The Law

Transfer=Tax Trouble by Ron Davis Confusion over the “transfer” of a San Antonio, TX, area shopping center from one investor to another has prevented a legal appeal of a tax assessment of the property. The shopping center is now controlled by an individual who operates the property as the sole shareholder of a limited partnership. He is also the sole officer and sole shareholder of a general partnership that, in turn, controls the limited partnership. The confusion resulted when his limited partnership protested the property’s local tax assessment for 2005. The property had merely been “transferred” to his control. But he appeared at a subsequent hearing before an appraisal review board and swore that he is the authorized agent for the property. The board had identified the title holder of the shopping center as the property’s owner, not the transferee. But board members did not try to identify the correct owner by name. They did, however, determine that the property had been accurately valued for tax purposes. That settled the matter for 2005. But the tax-assessment problem arose again the following year. The individual controlling the limited partnership again protested the assessment of the shopping center. In so protesting, however, he again used the name of the transferor of the property—though he did include his name, too. The board rejected that protest and identified the transferor of the property as the current owner. The board then found that the tax assessment was correct. Dissatisfied with the board’s finding, the limited partnership’s owner sued. But in doing so, he sued in his name. In response, the appraisal review board argued that he is not the owner of the property at issue and thus has no standing to sue. Board members added that the actual owner of the property in question did not protest the appraisal before the board. So, they added, the matter is therefore resolved. Not so, contended the limited partnership’s owner. He maintained that the shopping center operator of record is the partnership that he controls, making him a “virtual” property owner. A Texas court rejected the argument of the limited partnership’s owner. In so ruling, the judge pointed out that in order to sue or obtain relief from an appraisal review board’s decision, a person must be the owner of the property in dispute. And, the judge stated, the owner is not the limited partnership that operates the shopping center. On appeal, a Texas appellate court agreed with the lower court, adding, “No one has cited any authority for the proposition that a ‘virtual’ property owner automatically qualifies as the property owner and is thereby permitted to avoid strict compliance with the Tax Code.” (Ray v. Bexar Appraisal District, 2009 WL 700869 [Tex.App.—San Antonio]) Decision: March 2009 Published: March 2009