Tax question

[NotEasy]

Taxpayer owned 15% of a property and her parents owned 85% (tenant in common). Now her parents have passed away. The property was first transferred into a trust and now their lawyer is going to quit claim the property from the trust to the taxpayer.

(1) Is there any tax effect of such transfer?

(2) I think the property tax will probably be reassessed because of the transfer. Since the taxpayer owned 15% of the property already, technically only 85% is transferred (quit claimed) to her. So will only 85% of the property tax be reassessed, or 100%?

[appelman]

Basis upgrade

The only consequence I see to the taxpayer would be a basis upgrade/downgrade on the 85% to the FMV at date of death. Your conclusion about the real estate tax seems reasonable, since only 85% is part of the estate. What state are we talking about?

[NotEasy]

The only consequence I see to the taxpayer would be a basis upgrade/downgrade on the 85% to the FMV at date of death. Your conclusion about the real estate tax seems reasonable, since only 85% is part of the estate. What state are we talking about?

The state is California.

As for the basis, I thought the taxpayer lost the step up basis because the property was held as "tenancy in common". Is it incorrect?

[appelman]

I believe that your understanding is incorrect...

I can't quickly locate a primary source, but a number of secondary sources seem to agree. For example:

http://www.ca-trusts.com/tenancyincommon.html

[NotEasy]

I can't quickly locate a primary source, but a number of secondary sources seem to agree. For example:

http://www.ca-trusts.com/tenancyincommon.html

Thank you appleman.