Justia Lawyer Rating
Federal Bar Association
Google Reviews
Expertise - Best Tax Attorneys in San Francisco 2022
Super Lawyers Rising Stars
Top 3 Tax Attorney In San Francisco

California Proposition 19 Tax Impact on Transfer of Property

The IRS has accelerated its priority of enforcing reporting of any cryptocurrency transactions because the agency treats crypto similar to stocks and taxable events.

California voters approved Proposition 19 in November 2020 that primarily limits people who inherit family properties from keeping the low property tax base unless they use the home as their primary residence. This could have severe financial consequences for children who inherit property from their parents starting on and after February 16, 2021


Under previous California law, a child could inherit a primary residence valued at less than $1 million from their parents without any new assessment regardless if the child used the inherited property as their primary residence or treated it more as a second home or rental property. This allowed children to keep the same property tax basis that their parents had, which for most homeowners in California it is likely that the property is valued significantly higher today than when originally assessed at the time the parents purchased


However, beginning February 16, 2021, children who are going to inherit property from their parents now face a much more difficult decision to keep or sell the residence because of the potential impact of increased property tax assessments


Many children are already living in their own homes with their own families and likely would not move into the inherited property as their primary residence, which means so long as the child wishes to keep the property as a secondary residence or rental property then they will face a huge increase in property taxes based on the new assessment


If the child wants to move into the inherited property and maintain it as their primary residence, then the reassessed value will be excluded from the new property tax basis up to $1 million


There are various strategies Kugelman Law tax and estate planning attorneys could use in an attempt to minimize the tax burden in those situations, but the answers to these questions will dictate the best options available:

  • Do you wish to sell the inherited property?
  • Do you wish to move into the inherited property and make it your primary residence?
  • Do you wish to keep the inherited property as a secondary home or rental property?
  • Do you wish to have the inherited property remain in the family in perpetuity?

Parents could gift the property to their children through an estate plan but the carryover basis is the parent’s basis so if the child sells the property then there’s a capital gains tax


A grantor trust allows the parents to remain in the home, places the home in a trust with the child as the beneficiary, and when the parents die the step up in basis happens but the child has the home in the trust and property taxes minimized


California’s Proposition 19 is a new law so there is plenty of ambiguity with no litigation or case precedent so it’s important to thoroughly review your unique situation with Kugelman Law tax and estate planning attorneys to decide which strategy and approach will give you the best chance of a successful outcome to minimize your tax liability.

Client Reviews
Alexander helped me break down my tax situation and used his expertise to figure out the next actionable steps, make sure that all the bases were covered (that I wasn't aware even existed), and confirm that things were done correctly. If you are confused and stuck in a difficult tax situation, Alexander will guide you forward and help you confidently resolve the issue. Henry Wang
If you are having tax trouble, Alexander is the one to help you. He was very professional, personable, and easy to reach. His explanation of the entire process is helpful for easing the stress that is associated with tax trouble. We never felt intimidated or out of the loop while working with him. The process was handled to our liking and we are satisfied with the results. Even the after care has been phenomenal! Tony W.
If anyone out there is in need of stellar legal tax assistance, look no further and contact Alexander Kugelman. He helped me tremendously with my tax situation and is always there to help when needed. If I can give Alexander more stars, I would because 5 stars is not enough! Thank you for everything, Alex!!! Flo Lauzon
Alexander has been a life saver! I got dragged into some serious IRS issues with a complicated foreign assignment component, which included divorce. Alexander has been working with me to resolve directly with the IRS. Alexander is detail oriented, responsive and I trust him to guide me. I will be using Alexander for all tax related matters from now on! He is stuck with me forever. Eve T.
Alexander helped me understand the IRS audit process and prepared my response. There were certain records that I had lost, but he suggested alternatives that the IRS accepted. Even better, he showed up at the audit for me and I never actually had to talk with the IRS. I didn't have to pay any penalties. I'd definitely recommend hiring Alexander to deal with an IRS issue. L.R.