Was one transfer of substantially all partnership property to three equally owned corporations an exempt occasional sale?

Plain-English summary

Two partners each held 50 percent of a petitioning partnership. In one transaction, substantially all partnership property was transferred in portions to three corporations. Each partner also held an equal shareholding interest in each corporation.

After reviewing an unidentified file and information obtained at a preliminary hearing, Board staff took the position that the transfer was an occasional sale under section 6006.5(b) and exempt under section 6367. Staff recommended granting the client's petition and said a Board-action notice would follow. The PDF supplies no notice or final Board result.

File-review posture, limited facts, and absent outcome

The February 1, 1957 letter was addressed to K---s & L---, attention Mr. L--- J. K---, about B--- J--- and T--- D--- doing business as A--- E--- & M--- Co. The account number is redacted. The writer is not named; the closing contains only vty and WWM.

Staff said it reviewed facts developed from the file and information obtained at a preliminary hearing. Neither the file nor a hearing date, participants, transcript, exhibits, arguments, audit findings, petition, or procedural history is reproduced.

The source gives only three transaction facts: substantially all petitioner property moved in one transaction; portions went to three corporations; and the two equal partners also had equal shareholding interests in each corporation. It identifies no asset, business activity, location, permit, corporation, transfer date, agreement, consideration, liability, value, percentage allocated to a recipient, stock class, number of shares, outside owner, tax amount, or exemption calculation.

The staff said it now takes the position that the transfer qualified under section 6006.5(b), but the PDF provides no former position or explanation of any change. It invoked section 6367 for the exemption and recommended that the Board grant the petition.

The letter promised notice of Board action in due course. It supplies no notice, Board order, petition disposition, assessment adjustment, payment, refund, appeal, collection, or later outcome. The published record therefore supports a staff recommendation, not a claim that the Board actually granted relief.

The live annotation preserves the one transaction, substantially all partnership assets, portions to three corporations, equal partner shareholding in each, and exempt occasional-sale conclusion. It omits the parties and redacted account; file review and preliminary hearing; each partner's 50-percent partnership interest; section 6006.5(b), section 6367, and the staff's now takes the position wording; the recommendation rather than completed Board action; all missing transaction and ownership records; and the absent final outcome.

What this means for you

Partnerships reorganizing into corporations

In this staff recommendation, using three transferees did not defeat occasional-sale treatment where substantially all property moved once and the equal partners held equal interests in each recipient.

Accountants and tax professionals

Document transaction unity, the complete property pool, consideration, and exact pre- and post-transfer ownership across every recipient; this source provides none of those underlying records.

Common questions

Q: What did each partner own before the transfer?

A: Fifty percent of the partnership.

Q: How many corporations received property?

A: Three.

Q: What ownership did the partners have afterward?

A: The source says each had an equal shareholding interest in each corporation, but gives no stock percentages or information about other owners.

Q: What result was recommended?

A: Staff recommended granting the petition and promised later notice of Board action.

Q: Did the Board grant the petition?

A: The source does not say. It contains no Board notice, order, adjustment, refund, or later result.

Q: What property and consideration were involved?

A: The letter says only substantially all property moved in portions. It identifies no assets, consideration, liabilities, values, or allocation.

Citations and references

• California Revenue and Taxation Code §§ 6006.5(b) and 6367
• Unidentified Board file and preliminary-hearing information — reviewed but not included
• Petition, business, asset, consideration, value, allocation, corporation, stock, ownership, tax, hearing, Board-action, notice, payment, appeal, and outcome records — described or implicated but not included

Verbatim support

From the official February 1, 1957 staff letter:

It appears that in one transaction substantially all the property of petitioner was transferred to three corporations, a portion to each.

The staff now takes the position that a transfer such as outlined above is an occasional sale as defined in section 6006.5(b) of the California Revenue and Taxation Code and therefore exempt under section 6367 of the Code.

Accordingly, we shall recommend to the Board that your client’s petition be granted. You will receive notice of action taken by the Board in due course.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 395.1320
• Original supporting opinion: 395.1320 PDF

Original ruling text

395.1320

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

February 1, 1957

K---s & L--Suite XXX --- Building
XXX --- --- Street
--- --- XX, California
Attention:

Mr. L--- J. K--Re: B--- J--- & T--- D--dba A--- E--- & M---. Co. Account X-XXXX

Gentlemen:
We have made a review of the facts developed by examination of the file and have reviewed the information obtained at the preliminary hearing. It appears that in one transaction substantially all the property of petitioner was transferred to three corporations, a portion to each. It further appears that the two partners in petitioner each had a 50% interest in petitioner and also had an equal shareholding interest in the three corporations. The staff now takes the position that a transfer such as outlined above is an occasional sale as defined in section 6006.5(b) of the California Revenue and Taxation Code and therefore exempt under section 6367 of the Code. Accordingly, we shall recommend to the Board that your client’s petition be granted. You will receive notice of action taken by the Board in due course.

vty
WWM