The economic crisis may be bad news for most of us, but some folks are laughing all the way to the bank.

It’s a big week for Oracle chief Larry Ellison — an assessment of his 23-acre Woodsite estate dropped its net value from $173 million to $69.7 million.

Halving your property devalued by half would stop most people in their tracks, but it actually comes as a relief to Ellison: He’ll enjoy a 60% tax cut because of the adjustment.

Ellison’s Octopus Holdings LP fought against San Mateo County’s original assessment of the Japanese imperial-themed estate from the beginning. The county found the exotic features of his 16th century-inspired estate would result in such a grand price tag.

But his lawyers argued that the assessment should be based on what it’d cost to replace the property with one of equivalent value. Why would they do that? Because his estate is detailed in such a particular manner, it actually has “limited market appeal,” and it should therefore be assessed at a much lower price.

The county assessor eventually agreed, and Ellison will be due his $3 million refund.

That same tax refund will deprive the Sequoia Union High School District of $62,000 in revenue, while the Portola Valley School District will face losses of $250,000 to $300,000. That’s all on top of a $1 million shortfall for 2008, along with zero property growth and an enrollment boost in the elementary school from 714 to 750.

Such a refund won’t completely cripple the school system, at least, not at first. Ellison’s tax break will likely cause a “share the pain” repayment method that’ll spread the impact out over a much larger base.

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Tags: Mortgage crisis, Real estate, Tax break, tax rebate