Was one transfer of substantially all an individual's business property to two wholly owned corporations an exempt occasional sale?

Plain-English summary

After reviewing an absent file, a preliminary hearing record, and a February 7 supplemental letter, Board staff found that B--- B. R--- appeared to transfer substantially all property in one transaction, dividing portions between two corporations.

The petitioner was sole shareholder of both transferees, so staff treated both corporations as completely ultimately owned by the petitioner. Using two recipients did not defeat occasional-sale treatment under section 6006.5(b), and section 6367 exempted the transfer.

Associate Tax Counsel Warren W. Mangels said staff now takes the position that the transfer qualified and would recommend deleting the $831,716.54 transaction from the client's liability measure. The source supplies no final Board action or resulting tax adjustment.

Review posture, qualified facts, recommended measure deletion, and missing record

Mangels addressed the February 18, 1957 letter to attorney L--- D. W--- regarding client B--- B. R---, A--- W--- & E--- Co., and a redacted account. The source does not identify the entity form of the transferor beyond calling the petitioner an individual in the live annotation, the business, tax period, petition number, determination, or disputed tax.

The letter says staff completed review of facts in the file, facts developed at a preliminary hearing, and facts supplemented by the attorney's February 7 letter. None of those materials is included. No hearing date, officer, attendee, testimony, exhibit, or argument appears.

Staff used qualified It appears language for both the transaction and ownership. Substantially all petitioner property moved in one transaction, a portion to each of two corporations. The source gives no asset list, quantity, value, retained property, allocation between corporations, transfer date, agreements, consideration, debt, tax-paid status, or business-activity link.

The corporations were completely ultimately owned by the petitioner because the petitioner was sole shareholder of both. The source provides no corporate names, formation documents, share ledger, stock class, nominee, option, creditor, voting or economic rights, or before-and-after ownership table.

Staff now takes the position that the described transfer was occasional under section 6006.5(b) and exempt under section 6367. The letter does not identify the prior position, explain what changed after the preliminary hearing and supplemental letter, or state whether another proposed measure remained.

Mangels said staff would recommend that the 831,716.54 transaction be removed from the measure of liability. The rendered official page visibly prints $831,716.54; the preserved text layer below drops the dollar sign. That figure is the transaction measure proposed for deletion, not a tax or refund amount. No rate, jurisdiction, tax calculation, assessment, payment, or refund appears.

The live annotation preserves one transaction, substantially all individual-business property, two corporations, portions to each, sole ownership of both, exemption, and February 18, 1957 date. It omits the petitioner, attorney, account and company; complete file review; preliminary hearing and February 7 supplement; qualified appears language; staff's now posture; sections 6006.5(b) and 6367 by number; $831,716.54 measure and deletion recommendation; missing records; and absent Board or tax outcome.

The official PDF metadata does not identify a Paper Capture producer, but visual inspection was used to confirm the visible dollar sign that pdftotext omitted. The preserved original text remains unchanged. The source supplies no Board agenda, minutes or decision, final redetermination, adjusted assessment, payment, refund, collection, judicial appeal, or later result.

What this means for you

Sole owners reorganizing a business

Under this staff position, one integrated transaction could preserve ownership continuity even when substantially all property was divided between two corporations wholly owned by the transferor.

Accountants and tax professionals

Document transaction integration, every transferred and retained asset, allocation, consideration, and complete legal and economic ownership of each recipient before claiming continuity.

Common questions

Q: How many corporations received property?
A: Two.

Q: Who owned the transferee corporations?
A: The individual transferor was sole shareholder of both.

Q: Did dividing the assets defeat the exemption?
A: No. Staff treated the transfers as one qualifying transaction.

Q: What adjustment was recommended?
A: Deleting the transaction from the measure of liability.

Q: Was $831,716.54 the tax or refund?

A: No. Counsel called it the transaction to be deleted from the liability measure. The source gives no rate, computed tax, payment, or refund.

Q: What evidence did staff review?

A: A file, facts developed at a preliminary hearing, and a February 7 supplemental letter. None is included in the official source.

Q: Did the Board approve the recommendation?

A: The source does not say. It contains no Board action, final redetermination, adjusted assessment, payment, appeal, or later outcome.

Citations and references

• California Revenue and Taxation Code §§ 6006.5(b) and 6367
• Preliminary hearing record, reviewed file and February 7 supplemental letter — identified but not included
• Asset, allocation, consideration, corporation, stock, ownership, transfer, return, tax, audit, determination, petition, hearing, Board, payment, refund, appeal, and outcome records — described or implicated but not included

Verbatim support

From the official February 18, 1957 Warren W. Mangels letter:

We have made a complete review of the facts as found in the file, as developed at the preliminary hearing and as further supplemented in your letter of February 7.

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

It further appears that the corporations to which the property was transferred were completely ultimately owned by petitioner inasmuch as he was the sole shareholder of both corporations.

Accordingly, we shall recommend to the Board that the $831,716.54 transaction be deleted from the measure of your client’s liability.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 395.1720
• Original supporting opinion: 395.1720 PDF

Original ruling text

395.1720

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

February 18, 1957

Mr. L--- D. W--Attorney at Law
XXXX West --- Street
--- --- XX, California

Re:

B--- B. R--A--- W--- & E--- Co.
Account -- - XXXXX

Dear Mr. W---:
We have made a complete review of the facts as found in the file, as developed at the preliminary hearing and as further supplemented in your letter of February 7. It appears that in one transaction substantially all the property of petitioner was transferred to two corporations, a portion to each. It further appears that the corporations to which the property was transferred were completely ultimately owned by petitioner inasmuch as he was the sole shareholder of both corporations. The staff now takes the position that a transfer such as outlined above is an occasional sale such 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 the 831,716.54 transaction be deleted from the measure of your client’s liability. Very truly yours,

Warren W. Mangels
Associate Tax Counsel
WWM:cl
cc:

--- - Auditing