My question involves real estate located in the State of: California
My turn to ask a question instead of answering one.
California has a unique property tax system. Generally speaking, you are taxed at 1% per year of what you paid for the property. That tax can only be increased each year by 1% of the 1%. There are some exceptions, by they are irrelevant for the purposes of this discussion.
When you sell real property and ownership changes hands (new name on the deed), the property is reassessed and taxed each year at 1% of the new sale price, with the previously discussed 1% of 1% yearly increases to follow.
I own a couple of pieces of rental property. One is worth eight times what I paid for it 25 years ago and the other has doubled in price since I bought it two years ago. Needless to say, were I to sell these properties, the new owners would incur sizeable hikes in the property taxes over what I have been paying. This could affect my selling price.
Each rental property is owned by a separate LLC. Instead of selling the property, can I simply sell the LLC to a prospective buyer and in doing so, avoid any reassessment of the property values and resulting tax increase based on ownership changing hands? In this case, ownership of the real property (the LLC's name on the deed) would not change. Instead, only ownership of the LLC would change.