A Michigan investor owns a rental property in Traverse City. The property's taxable value is $95,000 and the SEV is $145,000. The investor sells the property to his adult daughter, who intends to live there as her primary residence. Under Michigan law, which of the following statements is MOST accurate regarding the taxable value after this transfer?
Correct Answer
A) The taxable value uncaps and resets to $145,000, but the daughter may then apply for a PRE to reduce her school operating tax bill
Under MCL 211.27a, a transfer of ownership — including a sale between family members — triggers uncapping of the taxable value, which resets to the SEV ($145,000). The family member transfer tax exemption (MCL 207.505) applies to the transfer tax, NOT to the Proposal A taxable value uncapping. These are separate legal concepts. After the uncapping, the daughter can file a PRE affidavit with the local assessor (by June 1 or November 1) to exempt her principal residence from up to 18 mills of school operating taxes, reducing her effective tax burden going forward.
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Related Topics & Key Terms
Key Terms:
Related Concepts
The cost approach estimates a property's value by calculating the current cost to rebuild the improvements, subtracting accumulated depreciation, and adding the land value. It is most reliable for new construction and special-purpose properties.
Depreciation is an accounting method of allocating the cost of an asset over its useful life, allowing investors to deduct a portion of the asset's cost each year.
Highest and best use is an appraisal concept that identifies the most profitable, legally permitted, physically possible, and financially feasible use of a property. It is the foundation of all property valuation.
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