Laws, Regulations & Annotations

C

220.0000 CHANGE IN OWNERSHIP

Annotation 220.0647

220.0647 Security Interest Transfers. The Civil Code provides that there is a rebuttable presumption that a conveyance is what it is purported to be, a transfer of property. The person contending that a conveyance is only for financing purposes has the burden of proving that contention.

Proof that a transfer was of a security interest only would include facts such as:

The transferor received a "purchase price" reflecting his book value rather than current market value; the amount of rent charged the transferor for the use of the "transferred" property was less than market rent; and the transferor retained all tax benefits, rights to proceeds from insurance, and all of the burdens of ownership, including the cost of maintenance and operating costs.

The transferee had to retransfer the property to the transferor upon payment of the "purchase price" and could not gain or lose money from its "ownership" of the property, and it was without other assets or sources of income.

As provided in Property Tax rule 462(k)(4), a written ruling by the Franchise Tax Board or Internal Revenue Service that a transfer was considered a financing transaction for income tax purposes would create a presumption that a transaction was a nonreappraisable sale and lease back. C 7/29/1987.