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'Trading Down' May Boost Value

September 30, 1990

Many older people who are trading their large homes for smaller ones may be "Trading Down" (Sept. 16) as far as market value goes, but "trading up" with respect to assessed value.

Since assessed values are locked in by Proposition 13 at the 1976 value plus 2% per year, it's not unusual, for example, for a $1-million dollar home to have an assessed value of $200,000. For such a homeowner, trading down to a $400,000 condo would result in a doubling of the property taxes.

Mr. Myers should have mentioned that such an increase in property taxes can be avoided by filing a claim with the assessor's office under Proposition 60, which allows homeowners 55 or older to transfer the Proposition 13 base-year value of their principal dwelling to a replacement dwelling, provided that their new house is located in the same county and was of equal or less value than their former residence.

Twelve counties also recognize inter-county transfers of Proposition 13 base-year property tax values.

With regard to income tax on the gain on the sale, Mr. Myers also could have mentioned that if one of the spouses had died, the surviving spouse should have gotten a stepped-up basis on at least half of the property, and possibly on the full value of the property if it was properly held as community property, thus reducing or eliminating any capital gain.

In addition to the income tax and property tax issues, the sale of highly appreciated property may have estate tax consequences. Anyone considering a sale of such assets should be cautioned to seek appropriate tax counsel.


Los Angeles

Fogg is a member of the law firm of Valensi, Rose & Magaram PLC

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