also a coauthor of California Trust Administration (2d ed Cal CEB).

Selected Developments

January 2022 Update

Legislative Developments

  • Property tax reassessment; intergenerational transfers; replacement homes. Proposition 19, passed in the November 3, 2020, election, amended the California Constitution to limit people inheriting family properties from keeping the property’s previous adjusted tax base year (unless they use the home as their primary residence), and allows homeowners who are over 55 years of age, disabled, or victims of a wildfire or natural disaster to transfer the assessed value of their primary residence to a newly purchased or newly constructed replacement primary residence up to three times anywhere within the state. See §§1.41, 3.3, 3.4A, 3.38, 3.50, 3.61, and 3.78.

  • Replacement property (disaster). Revenue and Taxation Code §70.5 provides that the base year value of property that is substantially damaged or destroyed by a Governor-declared disaster may be applied to replacement property reconstructed on the destroyed property’s site within 5 years after the disaster. See Legislation Alert in §3.3. See also §3.31.

  • Tax withholding; 1031 exchanges. Effective January 1, 2022, AB 1582 provides that sellers are exempt from withholding requirements when the transaction is an exchange under IRC §1031 (except for boot), provided that the exchange intermediary has received exchange funds and has not disbursed them. See §4.40.

  • COVID-19 pandemic; bankruptcy. The COVID-19 pandemic continued to impact real property transactions (and life in general) in California this year. The most notable legislation applicable to the this book is related to bankruptcy. For information about the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (Pub L 116–136, 134 Stat 281) and Consolidated Appropriations Act of 2021 (CAA-21) (Pub L 116–260, 134 Stat 1182), as they relate to real property in the bankruptcy estate and preferences in bankruptcy, see §§10.2, 10.45, and 10.53.

  • Revocable Transfer on Death (TOD) deeds. Senate Bill 315 was enacted in September 2021, and made several changes in response to recommendations from the California Law Revision Commission. See §§11.7–11.16, 11.37–11.39D.

Case Developments

  • “Open market transactions” and trustees’ sales. Phillis v County of Humboldt (2020) 59 CA5th 432 (trustee’s sale of property did not qualify as “open market transaction” to support application of statutory presumption under Rev & T C §110 that sales price accurately reflected property’s actual market value). See §3.13.

  • Escape assessments. LA Live Props., LLC v County of Los Angeles (2021) 61 CA5th 363 (county assessor’s apparent failure to timely mail notices of escape assessments under Rev & T C §531.8 did not excuse taxpayer’s failure to exhaust administrative remedies by filing application for assessment reduction with county board under Rev & T C §1603 and administrative tax refund claim under Rev & T C §5097(a); thus Rev & T C §5142(a) barred refund action). See §§3.32, 3.43.

  • Attorney fees. Chinese Theatres, LLC v County of Los Angeles (2020) 59 CA5th 484 (taxpayer not entitled to attorney fee award under Rev & T C §1611.6, even after successful property tax refund action, when assessment board did not fail to report requested findings and no court remanded proceedings due to deficient or arbitrary findings). See §3.45.

  • Parent-child exclusion from reassessment. Bohnett v County of Santa Barbara (2021) 59 CA5th 1128 (after trust’s transfer of home to 13 children qualified for parent-child exclusion from reassessment under Rev & T C §63.1, subsequent purchase by one sibling of other siblings’ shares was not excludable). See §§3.50, 3.60.

  • Constructive notice and lien priority. Tsasu LLC v U.S. Bank Trust, N.A. (2021) 62 CA5th 704 (lender that could have found defects in recorded chain of title and knew of facts warranting inquiry had constructive knowledge, thus could not satisfy CCP §764.060 and was not entitled to priority under CC §1214). See §4.52.

  • Insurable interest in property insurance. Wexler v California Fair Plan Ass’n (2021) 63 CA5th 55 (policy that covered property owned by “members of your family residing with you” covered named insured parents’ interest in property that daughter had in insured premises). See §6.1.

  • COVID-19 and insurance losses.

    • Ragged Point Inn v State Nat’l Ins. Co. (CD Cal, Sept. 23, 2021, No. 2:21-cv-05386-RGK-JPR) 2021 US Dist Lexis 183441 (distinct, demonstrable, physical alteration of property is benchmark for triggering coverage for direct physical loss; detrimental economic impact alone is not sufficient);

    • Protégé Restaurant Partners LLC v Sentinel Ins. Co. (ND Cal 2021) 517 F Supp 3d 981, 987 (“[e]very California court that has addressed COVID-19 business interruption claims to date has concluded that government orders that prevent full use of a commercial property or that make the business less profitable do not themselves cause or constitute ‘direct physical loss of or physical damage to’ the insured property.”);

    • Palomar Health v American Guar. & Liab. Ins. Co. (SD Cal, Sept. 3, 2021, No. 3:21-cv-00490-BEN-BGS) 2021 US Dist Lexis 167978, at *21 (courts applying California law “have all but universally rejected” arguments contrary to requirement of physical loss or damage).

  • The following cases are found in the Practice Tip in §6.45 as examples of courts holding that the virus exclusion is unambiguous and bars coverage for COVID-19 pandemic-related losses:

    • Boxed Foods Co. v California Capital Ins. Co. (ND Cal 2020) 497 F Supp 3d 516 (holding that COVID-19 is efficient proximate cause of loss; thus, virus exclusion provision applied);

    • Madera Group, LLC v Mitsui Sumitomo Ins. USA, Inc. (CD Cal, June 25, 2021, No. LA CV20-07132 JAK (AFMx)) 2021 US Dist Lexis 121083 (rejecting several arguments that virus exclusion was ambiguous).

  • Continuation of previously manifested loss in property insurance. Guastello v AIG Specialty Ins. Co. (2021) 61 CA5th 97 (summary judgment reversed due to disputed issue of fact regarding whether soil movement and collapse of retaining wall in 2010 was caused by insured subcontractor’s negligent construction on adjacent property before policy expired in 2004). See §6.61.

  • Homestead exemption. Schaefers v Blizzard Energy, Inc. (In re Schaefers) (BAP 9th Cir 2020) 623 BR 777 (homestead exemption denied when debtor attempted to use reverse alter ego theory; state court had found that debtor’s individual liability extended to LLC, but Ninth Circuit BAP affirmed bankruptcy court’s finding that extending alter ego theory to allow debtor to avail himself of homestead exemption, when LLC owned property, would mean rewarding debtor for his misdeeds). See §9.42.

  • Uniform Voidable Transfers Act (UVTA) and actual injury. Sarkisian v Stadtmueller (In re Medina) (9th Cir, July 29, 2021, No. 20–60045) 2021 US App Lexis 22529 (actual injury is not required under UVTA in cases of actual fraudulent intent, bringing UVTA into line with Bankruptcy Code’s fraudulent transfer provisions). See Note in §10.47. Section 10.48 of this publication was deleted based on this development, because it outlined the impact of old authority (holding that actual injury was required) on the role played by exemptions in fraudulent transfer matters; In re Medina renders the discussion moot.

Administrative Developments

  • ALTA update. The American Land Title Association (ALTA) overhauled many of its forms in 2021, updating and finalizing several forms that became effective July 1, 2021, including the Owner’s Policy and Loan Policy forms. See chap 5 (specifically, Warning in §5.5). These ALTA forms had not been substantively changed since 2006. For more information on this change and its implications, see Aaron and Cruz, Key Changes in the New 2021 ALTA Form Title Insurance Policies, 44 CEB Real Prop L Rep 72 (Sept. 2021).

REAL PROPERTY OWNERSHIP AND TAXATION

(1st Edition)

January 2022

TABLE OF CONTENTS

 

File Name

Book Section

Title

CH01

Chapter 1

Forms of Ownership

01-006

§1.6

Grant Deed—Statutory Form

01-016

§1.16

Certificate of Acknowledgment of Notary Public

01-023

§1.23

Tenancy-in-Common Grantee Recitals

01-028

§1.28

Joint Tenancy Grantee Recitals

01-030

§1.30

Community Property Grantee Recitals

01-032

§1.32

Community Property With Right of Survivorship Grantee Recitals

CH02

Chapter 2

Estate Planning Considerations of Real Property Ownership, Including Estate and Gift Tax Issues

02-038

§2.38

Checklist: Title Insurance—Advising Clients Transferring Real Property

CH06

Chapter 6

Property Insurance Basics

06-069

§6.69

CHECKLIST: INTERVIEWING THE CLIENT

CH08

Chapter 8

Lis Pendens

08-024

§8.24

CHECKLIST: PREPARING, MAILING, RECORDING, AND FILING NOTICE

08-033

§8.33

FORM: NOTICE OF PENDENCY OF ACTION (LIS PENDENS)

CH09

Chapter 9

Homesteads

09-030

§9.30

Declared Homestead

09-034

§9.34

Checklist: Preparing to Seek Sale of Dwelling

09-035

§9.35

Checklist: Writ of Execution

09-036

§9.36

Checklist: Application for Court Order of Sale

CH11

Chapter 11

Impact of Death on Ownership and Transfer of Real Property

11-029

§11.29

Affidavit—Death of Joint Tenant

11-032

§11.32

Affidavit—Death of Spouse

11-035

§11.35

Affidavit—Death of Life Tenant

11-038

§11.38

Affidavit—Death of Transferor (Revocable TOD Deed)

11-082

§11.82

Affidavit—Change of Trustee

 

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