Rev. Rul. 68-84
Rev. Rul. 68-84; 1968-1 C.B. 71
- Code Sections
- LanguageEnglish
- Tax Analysts Electronic Citationnot available
Distinguished by Rev. Rul. 73-600
Advice has been requested whether a lessee of real property in California, or his successor in interest, is entitled to deduct under section 164(a) of the Internal Revenue Code of 1954, real estate taxes imposed upon him by section 610 of the Revenue and Taxation Code of California.
The taxpayer owns a residence in California on land leased for a period of seventy-five years. Under the terms of the lease, the taxpayer as lessee is to pay all taxes and assessments levied upon or assessed against the leased land and the improvements thereon. The lease also requires the lessee to protect and hold harmless the lessor and the leased land and the improvements thereon from any or all taxes and assessments. The taxpayer's name appears as an assessee on the county assessment roll, and the taxes are assessed to him.
Section 405 of the Revenue and Taxation Code of California requires the assessor to annually assess all the taxable property in his county, except State assessed property, to the persons owning, claiming, possessing, or controlling it.
Section 610 of the Revenue and Taxation Code of California provides that land once described on the roll need not be described a second time, but any person, claiming and desiring to be assessed for it, may have his name inserted with that of the assessee. If a person desiring to be assessed for a parcel of land has claimed the parcel of land in the property statement filed pursuant to section 441 of the Revenue and Taxation Code of California, he has an absolute right to have the parcel assessed to him. 33 Opinions of the Attorney General of California No. 59/70 (May 29, 1959).
Section 164(a) of the Internal Revenue Code of 1954 provides, with exceptions not here material, that there shall be allowed as a deduction state and local real property taxes paid or accrued within the taxable year.
Section 1.164-1 of the Income Tax Regulations provides that, in general, taxes are deductible only by the person upon whom they are imposed.
As a result of having his name inserted with that of the assessee pursuant to section 610 of the Revenue and Taxation Code of California, the lessee is obligated to pay the real estate taxes directly to the taxing authority when he is personally assessed. The lessee is not paying the real estate taxes for or on behalf of the lessor since the state is now assessing him directly; nor is he assuming liability for taxes which had been assessed or accrued against the land prior to the commencement of the lease. Any private arrangement between the lessee and the lessor for the payment of the real estate taxes is not relevant except as it affords the lessee a reason to request that his name be placed on the assessment roll. Such private arrangement, under the circumstances, is not relevant for the purpose of ascertaining upon whom such taxes have been imposed within the meaning of section 1.64-1 of the regulations. The significant feature in the instant case is the presence of section 610 of the Revenue and Taxation Code of California which permits the incidence of the tax to rest upon any person claiming and desiring to be assessed for it.
Accordingly, under the circumstances of this case, the lessee will be allowed to deduct these taxes under section 164(a) of the Internal Revenue Code of 1954, subject to the provisions of section 164(d) of in Code (relating of the apportionment of real property taxes between a seller and a purchaser) if applicable.
- Code Sections
- LanguageEnglish
- Tax Analysts Electronic Citationnot available