Proposition 60 provides for real property tax relief for homeowners 55 years of age or older. This is a one-time benefit that allows qualifying persons to carry over lower real property taxes on the home that they sell into a new home that they purchase. The new home must be purchased within two years of the sale of the old home and must involve trading even or trading down. For the purpose of the trade-even or trade- down rule, the only consideration is the selling price of the old home and the purchase price of the new home. In recognition of inflation of property values, the taxpayer is allowed to trade up 5% during the first year after the sale and 10 during the second year. The new home can be purchased before the old home is sold as long as the old home is sold within two years of the purchase of the new home.
Taxpayers who trade up sometimes try to “fudge” to make the transaction look like a trade-even or trade-down. If the new home purchase includes furniture or other personal property it is perfectly legitimate to exclude these personal property items in determining the purchase price of the real property and improvements. For example, if the old home is sold for $500,000 and the new home is purchased completely furnished for $550,000 and there really is $50,000 worth of furniture there is no problem however the personal property portion of the transaction should be separately documented.
Artificially trading even or down by ascribing an unreasonable amount to personal property or having the buyer pay the real estate commissions is improper. Commissions, no matter who pays them, are part of the consideration for the property and thus part of the purchase price for the purposes of Proposition 60.
Proposition 60 applies to sales and purchases within the same county. Proposition 90 applies to situations where the replacement property is in a different county than the county where the property sold is located but only applies to counties that have adopted an ordinance opting into Proposition 90. As of November 7, 2018, the following ten counties in California have an ordinance enabling the inter-county tax base transfer:
Alameda - Los Angeles-Orange-Riverside-San Bernardino
San Diego-San Mateo-Santa Clara-Tuolumne-Ventura