Propositions 60 and 90
Propositions 60 and 90 offer property tax relief for
senior citizens (55 or older) who sell their principal
residence and purchase a replacement home of equal or
lesser value within the same eligible county or between
eligible counties. The eligible counties in California
are Alameda, Kern, Los Angeles, Orange, Modoc, San Diego,
San Mateo and Santa Clara. Basically, the current assessment
is transferred to the next property without a new assessment
being used.
This benefit can be used only once in a lifetime, however,
persons who have used the benefit upon reaching age
55 may use it again if they later become severely and
permanently disabled. The original dwelling must be
a principal residence occupied by the owner either at
time of sale, or within 2 years of purchase or construction
of replacement dwelling. In addition, the replacement
dwelling must be purchased within 2 years of the sale
of the original property and it must be purchased at
fair market value. It is always wise to consult a qualified
attorney or tax advisor before starting a transaction.
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1031 Exchange
Tax Deferred Exchange (Section 1031)
A property owner wanting to defer (postpone) any current
tax when selling a non owner occupied property would
need to trade for a property with an equal, or larger
equity than the present one, or at least for one with
equal value. An exchange of eligible real properties
allows deferring income tax on a potential gain.
A capital gain tax is currently avoided unless an owner
has a gain in his present property AND receives boot.
Boot consists of cash, personal property, a note, or
the difference of taking over a smaller loan versus
a larger existing one. Eligible property (like kind
property) means any combination of investment property
(including vacant land), income producing property,
or business property.
It is important to see your accountant before participating
in any deferred exchange transactions
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