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926 North Ardmore v. County of L.A.

Filed 6/29/17 IN THE SUPREME COURT OF CALIFORNIA 926 NORTH ARDMORE AVENUE, LLC, ) ) Plaintiff and Appellant, ) ) S222329 v. ) ) Ct.App. 2/7 B248356 COUNTY OF LOS ANGELES, ) ) Los Angeles County Defendant and Respondent. ) Super. Ct. No. BC476670 ____________________________________) Here we consider whether the County of Los Angeles can impose a documentary transfer tax on a written instrument that transfers beneficial ownership of real property from one person to two others. We hold that the tax may be imposed if the document reflects a sale: that is, an actual transfer of legal beneficial ownership made for consideration. I. FACTS AND PROCEDURE A. Transactions Involving the Building This case arises from a series of transactions among trusts maintained for the benefit of Averbook family members. Beryl and Gloria Averbook owned an apartment building at 926 North Ardmore Avenue in Los Angeles (the Building). In 1972, they established a family trust and transferred the Building into it. Beryl died in 2007. After his death, the family trust‘s assets, including the Building, were transferred to an administrative trust maintained for Gloria‘s benefit. Bruce and Allen Averbook, Gloria‘s sons, were named successor trustees. SEE DISSENTING OPINION In their roles as successor trustees, Bruce and Allen formed two entities: 926 North Ardmore Avenue, LLC (LLC), a single-member limited liability company established to acquire and hold the Building; and BA Realty, LLLP (BA Realty), a partnership. The administrative trust was the sole member of LLC. It also held a 99 percent partnership interest in BA Realty.1 Between August and December 2008, the administrative trust engaged in the following transactions. First, it conveyed the Building by grant deed to LLC. Second, it transferred its membership interest in LLC to BA Realty. Third, it divided its 99 percent interest in BA Realty and distributed it to four subtrusts also maintained for Gloria‘s benefit. The survivor‘s trust received 64.66 percent; the nonexempt marital trust 23.86 percent; the exempt marital trust 0.67 percent; and the bypass trust 9.81 percent. The net result of these transactions did not alter one central reality. When Beryl and Gloria transferred the Building from themselves personally into the family trust, they retained a beneficial interest. The trust became the legal owner, but it was obligated to hold and manage the Building for their benefit. After Beryl‘s death, Gloria held the sole beneficial interest. The subsequent transactions described in the preceding paragraph moved the Building‘s legal ownership among the various entities. But Gloria‘s beneficial interest remained unchanged. In January 2009, a different kind of transaction triggered imposition of the documentary transfer tax. The survivor‘s trust, the nonexempt marital trust, and the marital trust transferred all of their interests in BA Realty to two trusts maintained for Allen and Bruce. Allen and Bruce were each the sole beneficiary 1 BA Realty‘s general partner, BA Realty Management, LLC (BARM), held the other 1 percent partnership interest in BA Realty. BARM, in turn, was wholly owned by the administrative trust. 2 of their …
Original document
Source: California Supreme Court