Driven by a 66 percent increase in commercial transactions (from 90 to 149 sales valued at $5 million or more), and Proposition N which created a new tax bracket for properties transacting for $5 million or more (which resulted in an additional $14 million in revenue alone), San Francisco collected $135 million in transfer tax revenue in fiscal year 2010/2011, exceeding budget forecasts by $64 million and up 39 percent year-over-year.
∙ The Day After: November 2 Real Estate Related Election Results [SocketSite]
That’s all great for the our fair city, but there should have been a provision in here that if you’re selling for a loss over $5 million this shouldn’t apply.
I was in a situation where my business partner was hit hard by the recession — we were forced to sell a $5 million plus property at a loss. That extra transfer tax seemed excessive given the situation.
The rule was created when everything was rosy — it doesn’t make much sense when values are going the other way.
I don’t quite remember things being so rosy when this was passed…wasn’t it 2009?
You may be right — I thought it was first proposed earlier. Anyway, my point being that most times these things are proposed and passed, no one really things through ALL the consequences.
If you want the best example of this, look at the ORIGINAL purpose of rent control in SF vs. what it has evolved into and the far-reaching impact it has on many, many elements of life in this city.
Prop 13 — same thing…
” rent control in SF ”
” Prop 13 ”
Oooh look that third rail is so shiny (reaches hand out…)
Well, it’s a transfer tax, not an income tax. You pay the same whether you lost $10 million, made $10 million, or broke even on your investment.
The concept of a property “transfer tax” makes no sense to me, but if you’re going to have such a tax then it would only invite gaming and clever deal structuring if you carved out exceptions.
Seems like it would invite gaming anyway. For example, suppose there’s a “101 California Inc.” which owns the building. If some shares in the company are sold, does the transfer tax apply? Seems unlikely. If the rest are then sold? The building’s still owned by the same company.
Does the government simply decide that it’s too obviously a ploy? Who keeps track of it? Seems like it would be pretty easy to get away with.