The state Board of Equalization voted unanimously last month to settle a long-running dispute between the Franchise Tax Board and actor Rob Lowe over taxes on the sale of his Montecito home in 2005.
Late Wednesday, the board voted 3-2 to rescind the action and reopen the Lowe case because of confusion among board members over the exact amount of taxable gain that Lowe and his wife, Sheryl Berkoff, realized from the $25 million sale.
“We had some confusion,” Republican member George Runner said. He, fellow Republican Diane Harkey and Democrat Fiona Ma voted to rescind the November action, opposed by the board’s chairman, Democrat Jerome Horton, and Yvette Stowers, Controller Betty Yee’s surrogate on the board.
The confusion is over whether Lowe should be given credit for $1.3 million in interest he paid while he owned the home.
Harkey, who made the motion that passed in November, said, “There were a lot of numbers flying around.”
The board debated whether to completely reopen the case and conduct another hearing on the issue, or merely take another vote. Ultimately, it was decided, by another 3-2 vote, to just vote on the issue again in February and then allow Lowe, if he wishes, to petition for a rehearing to fully reopen the matter.
The Franchise Tax Board wanted to make Lowe and Berkoff pay taxes on $18 million in capital gains, while they said they should be given credit for extensive remodeling, for which many records were missing.
The couple appealed the FTB ruling to the Board of Equalization and he appeared before the board in August. “I take this very seriously,” the actor said. “I've been paying my taxes in this state since I was 15 years old ... and it's a privilege,” adding that he was seeking “common sense and fairness and expediting.”
November’s action seemingly reduced the taxable gain to about $13 million, $2 million more than Lowe sought but $5 million less than the FTB’s figure. If the $1.3 million in interest is disallowed, it could have a tax effect of more than $100,000.
“I just get real nervous of how it could go wrong,” Harkey said at one point. Given what’s happened, it may not be an unrealistic fear.