patrick.net

Most assessors will only use arms-length transactions when appraising a home. So, clearly this one wouldn't qualify.

If their home really has gone down in value this much, then it should be possible to find comps that will support the new value. That's all you need to reduce your property taxes.

Interesting...Property values have not gone down to this level in the Ladera subdivision of Portola Valley as they are part of the Las Lomitas school district in Menlo Park, which is very good.

At any rate, it may be beneficial as a buyer as there is now a new comp for a 5 bedroom home in the community which sold for $1M and could possibly help bring other prices in the area down to a reasonable level.

I'm sure the agents hate seeing this like this as it blows their protected bubble prices!

If they have capital gains from other sources, such as stocks, and they bought at the peak, then this capital gains loss would be additionally very valuable.

Um maybe it was a divore settlement.
She gets to keep the house, but she had to pay him 100K, it was in his name, but filed a for a new title after the divorce. Saw a lot of those in the last three years.

I guess that's what living for 6 mos. on the Peninsula will do to you!

It was a $500K drop from June to December, as they were new owners in June. All the other houses in this subdivision have sold for over $1.3M, so to see a house of this size having sold for much less is curious.

"At any rate, it may be beneficial as a buyer as there is now a new comp for a 5 bedroom home in the community which sold for $1M and could possibly help bring other prices in the area down to a reasonable level."

The sale is not an arms length transaction and can't be used as a legimate comp.

In my opinion Zillow information is nearly useless. Case in point:

While I'm not really a deed expert a glance at the actual County records shows that in December it was a sister granting another sister (assuming from names) a "4/7 interest" in the property. In June there was another grant deed but no mortgage and no sales record at the County.

Further, it is NOT assessed at $1 mil, it is still assessed at $1,493,000 but with a supplemental at $1,346,170. (Probably what it was reduced to as a re-assessment due to value drop).

The tax bill on this property includes two records, one at $14,642.28 plus a second at $2,742.94. These are in two names, two women with the same last name.

In any event you can petition for lowering property tax based on value decrease. And as I understand it Prop 13 does not tie the tax basis to the "sales price" (in this case I think you are proposing a "fake" price to artificially lower the tax basis), but to something like the 'value at time of sale'. These are not one in the same amount, necessarily.

So basically your assumptions on this property appear incorrect and I suspect what you are proposing probably just doesn't work anyway. What people DO successfully do in California is buy and hold for decades and never sell, just grant to their heirs and thereby avoid tax at the going valuations, due to Prop 13. So you can't generally lower your tax through a sale (albeit it may go down with the actual market valuation/assessment at time of sale), but you can keep it low by never selling.

this capital gains loss would be additionally very valuable.
The implied put that comes with a non-recourse mortgage in California is very valuable. You may want to check with your tax adviser as to the value of a capital loss on a home sale. I think you'll find that it is zero dollars. IANAA.

Most interesting regarding transactions for that zip...per Redfin

http://www.redfin.com/CA/Menlo-Park/170-Gabarda-Way-94028/home/1480051

Why don’t more people do this to reduce property taxes if it is legal??

No! Not possible and any action to cheat the IRS would land you in some serious hot water!

Ptipking222 says

If they have capital gains from other sources, such as stocks, and they bought at the peak, then this capital gains loss would be additionally very valuable.

A "capital loss" as you call it cannot be written off on sale of a your home, nor netted in any way to gains.
Gains on the sale of home are taxable, but losses are not deductable.