the fact that he obtained his interest in the property by a conveyance that resulted in the
uncapping of the taxable value. John and Michael became “initial joint tenant” when
the “initial” joint tenancy was created in 2005. Since John was an “original owner”
whose ownership interest has continued in the “successor” joint tenancy that added
Peter, and since both John and Michael were “initial joint tenants” whose interests as
co-tenants was continuous from the time of the “initial” joint tenancy, the taxable value
did not uncap when Peter was added.
Example # 5: Life Estate
John and Mary purchased Blackacre, as tenants by the entireties, in 2004. In 2005 John
and Mary conveyed to themselves and Michael, using language which indicated that “all
three (held title) as joint tenants.” However, in addition to creating the joint tenancy
among the three of them, John and Mary also reserved a life estate for their joint lives.
In 2006, both John and Mary died. Did the taxable value uncap in 2007?
Yes, there was a transfer of ownership. Although John and Mary were “original
owners” in Blackacre, arising from the fact that the taxable value uncapped in 2005, the
year following their purchase, no “present” joint tenancy was created by the 2005
conveyance. Instead, the instrument, by reservation, created a Life Estate during their
joint lives, with a remainder interest, in joint tenancy, among John, Mary and Michael.
MCL 211.27a(7)(c) provides an exception to uncapping for a conveyance of property
subject to a retained Life Estate “until the expiration or termination of the life estate…”
Therefore, it is the State Tax Commission’s interpretation that a separate and distinct
uncapping event, the expiration or termination of a retained life estate, occurred prior
to the joint tenancy becoming a present interest and that this uncapping event took
precedence over the exception to uncapping contained in MCL 211.27a(7)(i). MCL
211.27a(6) provides that a “transfer of ownership means the conveyance of title to or a
present interest in property, including the beneficial use of the property, the value of
which is substantially equal to the value of the fee interest.” In this example, by the
time the remainder interest becomes a present interest, Michael was the sole owner of the
property, not an “initial joint tenant.” It should also be noted that upon the death of
John and Mary, Michael becomes an “original owner.”
Example # 6: Partial Interest
John, who was a single man at all relevant times, purchased Blackacre in 2004. In 2005,
by quit claim deed, John conveyed to himself and his son, Michael, as joint tenants,
with rights of survivorship. Several weeks later, but still in 2005, John died, leaving
Michael as the sole surviving co-tenant. Michael immediately conveyed a 1% interest
in the property to his daughter, Roberta, as a tenant in common. At the time, Roberta
was a Michigan resident who resided on the property, and the conveyance was made
for the purpose of allowing her to claim the Principal Residence Exemption. In 2007,
Michael and Roberta conveyed to themselves, as joint tenants, with rights of survivorship.
Did the taxable value uncap in 2008?
Yes, there was a transfer of ownership as to an undivided 99% interest in the property.