Drop-Down LLC transaction constitutes value for real estate tax purposes

For years in Ohio, experienced real estate investors have been utilising a tool known by various names, such as a “drop and swap” or an “entity purchase,” to acquire commercial real estate in an effort to maintain a lower real estate tax valuation on the county tax records and, simultaneously, to keep the new sale price of the transaction from the scrutiny of county taxing authorities.

This latter step would often keep taxing authorities from noticing a new transaction at a price that might be two or three times greater than the current tax valuation. Such steps were popular with CRE investors since it helped to keep real estate taxes, which in Ohio can range from about 1.0% to 4.0% of the tax assessed value, artificially low.

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