The FLP has the double benefit of allowing the survivor’s full step up of basis of the underlining partnership assets for income tax purposes after the first death and following the survivor’s death the limited partner interest can still be discounted for estate tax purposes. The Minority Discount of the value of the Limited Partnership interest allows the transferor to effectively make large annual tax free gifts. In the case of real estate, the due on Sale Clause or Acceleration Clause of the underlining promissory note and deed of trust which secures the real estate to be transferred should be reviewed.

Moreover, care should also be taken to avoid triggering reassessment of property taxes under Proposition 13 and the Change In Ownership Rules found in the Revenue and Taxation Code Sections 60 through 69.5 and the Real Property Tax Rules found in 18 Cal. Co. Regs. Section 62 through Section 471. Section 60 of the Revenue and Taxation Code provides that a change in ownership is a transfer of present interest in California real property including the beneficial use thereof, the value of which is substantially equal to the value of the fee interest.

The transferor must file a Preliminary Change of Ownership Form containing sufficient information in order to determine if a change of ownership has actually occurred. There are several rules that should be addressed with respect to funding the FLP with real property with respect to the change in ownership rules. The Interspousal Transfer Exclusion of Revenue and Taxation Code Section 63 provides that transfers between spouses are not to be considered a change in ownership.

It may be that the property should be transferred out of the name of one spouse into the name of both spouses before it is transferred to the FLP. This may be a good idea even though the property is technically community property held in the name of only one spouse.

Revenue and Taxation Code Section 63.1 provides for a Parent Child Exclusion with respect to the transfer of the transferor’s principal residence as well as the transfer of the first million dollar full cash value of all other California real property. There is also a one million dollar exclusion available for grandchildren if their parents who qualify as the children of the grandparents are deceased as of the date of the purchase or transfer and the grandchild has no surviving parents on the date of the transfer of California real property.

Like the Parent Child Exclusion, a claim form must be filed with the County Assessor’s office in order to claim the exemption. Revenue and Taxation Code Section 65.1 provides that a purchase or change in ownership during one assessment year of interests with a cumulative value of less than 5% of the total value of the real property in question does not constitute a reappraisal of the interest if the fair market value of the interest transferred is less than $10,000. This exclusion starts over each assessment period. Under Revenue and Taxation Code Section 62(a) a Change in Ownership does not occur when the proportional interest in the California real property remains identical before and after the transfer to the legal entity. The property owner can accordingly deed a de minimis interest in real property to the legal entity that will be serving as general partner of the FLP as well as to each of the limited partners. Then the legal entity and all of the other tenants in common/ prospective limited partners can then transfer their proportionate interest in the real property to the FLP and avoid reassessment by utilizing the proportionate interest transfer rule.

Section 64(d) of the Revenue and Taxation Code provides that if property is transferred to a legal entity in a transaction excluded from change in ownership under the proportionate interest transfer rule, those transferor owners are considered the original co-owners. Thereafter, if more than 50% “cumulatively” of the total interest held by the original co-owners in the entity are transferred by the original co-owners the property previously excluded from the assessment is then reassessed. Interspousal transfers, transfers into qualified trusts excluded under Section 62(d) of the Revenue and Taxation Code and proportional transfers excluded under 62.82 are not to be cumulated or counted to determine a change in ownership for purposes of transfers of more than 50%.

Copyright (c) 2011 Jeffrey Matsen

Jeffrey R. Matsen of Wealth Strategies Counsel helps people structure their personal and business assets in the best way possible to protect, preserve and transfer them in the most efficient and tax saving manner. For more information go to http://www.WealthStrategiesCounsel.com

There is no doubt that a career in real estate can be very advantageous, as well as exciting. Of course, in order to obtain a career in this field, the first thing that you will need to do is go through the real estate licensing process. This does not need to be difficult, as long as you have a good idea of what it is that you will be facing. Here, we will take a closer look at some of the most important things that you should know when it comes to real estate licensing.

One of the things that you may be wondering about is what type of requirements there are for you to be eligible for real estate licensing. For starters, you need to be of at least eighteen years of age. You also must have graduated from high school, or have obtained a degree of equivalency, such as a GED in order to go through the real estate licensing process. Before you can take the exam that is required for real estate licensing, the first thing that you will need to do is learn more about what other requirements your state has prior to the real estate licensing process.

Most states will require you to take a course, or some form of training before you will be eligible to complete the real estate licensing exam. These types of real estate training courses are often offered by community colleges or real estate schools. You should be able to find one within your local area. It is important to make sure that you learn about all of the state requirements beforehand. Completing them is the first step of the real estate licensing process, as you cannot continue the process without these requirements.

Once you have completed all of the requirements of your state, the next thing that you will need to do is find a test center which offers real estate licensing. The cost of this examination will vary according to where you live, but it is typically around a hundred dollars. Keep in mind that is necessary for you to get your real estate licensing done from the state that you are planning on working in. For example, if you are planning on working as a real estate agent in California, you would not want to get your real estate license in Washington.

In order to prepare yourself for the real estate licensing examination, it is important to make sure that you look over all of the information that you learned in your real estate classes. It will also be very beneficial for you to buy a real estate licensing test kit, which will provide you with a good idea of what types of questions you can expect to see on the real examination.

Keep in mind that if you do not pass your real estate licensing test the first time, it is quite okay. You will be able to take it again, but you will probably need to wait a certain period of time. Once you have actually passed the real estate licensing examination, you will be ready to find a job with a reputable real estate agency to work for. While you may have to spend money, time and hard work to get through the real estate licensing process, you will find that it is well worth it in the end.

Written by Ken Edwards for http://www.bkkcondos.com

Article Source: http://EzineArticles.com/?expert=Rob_Rystrom

Image Credit: pro-studies.com

I recently read this headline and thought is this a true statement? After pondering the question “Why is it smart to buy real estate now” I concluded that in fact this is a true statement. Here are the reasons why.

1. Prices of most homes have dropped significantly and in some areas as much as 75%. What this means is the only direction for prices going forward is up. Will prices of homes drop lower, perhaps, but just like trying to time the stock market, it is difficult to time the real estate market.

Here in California and specifically in Contra Costa County (where I live), prices data shows we hit the bottom in 2008 and have been going up ever since. Inventories in certain price ranges have dropped and we are seeing days on market decreasing to less than three months.

That doesn’t mean that we will see home prices skyrocket to unrealistic levels as we had in the mid 2000’s. But what it does mean, those in the know and are buying homes now.

2. Interest rates are the lowest they will ever be. They can’t and won’t stay in the 4% to 5% range forever and the prediction is that interest rates will start to go up on 2011. Looking back to 2003 thru 2007 interest rates were in the 6.25% range and actually crept close to 7%. At that time, everyone was excited because just a few years prior to this time period interest rates were up to 8.5%. So when the rates dropped under 7%, it caused a big stir in the market. So rates in the 4% range are unprecedented and should be taken advantage of right now.

Real Estate is an asset and a valuable one which savvy investors understand. There are investors in our area in California that are buying blocks of homes. It was unheard of to find homes in the $200K range, but there were plenty to go around over the past year to year and a half. These investors may rent them now, but look to reap the fortunes in the future – and probably not the too distant future – when prices go back up.

This is also a fantastic opportunity for the first time home buyer. You can get so much more home for your money and in areas that may have been out of reach for many.

If you are on the fence waiting for the right time, this may be the right time.

Linda Urbick – real estate professional serving clients in the purchase and sale of homes in the Contra Costa County area of California. For information on the market or real estate in general, visit my web site lindaurbick.com and send me an email.