California Real Estate SalespersonTransfer of PropertyMedium
A homeowner purchased their house in 2010 for $400,000, which became the Prop 13 base year value. In 2023, they sell it for $750,000 to a new buyer. What happens to the property's assessed value for tax purposes as a result of this sale?
- AIt stays the same because Prop 13 protects all future owners equally
- BIt remains at the 2010 base year value adjusted only by the annual 2% cap
- CIt is reassessed to the new purchase price of $750,000, establishing a new base year
- DIt is averaged between the old and new purchase prices
Show answer & explanationAnswer & explanation
Correct answer: C. It is reassessed to the new purchase price of $750,000, establishing a new base year
Under Proposition 13, a change of ownership triggers reassessment to current market value (the new purchase price), which becomes the new base year value for the new owner. Afterward, this new base value can only increase by a maximum of 2% per year, unless further changes in ownership or new construction occur.
Why the other options are wrong
- A. Prop 13 protection is tied to the property's specific base year owner, not transferred to new owners at the old value.
- B. That would only apply if there were no change in ownership; a sale triggers reassessment.
- D. Averaging is not how Prop 13 reassessment works; the new base is set at current market value.
Prop 13 Reassessment on Sale
Under Proposition 13, real property is reassessed to full market value (creating a new base year) whenever a change in ownership occurs.
- Change of ownership triggers reassessment to current market value
- New base year value then increases max 2% annually
- Certain transfers, like parent-child transfers, may be excluded under specific rules
Memory trick: New owner, new number — sale resets the base year value