926 North Ardmore Avenue LLC v. County of Los Angeles

Facts: An owner transfers their rental property into a trust benefitting them and names a successor trustee. The successor trustee forms a limited liability company (LLC) of which the trust is the only member, and a limited liability limited partnership (LLLP) which is primarily owned by the LLC. The trust conveys the property to the LLC. The LLC transfers its interests in the LLLP to a trust benefitting the successor trustee. The successor trustee pays a documentary transfer tax imposed by the county on the transfer of the property.

Claim: The successor trustee seeks a refund of the documentary transfer tax payment from the county, claiming it cannot impose the tax since no real estate interest changed hands.

Counterclaim: The county seeks to retain the successor trustee’s documentary transfer tax payment, claiming the transfer of the interests in the LLLP from the LLC to the successor trustee’s trust warrants imposing a documentary transfer tax since it constitutes a change in ownership.

Holding: The California Supreme Court holds the county may keep the transfer documentary tax payment since the final transaction between the LLC and the successor trustee’s trust involved the original owner transferring more than half of their interest to the trust, allowing its property to be treated as though it were transferred. [926 North Ardmore Avenue, LLC v. County of Los Angeles (June 29, 2017)_C5d_]

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