State of California
in 1985, a single family residence was purchased for $181.5k. It was used as a family home untii 1994, when the original owner moved out and converted it to a rental. In 2012, the same owner moved ownership of the property out of his name and into that of an LLC he owns.
California has Prop 13, which for tax purposes places severe limits on the assessed value of real estate (even with the transfer to an LLC). 34 years later, the property is only assessed at around $375,000 for tax purposes, while the house is actually worth a little over $2 Million.
In his will, the owner plans on leaving the LLC rather than the property to a friend. Should his friend sell the property and dissolve the LLC, how will the basis be determined for the house's value?