The custom and standard in
commercial real estate in California is to have the deed state something like:
"In accordance with Section 111932 of the California Revenue and Taxation
Code, Grantor has declared the amount of the transfer tax which is due, DTT not
of public record." This makes it so that the purchase price cannot
be computed from the amount of the transfer tax paid. The formula for
transfer tax in California is: $.55 per $500 of purchase price. The
purchase price is rounded to the nearest $500, then divided by $500, then multiplied
by $.55 to compute the tax amount. When the parties desire NOT to have
this purchase price made public, they include the "non-public"
election mentioned above. Starting January 1, 2015, this option is no
longer available meaning that all deeds will show the transfer tax and the
public will be able to compute the purchase price based upon the above formula.
This is still not a "mindless" computation, however, in that
the tax is on the "new value". If the "purchase
price" is $1,000,000 but is taken subject to a $1,000,000 existing first
loan, then the "value" of that property would be $2,000,000 even
though the tax would be computed on $1,000,000. See:
Some counties and cities impose
additional transfer taxes, not all of which provide a reduction for the “continuing
liens,” so further care is warranted.
See also California Real Property journal, Vol. 23, No. 2, A Practical
Guide to Transfer Taxes in California by Dena Cruz and Scott Rogers which is a
detailed analysis of the transfer tax issue.
It was published in 2005, so check the current statutes before relying
on it.
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Required Disclaimer: This is Attorney Advertising. This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. An attorney licensed to practice in the jurisdiction where the matter occurs must interpret the facts of any specific case and advise as to whether and how any of these concepts may apply to a particular case.
