CA Property Tax Question - Change of Control of Entity

California has 3 questions on the front page of all entity tax returns for the purpose of identifying a change of control of an entity that owns real estate. The purpose, of course, is to trigger a reassessment of property tax on the property.

I have a question here for somebody that knows something about CA property tax reassessments and exclusions.

C-Corporation owns real estate. The stock of the corp is held in husband & wife's revocable living trust, but is the separate property of the husband. Husband passes away and all the stock transfers to a bypass trust for the benefit of the wife.

Is this a change of control?

Is the real estate held by the corp subject to reassessment?

I believe any transfer between spouses is exempt from reassessment under Sec 63 & Rule 462.220 because it is not a "change in ownership." The rule is broad, with sections addressing entities and trusts.

But that just addresses re-assessment - I don't know the correct response to the "change of control" question.

An attorney is telling me that the spousal transfer exemption only work when there is direct ownership of real estate.

However, when there is indirect ownership, such as above, then there is no such exclusion from reassessment. You can't look through the entity to the relationship of the parties involved. If the control of the company changes (>50%) and the company owns real estate, then there will be a reassessment.

I have not confirmed this, but I tend to trust this attorney's knowledge in this area.