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Published July 15, 2026
Not automatically. It stays excluded only if your ownership percentage in the LLC exactly mirrors your prior ownership.
Transferring a rental you own outright into an LLC you fully own is generally excluded from Proposition 13 reassessment under California Revenue and Taxation Code section 62(a)(2), but only if your proportional ownership interest stays identical before and after the transfer. If a spouse, partner, or investor ends up with a different percentage in the LLC than they had in the property directly, that difference can blow the exclusion and trigger a full reassessment to current market value.
California reassesses real property for tax purposes when there is a "change in ownership," a term defined in the Revenue and Taxation Code and interpreted through the Board of Equalization's property tax rules. Simply re-titling a property from your own name into a wholly owned LLC looks, on its face, like a change in ownership, since the legal owner of record changes from you to the entity.
Section 62(a)(2) of the code exists precisely to prevent that kind of purely cosmetic re-titling from triggering a reassessment. It excludes transfers between an individual and a legal entity, or between legal entities, when the transfer results solely in a change in the method of holding title and the proportional ownership interests of the transferors and transferees in the real property remain exactly the same before and after. If you own a Manhattan Beach duplex 100 percent in your own name and you transfer it into an LLC where you hold 100 percent of the membership interest, that is the classic case the exclusion is built for.
The same logic extends to co-owners. If you and a business partner each own 50 percent of a rental property as tenants in common, and you form an LLC together where each of you holds exactly 50 percent of the membership units, the proportional test is satisfied and the transfer into the LLC is excluded from reassessment.
The exclusion is unforgiving about the word "proportional." If ownership shifts even slightly in the transfer, such as one partner contributing the property but receiving a smaller membership stake because a third investor is buying in for cash, or a parent transferring property into an LLC that also names adult children as members with different percentages, the proportional ownership interests are no longer identical. That mismatch can cause the county assessor to treat the transfer as a full change in ownership, reassessing the property to its current market value at the time of transfer, not its prior Prop 13 basis.
The Board of Equalization's Property Tax Rule 462.180 governs how change in ownership applies to legal entities generally and works alongside section 62(a)(2). It also introduces the concept of "original co-owners," the people who held the proportional interests in the entity immediately after an excluded 62(a)(2) transfer. Their LLC interests are tracked going forward. If, cumulatively, more than 50 percent of the original co-owners' interests in the entity are later transferred, sold, or otherwise change hands (through gifts, sales of membership units, adding new members who dilute the originals, and so on), the real property the entity holds becomes subject to reassessment at that point, even though the property itself never moved again. This is sometimes called the "change in control" or cumulative transfer rule, and it can catch owners off guard years after the original LLC formation, when they assumed the reassessment question was long settled.
Before you move a rental property into an LLC for liability protection or estate planning reasons, work out the exact ownership percentages on paper first. The safest structure mirrors your existing ownership exactly: same people, same percentages, nothing added or shifted in the same transaction. After formation, keep a running record of membership transfers, because the 50 percent cumulative threshold in Rule 462.180 is measured over the life of the entity, not reset each year. A form BOE-100-B change in control statement is generally required to be filed with the Board of Equalization when a legal entity acquires control of real property, so this is not something that can quietly go unreported.
If you are weighing an LLC restructure for a South Bay rental and want the ownership math checked before you file anything, we would rather catch a mismatch before escrow than after the county reassessment notice arrives.
This is general information, not legal or tax advice. Confirm the exact ownership structure with a California real estate attorney or tax professional before you file any transfer.
Last verified: July 2026.
Topics: taxes, property tax reassessment, LLC rental property, California Revenue and Taxation Code, Proposition 13
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Schofield Properties is a family run property management company at 323 Richmond St, El Segundo, CA 90245. We have managed the South Bay since 1972 and personally oversee about 186 doors today. Book a call to talk about your property.
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