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Can prop 13 be passed on from parent to child through a short sale or foreclosure?

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November 21 2010 - San Francisco
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Answers (3)

Excellent questions, but a child would not be allowed to purchase a parents home in a short sale.  The lenders require a non-related third party be the buyer.  If the property is truly foreclosed then the "tax value" will be set at the purchase price.  For a more detailed explanation you should see advice from a tax professional.
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November 22 2010
Profile picture for wetdawgs
It is possible that if you have a regular sale to your child (or you ( the child) buy from the parents) that you can maintain the benefit of the Prop 13 assessment.  Here's a link

However, if you do a short sale or foreclosure, there are some issues that are likely to disqualify.   A "child" is not able to purchase a house with a short sale from a parent, as short sales are required to be "arm's length" transactions. I think foreclosures must also be "arm's length".

Please talk with a California accountant. 
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November 21 2010
Profile picture for SoCal Engr

I am not an accountant nor versed in RE law, so you should check with a professional. However, to get you started in a direction...

I am assuming that you are asking if the assessed value of your house can be preserved (i.e., maintained under Prop 13 guidelines and not subject to a re-assessment) in a parent-child transaction.

My experience is that both the assessed value and cost basis are preserved if the house is quit-claimed or inherited parent-to-child. I do not know how this would be accomplished in a short-sale, and it seems counter-intuitive to think this could be accomplished through the foreclosure process.

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November 21 2010
 
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