Was a corporation's immediate resale of newly purchased business property an exempt occasional sale?

Plain-English summary

A corporation acquired property on December 3, 1962 and immediately resold it to B--- Division on the same date. The letter said the first sale did not occur before December 3 and found that the intermediary did not hold or use the property in an activity requiring a seller's permit between acquisition and resale.

The corporation's resale therefore qualified as an occasional sale under section 6006.5(a). Associate Tax Counsel proposed recommending cancellation of the determination, assumed the taxpayer no longer wanted its requested Board hearing, and said the matter would go to the nonappearance calendar.

A final note says the March 19 Santa Ana hearing produced an approved September 23, 1964 hearing-officer report, with two copies attached. The published PDF does not reproduce that report or any official notice or Board action.

The live annotation adds that the sale to the intermediary was taxable, took place at escrow close, and involved no physical possession by the intermediary because the first seller held the property for it between a specified date and closing. Those facts do not appear in the supporting letter or an included transaction record, so this page identifies them as annotation-only facts.

Petition posture, simultaneous transactions, and source limits

Associate Tax Counsel Jack D. Paulson wrote on September 30, 1964 to attorney C. H. L--- for A--- I---, Inc. Staff had “again reviewed” the client's petition for redetermination using previously submitted information and arguments in an August 27 letter. The petition, information, and attorney letter are absent.

Staff believed it had been established that P---–B--- E--- did not sell the property to A--- I--- before December 3, 1962. A--- I--- immediately resold it to B--- Division on that same date. Because A--- I--- did not hold or use the property in an activity requiring a seller's permit, its outgoing sale qualified as occasional under section 6006.5(a).

The supporting PDF does not itself say the incoming sale was taxable, identify escrow, state when title passed, or discuss physical possession or the first seller's holding of the property. Those points appear on the live annotation, which says the first taxable sale occurred at escrow close, A--- I--- did not take physical possession, and the first seller held the property for it from a specified date to closing. No agreement, escrow, title, possession, agency, or tax record is included to explain or verify those added details beyond the official annotation.

Paulson proposed recommending that the Board cancel the determination. Because the recommendation favored the taxpayer, he assumed the previously requested Board hearing was no longer desired and said the matter would be scheduled for the Board's nonappearance calendar, followed by official notice. The source provides no withdrawal or waiver of the hearing request.

The letter's final note says two copies of an approved September 23 hearing-officer report were attached and that the hearing occurred in Santa Ana on March 19. The PDF does not reproduce the report. It also omits the petition, prior information, August 27 letter, hearing request, hearing record, business and property identity, transaction agreements, escrow instructions and close, first-seller holding arrangement, title and possession evidence, prices, buyer and division relationship, permit records, invoices, tax return, audit, determination and amount, Board calendar, order, official notice, payment, refund, appeal, or later outcome. It does not establish that the Board canceled the determination.

The live annotation preserves the purchase and simultaneous resale, no-physical-possession arrangement, lack of other permit-requiring business, and occasional-sale conclusion. It adds the first-sale tax and escrow facts described above but omits the petitioner and attorney, redetermination posture, prior submissions and August 27 letter, P---–B--- E--- and B--- Division, section 6006.5(a), proposed cancellation, hearing assumption, nonappearance calendar, March 19 hearing, September 23 approved report and missing copies, absent official notice, missing records, and final-outcome gap.

What this means for you

Businesses making immediate resales

Under this letter, the absence of intervening holding or use in a permit-requiring activity was decisive to the intermediary's occasional-sale treatment. The live annotation also relies on the escrow and possession structure.

Accountants and tax professionals

Document the purchase date, resale date, escrow close, title, possession, any seller-held arrangement, asset use, permit status, and the intermediary's other business activities.

Common questions

Q: Did the corporation hold or use the property in a permit-requiring activity?

A: No, according to the letter.

Q: When did the purchase and resale occur?

A: Both occurred on December 3, 1962, under facts counsel said had been established.

Q: What result did counsel propose?

A: Cancellation of the determination, followed by nonappearance-calendar action and official notice.

Q: Does the source letter explain the separate hearing report?

A: No. It only says the September 23 report was attached and approved.

Q: Was the first sale taxable?

A: The live annotation says yes. The supporting letter does not state that conclusion or provide the tax record.

Q: Did the intermediary physically possess the property?

A: The live annotation says no and says the first seller held it for the intermediary until escrow closed. The supporting PDF omits those facts.

Q: Did the Board cancel the determination?

A: The source shows only counsel's proposed recommendation and promised official notice. No Board action or outcome is included.

Citations and references

• California Revenue and Taxation Code § 6006.5(a)
• August 27, 1964 attorney letter and earlier submitted information — identified but not included
• March 19, 1964 Santa Ana hearing and approved September 23, 1964 hearing-officer report — identified; report and hearing record not included
• Live Annotation 395.1220's taxable-first-sale, escrow-close, no-physical-possession, and first-seller-holding facts — not stated in the supporting PDF
• Petition, hearing request, business, property, transaction, escrow, title, possession, holding, permit, invoice, tax, audit, determination, Board-action, notice, and outcome records — described or implicated but not included

Verbatim support

From the official September 30, 1964 Jack D. Paulson letter:

Since the property was immediately resold to B--- Division on the same date, we do not believe it was held or used in an activity requiring the holding of a seller’s permit by A--- I---, Inc.

Accordingly, the sale by A--- I---, Inc., is an occasional sale as defined in § 6006.5(a). We propose to recommend to the board that the determination be cancelled.

Accordingly, this matter will be scheduled for action on the nonappearance calendar of the board and you will receive official notice thereof in due course.

From the official live annotation:

The sale to the purchaser occurred at the close of escrow where the purchaser did not take physical possession of the property, although pursuant to the agreement of sale the first seller held the property for the purchaser between a specified date and the close of escrow.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 395.1220
• Original supporting opinion: 395.1220 PDF

Original ruling text

395.1220

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

September 30, 1964

Mr. C. H. L--Attorney at Law
XXXX West --- Street
--- ---, California XXXXX
--- - XXXXXX
A--- I---, Inc.
Dear Mr. L---:
We have again reviewed your client’s petition for Redetermination in the light of the information previously submitted and arguments made in your letter of August 27, 1964. We believe it has been established that the sale of the property by P--- - B--- E--- to A--- I---, Inc., did not occur prior to December 3, 1962. Since the property was immediately resold to B--- Division on the same date, we do not believe it was held or used in an activity requiring the holding of a seller’s permit by A--- I---, Inc. Accordingly, the sale by A--- I---, Inc., is an occasional sale as defined in § 6006.5(a). We propose to recommend to the board that the determination be cancelled. In view of our proposed recommendation, we assume the board hearing requested in your client’s petition for Redetermination is no longer desired. Accordingly, this matter will be scheduled for action on the nonappearance calendar of the board and you will receive official notice thereof in due course. Very truly yours,

Jack D. Paulson
Associate Tax Counsel

JDP:mm
cc:
Mr. J--- W----- --- – Subdistrict Administrator
Attached are two copies of the Report of Hearing Officer dated September 23, 1964, which has been approved. The hearing was held in Santa Ana on March 19, 1964.