Did a nominal end-of-term purchase option make a relocatable-classroom contract a sale from inception if the customer could terminate early and return the property?

Plain-English summary

Live Annotation 330.2380 supplies a historical baseline absent from the PDF: when customer was bound for the fixed term, an end option no greater than the lesser of $100 or 1% of total contract price was nominal and prevented true-lease treatment.

The June 5 Putnam addendum adds an exception to an unreproduced May 28 letter. If lessee had contractual right to terminate before term expiration, relinquish possession and avoid purchasing, a nominal end option did not make transaction a sale at inception.

No contract, price, term, termination clause or option appears, so the source establishes the stated legal treatment without showing whether a particular agreement satisfied it. Neither the PDF nor live annotation cites a numbered statute, regulation or case.

Common questions

What historical option threshold did the annotation state?

The lesser of $100 or 1 percent of total contract price for a customer bound through the fixed term.

Did that threshold automatically control every contract?

No. A genuine right to terminate early and surrender the classroom preserved lease treatment.

Did the lessee have to buy after early termination?

No under the addendum's stated condition.

Does the supporting PDF contain the threshold analysis?

No. It expressly adds the termination point to the earlier May 28 letter; the threshold appears on the official annotation page.

Does the source reproduce the contract?

No. It supplies no party, rent, term, termination wording, option amount or total contract price, so no actual threshold calculation can be checked.

Does the result depend only on a low option price?

No. The addendum says the contractual early-exit, surrender and no-purchase rights could preserve a true lease even though the scheduled option was nominal.

May another classroom lessor rely on it?

No. It is historical staff guidance built from an incomplete source set; current law and the complete agreement must control.

Citations and references

• May 28, 1968 letter — supplemented but absent; live annotation supplies its threshold
• June 5, 1968 Putnam addendum — early-exit/surrender/no-purchase exception
• Relocatable-classroom contract and pricing — absent
• Official Annotation 330.2380 — combines both dates and the $100/1% threshold
• No numbered statute, regulation or case appears in either visible source

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 330.2380
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/330-2380.pdf

Original ruling text

330.2380

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

June 5, 1968

Gentlemen:
I believe it is advisable to add to my letter of May 28, 1968 a point which we have not previously discussed. We would regard a transaction involving a relocatable classroom as a true lease if the lessee has the contractual right to terminate the arrangement and relinquish possession before the expiration of the specified term even though the contract may designate a nominal option price at which the lessee could acquire title at the end of the specified term. In other words, we would not regard a transaction as a sale at the inception if the lessee can terminate the arrangement at anytime without purchasing the property. Very truly yours,

T. P. Putnam
Tax Counsel

TPP:kc

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