From: Edward Yen Sent: Tuesday, January 8, 2019 6:54 PM To: Schultz, Glenna; Berry, Angie Cc: Yeung, David; Scott Woods; George Renkei; Robert Isozaki; Robert Lardge Subject: Interested Parties Process: Change in Ownership LAC Assessor Response

My apologies for getting this document to you late. I thought I emailed this by the due date last Friday. But, after I checked my sent email box, I did not see it reach you. Attached you will find Los Angeles County Assessor’s comments in response to the discussion regarding the Interested Parties Process: Change in Ownership – Rescission. The document list and explains the various factual circumstances that have arisen in Los Angeles County. In some instances we have accepted the taxpayers’ rescission deeds. These circumstances are typically due to the rescission deeds being recorded right after the taxpayer receives an increased tax bill. Whereas in the circumstances where the rescission deed was not accepted the Assessor has found facts that appear to show the parties intended to create another transfer. These are not all inclusive of the examples of situations we have experienced, but is a good sample of what we have received. We look forward to any guidance you can offer. I have also attached for your reference our current rescission policy. I am available for further discussion if you have any further questions. Eddie Edward T. Yen, Esq. General Counsel Office of the Assessor (213) 974-3101 eyen@assessor.lacounty.gov

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Los Angeles County Assessor’s Office Submission Board of Equalization Interest Parties Process Change in Ownership – Rescission Examples

January 3, 2019 Fact Pattern Issue/Position Proposed Result

1 1.

2. 3.

A transfers property to B, via deed. No documentary transfer tax is paid and no sales price is reported on the PCOR. The transfer is reassessed. Within 2 years of the original transfer, B transfers the property back to A. No documentary transfer tax is paid and no sales price is reported on the PCOR. A and B submit a statement that they mutually consent to rescind the original transfer.

Issue: Whether or not restoration of benefits is required. Position: Here, no evidence of restoration of consideration or other benefits is required.

Granted: Here, there was no evidence that consideration or other benefits were exchanged, and rescission was sought promptly.

2 1.

2. 3.

A transfers property to B, via deed. A documentary transfer tax is paid and sales price is reported on the PCOR. The transfer is reassessed. Within 1 year of the original transfer, B transfers the property back to A. No documentary transfer tax is paid and no sales price is reported on the PCOR. A and B submit a statement that they mutually consent to rescind the original transfer.

Issue: Whether nor not evidence of restoration of benefits is required. Position: Here, evidence of restoration of consideration is required.

Granted: Applicants provided Release Agreement, whereby A rescinded seller financing, and returned down payment to B. Note: Evidence of an actual return of the down payment does not appear to have been provided.

3 1.

2. 3.

Property is transferred from A to B, via deed, in error, as a result of an alleged failed escrow. No documentary transfer tax is paid and no sales price is reported on the PCOR. The transfer is reassessed. 9 years later, B transfers the property back to A. No documentary transfer tax is paid and no sales price is reported on the PCOR. A and B submit a statement that they mutually consent to rescind the original transfer.

Issue: Whether or not the lapse of an extended period of time precludes approval of mutual rescission. Position: The lapse of an extended period of time precludes approval of mutual rescission. The asserted rescission may be regarded as a second transfer.

Denied: 9 years is too long a period between an original transfer and rescission to approve a mutual rescission request. Here, however, A may be able to obtain an exclusion, if evidence sufficient to rebut the title presumption is provided.

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4 1

2.

3. 4.

A and B hold property as joint tenants. A is an original transferor joint tenant and B is an other than original transferor joint tenant. A transfers her 50% interest in the property to herself, as trustee of her revocable trust, via deed. No documentary transfer tax is paid and no sales price is reported on the PCOR. The transfer is reassessed. Within 2 years of the original transfer, A, as trustee of her revocable trust, transfers a 50% interest in the subject property to A and B, as joint tenants. No documentary transfer tax is paid and no sales price is reported on the PCOR.

Issue 1: Whether or not restoration of benefits is required. Position: Here, no evidence of restoration of consideration or other benefits is required. Issue 2: Whether or not the ownership interest percentages in the property following a rescission must be the same as those that existed prior to the original transfer. Position: the ownership interest percentages in the property following rescission must be the same as those that existed prior to the original transfer.

Denied on Issue 2: Deed 2 does not rescind the transfer on deed 1, as, prior to the recordation of deed 1, A and B each held a 50% joint tenancy interest in the subject property, and, following the recordation of deed 2, A held a 25% joint tenant interest and B held a 25% joint tenant interest and a 50% tenant in common interest in the subject property – an overall 75% interest in the subject property.

5 1.

2.

3. 4.

A and B hold property as joint tenants. A is an original transferor joint tenant and B is an other than original transferor joint tenant. A transfers her 50% interest in the property to herself, as trustee of her revocable trust, via deed. No documentary transfer tax is paid and no sales price is reported on the PCOR. The transfer is reassessed. Within 2 years of the original transfer, A, as trustee of her revocable trust, and B, as a tenant in common, together transfer a 100% interest in the subject property to themselves, as joint tenants. No documentary transfer tax is paid and no sales price is reported on the PCOR.

Issue 1: Whether or not restoration of benefits is required. Position: Here, no evidence of restoration of consideration or other benefits is required. Issue 2: Whether or not the ownership interest percentages in the property following a rescission must be the same as those that existed prior to the original transfer. Position: the ownership interest percentages in the property following rescission must be the same as those that existed prior to the original transfer. Issue 3: Whether or not the manner in which title is held (JT, TC, CP, SSP, etc.) following a rescission

Granted: Deed 2 rescinds the transfer on deed 1, as A and B have been restored to their positions as joint tenants, which existed prior to the original transfer. Note: A should be viewed as having been restored to her position as the original transferor joint tenant, and B should be viewed as having been restored to her position as the other than original transferor – B should not now be viewed as an original transferor joint tenant as well.

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must be the same as the manner in which it was held prior to the original transfer. Position: The manner in which title is held following a rescission must be the same as the manner in which it was held prior to the original transfer.

6 1. A and B hold property as joint Issue 1: Whether or not Granted, in part: Deed tenants. restoration of benefits is 3 rescinds the transfer

2. A transfers her 50% interest in the required. on deed 2. However, property to B, via deed 1. No no corrections are documentary transfer tax is paid Position: Here, no required, as neither and no sales price is reported on evidence of restoration of transfer has been

consideration or other reassessed, per the PCOR. benefits is required. Section 62(f). 3. B then transfers a 100% interest in the property to herself, as Issue 2: Whether or not Denied, in part, on trustee of her revocable trust, via multiple prior transfers can Issue 3: Deed 4 does

deed 2. No documentary transfer be rescinded. not rescind the transfer tax is paid and no sales price is on deed 1, as the joint reported on the PCOR. Position: The rescission of tenancy relationship

4. Thereafter, both transfers are multiple prior transfers between A and B, that reassessed. must be executed by existed prior to the

5. Within 1 year of the first transfer, stepping back one transfer recordation of deed 1, B executes deed 3, in which she, at a time. is not restored. as trustee of her revocable trust, Following the transfers a 100% interest in the Issue 3: Whether or not recordation of deed 4,

the manner in which title is A and B held the property back to herself, as an held (JT, TC, CP, SSP, property as tenants in individual. Deed 3 contains a etc.) following a rescission common. statement that it is intended to must be the same as the

rescind deed 2. No documentary manner in which it was transfer tax is paid and no sales held prior to the original price is reported on the PCOR. transfer.

6. At or about the same time as the recordation of deed 3, B executes Position: The manner in deed 4, in which B, an individual, which title is held following transfers a 50% interest in the a rescission must be the property back to A. No same as the manner in documentary transfer tax is paid which it was held prior to and no sales price is reported on the original transfer. the PCOR. A and B submit a statement that they mutually consent to rescind the transfer effected by the deed 1.

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7 1. A and B hold property as joint tenants.

2. A transfers her 50% interest in thproperty to B, via deed 1. No documentary transfer tax is paidand no sales price is reported onthe PCOR.

3. B then transfers a 100% interestin the property to herself, as trustee of her revocable trust, viadeed 2. No documentary transfetax is paid and no sales price is reported on the PCOR.

4. Thereafter, both transfers are reassessed.

5. Within 1 year of the first transfer,B executes deed 3, in which sheas trustee of her revocable trust,transfers a 100% interest in the property back to herself, as an individual. Deed 3 contains a statement that it is intended to rescind deed 2. No documentartransfer tax is paid and no sales price is reported on the PCOR.

6. At or about the same time as therecordation of deed 3, B executedeed 4, in which she, as an individual, transfers a 100% interest in the subject property toA and B, as joint tenants. No documentary transfer tax is paid and no sales price is reported onthe PCOR. A and B submit a statement that they mutually consent to rescind the transfer effected by the deed 1.

Issue 1: Whether or not Granted: Deed 3 rescinds the transfer on deed 2. However, no corrections are required, as neither transfer has been reassessed, per Section 62(f). Also, deed 4 rescinds the transfer on deed 1, as the joint tenancy ownership relationship between A and B, that had existed prior to the recordation of deed 1, was restored. Note: A and B should be viewed as having been restored to their positions as regular joint tenants – B should not now be viewed as an original transferor joint tenant and A should not now be viewed as an other than original transferor joint tenant.

restoration of benefits is e required.

Position: Here, no evidence of restoration of

consideration or other benefits is required. Issue 2: Whether or not multiple prior transfers can

r be rescinded. Position: The rescission of multiple prior transfers must be executed by

stepping back one transfer , at a time.

Issue 3: Whether or not the manner in which title is held (JT, TC, CP, SSP, etc.) following a rescission must be the same as the y manner in which it was held prior to the original

transfer. s Position: The manner in

which title is held following a rescission must be the

same as the manner in which it was held prior to the original transfer.

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8 1. A and B hold property as joint tenants. A is an original transferor joint tenant and B is another than original transferor jointenant.

2. A transfers her 50% interest in thproperty to B, via deed 1. No documentary transfer tax is paid and no sales price is reported onthe PCOR.

3. B then transfers a 100% interest in the property to herself, as trustee of her revocable trust, viadeed 2. No documentary transfetax is paid and no sales price is reported on the PCOR.

4. Thereafter, both transfers are reassessed.

5. Within 1 year of the first transfer,B executes deed 3, in which she,as trustee of her revocable trust, transfers a 100% interest in the property back to herself, as an individual. Deed 3 contains a statement that it is intended to rescind deed 2. No documentarytransfer tax is paid and no sales price is reported on the PCOR.

6. At or about the same time as therecordation of deed 3, B executedeed 4, in which she, as an individual, transfers a 100% interest in the subject property toA and B, as joint tenants. No documentary transfer tax is paid and no sales price is reported on the PCOR. A and B submit a statement that they mutually consent to rescind the transfer effected by the deed 1.

Issue 1: Whether or not restoration of benefits is

required. t

Position: Here, no e evidence of restoration of

consideration or other benefits is required.

Issue 2: Whether or not multiple prior transfers canbe rescinded. Position: The rescission o

r multiple prior transfers must be executed by stepping back one transfeat a time.

Issue 3: Whether or not the manner in which title is

held (JT, TC, CP, SSP, etc.) following a rescissionmust be the same as the manner in which it was held prior to the original transfer.

Position: The manner in which title is held following

a rescission must be the s same as the manner in

which it was held prior to the original transfer.

Granted: Deed 3 rescinds the transfer on deed 2. However, no corrections are required, as neither transfer has been reassessed, per Section 62(f). Also, deed 4 rescinds the transfer on deed 1, as

the joint tenancy ownership relationship between A and B, that

f had existed prior to the recordation of deed 1, was restored.

r Note: A should be viewed as having been restored to her position

as the original transferor joint tenant,

and B should be viewed as having been restored to her position as an other than original transferor – B should not now be viewed as an original

transferor joint tenant and A should not now be viewed as an other than original transferor joint tenant.

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9 1. A and B hold property as joint tenants.

2. A alone transfers her 50% joint tenant interest to A and B, as jointenants, via deed 1. No documentary transfer tax is paid and no sales price is reported on the PCOR. Following the transfer, A holds a 25% joint tenant interest, and B holds a 25% joint tenant interest and 50%tenant in common interest – an overall 75% interest in the subjectproperty.

3. A and B, as joint tenants, transfera 50% interest in the subject property to B, via deed 2. No documentary transfer tax is paid and no sales price is reported on the PCOR.

4. B then transfers a 100% interest in the subject property to herself, as trustee of her revocable trust, via deed 3. No documentary transfer tax is paid and no sales price is reported on the PCOR.

5. Thereafter, the second and third transfers are reassessed.

6. Within 1 year of the first transfer, B executes deed 4, in which she, as trustee of her revocable trust, transfers a 100% interest in the property back to herself, as an individual. Deed 4 contains a statement that it is intended to rescind deed 3. No documentarytransfer tax is paid and no sales price is reported on the PCOR.

7. At or about the same time as the recordation of deed 4, B executes deed 5, in which she, an individual, transfers a 50% interest in the property back to A. Nodocumentary transfer tax is paid and no sales price is reported on the PCOR. A and B submit a statement that they mutuallyconsent to rescind the transfer effected by the deed 2. Following the transfer, A and B each hold a 50% interest in the subject property, as tenants in common.

Issue 1: Whether or not restoration of benefits is required.

t Position: Here, no evidence of restoration of consideration or other benefits is required. Issue 2: Whether or not

multiple prior transfers can be rescinded.

Position: The rescission of

multiple prior transfers must be executed by stepping back one transfer at a time. Issue 3: Whether or not the ownership interest percentages in the property following a rescission must be the same as those that existed prior to the original transfer. Position: the ownership interest percentages in the property following the rescission must be the same as those that existed prior to the original transfer.

Granted, in part: Deed 4 rescinds the transfer on deed 3. However, neither transfer has been reassessed. Denied, in part, on Issues 3: Deed 5 does not rescind the transfer on deed 2, as, prior to the recordation of deed 2, A held a 25% interest in the subject property, and B held a 75% interest in the subject property, and, following the recordation of deed 5, A and B each held a 50% interest in the subject.

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10 1. A transfers property to B, via deed 1. No documentary transfer tax is paid and no sales price is reported on the PCOR.

2. B then transfers the property to herself, as trustee of her revocable trust, via deed 2. No documentary transfer tax is paid and no sales price is reported on the PCOR.

3. Thereafter, both transfers are reassessed.

4. Within 1 year of the first transfer, B executes deed 3, in which she, as an individual and as trustee of her revocable trust, quitclaims any interest in the property to A. Deed 3 contains a statement that it is intended to rescind both deed1 and deed 2. A and B also submit a separate statement that they mutually consent to rescind the transfers effected by the deed 1 and deed 2. No documentary transfer tax is paid and no sales price is reported on the PCOR.

Issue: Whether or not multiple prior transfers can be rescinded by a single deed. Position: A single deed may not rescind multiple prior transfers. The rescission of multiple prior transfers must be executed by stepping back one transfer at a time.

Denied: A single deed may not rescind multiple prior transfers. The rescission of multiple prior transfers must be executed by stepping back one transfer at a time.

11 1. A general partnership transfers property to A and B, as joint tenants, via deed 1. No documentary transfer tax is paid and no sales price is reported on the PCOR.

2. The transfer is reassessed. 3. 2 years after the original transfer,

A and B then transfer the propertyto A, via deed 2. No documentartransfer tax is paid and no sales price is reported on the PCOR.

4. At or about the same time as the recordation of deed 2, A transfersthe property to an LLC, via deed 3. No documentary transfer tax is paid and no sales price is reported on the PCOR.

5. The transfers effected by deed 2 and 3 were not reassessed.

6. 4 years after the original transfer, the LLC transfers the property to the general partnership. No documentary transfer tax is paid and no sales price is reported on the PCOR.

Issue: Whether or not multiple prior transfers canbe rescinded by a single deed. Position: A single deed may not rescind multiple

prior transfers. The rescission of multiple prior

y transfers must be executed by stepping backone transfer at a time.

Denied: A single deed may not rescind

multiple prior transfers. The rescission of multiple prior transfers must be executed by stepping back one transfer at a time. Also, the lapse in time between the first

transfer and the attempted rescission was too great. The asserted rescission may be regarded as another transfer.

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12 1. A transfers property to B. A documentary transfer tax is paid and sales price is reported on the PCOR. The purchase price is comprised of a down payment and mortgage.

2. B leases back the property to A. The monthly mortgage payments, due from B to A, and rents, due from A to B, are about the same amount.

3. The transfer is reassessed. 4. Following the transfer, A spends

the sum paid as the down payment; B then stops making mortgage payments; and A thereafter stops making rental payments.

5. 4 years after the original transfer, B transfers the property back to A. A and B submit a statement that they mutually consent to rescind the original transfer, and cancel the respective amounts owed on the mortgage and lease. No documentary transfer tax is paid and no sales price is reported on the PCOR.

Issue: Whether nor not evidence of restoration of benefits is required. Position: Here, evidence othe restoration of consideration and/or otherbenefits exchanged is required.

Denied: The lapse in time between the first transfer and the attempted rescission

f was too great. The asserted rescission

may be regarded as another transfer.

OFFICE OF THE ASSESSOR LOS ANGELES COUNTY

GUIDE TO CHANGE IN OWNERSHIP RESCISSION DEEDS

Assessor's Policy Change on Rescission Deeds

E ffective July 5, 2017, the Office of the Assessor clarified its longstanding policy concerning Rescission Deeds and their appraiasability. This policy allows the Assessor to accept mutual rescission in accordance with the provisions of Civil Code Section 1698(a) and within the guidelines of the State Board of Equalization’s Property Tax Annotation 220.0599.

Rescinding the transfer of property by mutual agreement, otherwise known as “mutual rescission,” is acceptable where the parties consent to rescind the transfer, return all benefits, and place the parties in the same position in which they stood before the change in ownership took place.

The Assessor’s policy and determination to accept a mutual rescission for a change in ownership of a property that triggered a reassessment, is not an automatic right. It is dependent upon a review of the facts of each case. If denied, a property owner has the right to challenge the Assessor’s determination of a change in ownership by filing an assessment appeal application with the Los Angeles County Assessment Appeals Board.

Requirements for Mutual Rescission

Pursuant to the Assessor’s policy, the following elements are required to satisfy a mutual rescission: a completed Property Owner’s Declaration form submitted to the Assessor; evidence of Mutual Consent; Recorded Deed Reconveying Property; and Proof of Restoration of Benefits.

A. Property Owner’s Declaration.

A completed and appropriately signed Property Owner’s Declaration signed by the original grantor and grantee under penalty of perjury. The declaration is available on the Assessor’s website: https://assessor.lacounty.gov/wp-content/uploads/2016/12/OWN-48-Repro.-Rev.-11-16.pdf

B. Mutual Consent Evidence of mutual consent to rescind the transfer of the property includes, but is not limited to:

1. An agreement signed by each party stating that the parties are rescinding the transfer. Notarized agreements are preferred but not mandatory unless there is evidence that the parties may not be in agreement with all of the terms of the rescission. An agreement may be recorded.

2. A recorded deed that reflects mutual consent.

3. Other evidence demonstrating mutual consent.

1.

Inside this issue:

Introduction 1

Requirements 1-2

Relief Available for Mutual Rescission 3

Questions

Additional Information 4

Page 2

Requirements for Mutual Rescission Cont.

C. Recorded Deed Reconveying Property

1. A deed recorded with the Los Angeles County Registrar-Recorder/County Clerk, transferring or returning the property back to the original grantor, including the recording number and notarized signatures.

2. Language rescinding the transfer of property must be included in deeds. Words like rescission, revocation, cancellation, correction, or other language demonstrating an intent to restore the status quo or the parties' original positions may be sufficient evidence of an acceptable deed to reconvey property.

D. Proof of Restoration of Benefits

1. The Property Owner's Declaration should give a detailed explanation of the extent of the transaction and what was returned, if anything.

2. Documented evidence that all money or things of value have been returned must be submitted with the Property Owner's Declaration.

3. Documented evidence that the beneficial use of the property has been restored.

4. Documented evidence proving restoration of benefits; this includes, but is not limited to, bank statements, the return of the funds in the amount of the purchase price or down payment, income tax returns, partnership agreements, and/or written declarations under penalty of perjury.

Other factors may be considered when determining eligibility; for example, the time that has elapsed from the original transfer to the date of the rescission may be taken into consideration. A large time gap may be evidence that the parties to the transaction are not genuinely rescinding the original transfer, but rather engaging in a new transaction. Ideally, rescissions that meet these standards for acceptance will take place within the first year following the original transaction.

Additionally, rescission between parties such as legal entities (limited liability companies and corporations) or trusts may require a review of their formation documents, trust documents, and when applicable, amendments thereto. If there is insufficient evidence, the Assessor is not obligated to recognize the rescission, and there will be no restoration of the base year value of the property. NOTE:In fact, the recording of the rescission deed in such cases may be considered another change in ownership which may result in a subsequent reassessment. Property owners considering a rescission should consider legal consultation to determine all potential ramifications of their particular rescission.

2.

3.

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Relief Available for Mutual Rescission

When the Assessor determines that the parties have met the requirements for a mutually agreed rescission, the Assessor will restore the prior base year assessed value of the property as of the ensuing lien date in which the rescission deed became effective and recorded. The original change of ownership will not be reversed. The relief is prospective only. Generally, the rescission of a transfer of property relates back to its formation and dissolves a transfer as though it had never been made. However, in the property tax context, the rescission is applied prospectively and no refund of taxes is available to the parties for the period of time under which a deed transfer is treated as a change in ownership. The deed which transfers the property back to the original grantor is not considered a change in ownership, when all conditions have been met and accepted.

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For More Information: You may also contact us for any other general property tax questions in the following ways:

Assessor’s Website: To research comparable sales, verify valuations, download forms, learn how apprais-

als are made, and more, visit: http://assessor.lacounty.gov

Assessor’s Email: Send your questions, comments, and suggestions to:

helpdesk@assessor.lacounty.gov

Los Angeles County Property Tax Website: General information regarding prop-

erty taxes, including how to read your tax bill and where to find answers to your

questions. Visit: http://www.lacountypropertytax.com

Property Information Hotline: Minimal wait times, averaging less than a minute.

Fast transfers to expert staff during normal business hours. Just call toll free

1.888.807.2111.

Automated Interactive Voice System: Information on valuations and taxes can

be obtained by entering the Assessor Identification Number from a property tax

bill.

Call 213.974.3838 or the toll free number above.

Si desea ayuda en Espanol, llame al numero 1.888.807.2111

Assessor’s Public Service Locations Main Office

Kenneth Hahn Hall of Administration

500 West Temple Street, Room 225

Los Angeles, CA 90012-2770

1.888.807.2111

North District Office

13800 Balboa Boulevard

Sylmar, CA 91342

818.833.6000

South District Office

1401 E. Willow Street

Signal Hill, CA 90755

562.256.1701

East District Office

1190 Durfee Avenue

South El Monte, CA 91733

626.258.6001

West District Office 6120 Bristol Parkway

Culver City, CA 90230

310.665.5300

Lancaster Regional Office 251 East Avenue K-6

Lancaster, CA 93535

661.940.5700

E-28P 12/17