Was a vendor corporation's single transfer of property to four corporations it wholly owned exempt from sales tax?

Plain-English summary

A vendor corporation made one transfer of unidentified property to four corporations. Afterward, the property was owned by four corporations instead of one, and the vendor owned all stock of the four transferees.

After discussing the redacted problem with an unidentified Assistant Attorney General and Deputy Attorney General, Board Tax Counsel E. H. Stetson concluded that the transaction was exempt from sales tax under section 6006.5(b). Four transferees did not change the result because the source treated the movement as one transfer and the vendor owned all their stock.

Stetson said the Board would revise its audit to eliminate the transaction from the measure of tax. The letter supplies no revised audit, assessment, claim, appeal, or final action.

Redacted facts, live-annotation differences, scanned source, and missing result

The one-page letter is dated December 3, 1956 and addressed to a redacted recipient about a redacted matter. It says Stetson had discussed this problem last Friday with an Assistant Attorney General and a Deputy Attorney General. Their identities, advice, meeting, submissions and reviewed facts are absent.

The letter does not describe the property, businesses, corporate chain, transfer date, simultaneity, transaction documents, consideration, liabilities, stock classes, ownership duration, seller's permits, sales activity, asset totals, value, tax period, measure, rate or asserted tax. It says only that the property moved in one transfer from the vendor and afterward was owned by four corporations instead of one, while the vendor owned all of each transferee's stock.

The conclusion is expressly a sales-tax exemption under section 6006.5(b) of the Sales and Use Tax Law. The source does not reproduce the statute, identify a regulation or case, call the result a contribution to capital, state that stock or other consideration was issued, or explain a percentage or substantially-all-assets test.

The live 395.2520 annotation says the simultaneous transfer of all assets of a corporation to one or more wholly owned subsidiaries is an exempt occasional sale under section 6006.5(b). The supporting letter itself does not use simultaneous, all of the assets, subsidiary or occasional sale; it records one property transfer to four corporations wholly owned by the vendor and concludes it was exempt from sales tax. This page preserves the source's narrower wording and identifies the live summary separately.

Stetson promised to revise our audit by eliminating this transaction from the tax measure. No audit report, original or revised computation, notice, payment, refund, petition, correspondence or proof of implementation is included, so the promised revision is not presented as a completed final outcome.

The official PDF is a one-page raster scan with an embedded OCR layer. Visual inspection confirmed control number 395.2520, the December 3, 1956 date, redactions, both Attorney General roles, section 6006.5(b), four transferees, single-transfer reasoning, complete stock ownership, proposed audit revision, Stetson's name and Tax Counsel title. The original OCR tail remains byte-identical and preserves recognition errors such as December 3t, lieneral, vecti on, s ,tle s t a x, £ven, t,rans.f'~rrBd, venaor and &tetson; those errors are not silently used as source facts. The scan contains no case citation, so the runbook's scanned-case citation verification is not triggered.

What this means for you

Parent corporations reorganizing assets

Under this historical analysis, using four corporations wholly owned by the vendor did not defeat the exemption when the movement was treated as one transfer. The letter does not disclose enough facts to extend that conclusion to a different reorganization.

Accountants and tax professionals

Document every entity, ownership percentage, asset, agreement, transfer step, date, consideration, liability, seller's permit and accounting entry. Confirm current law rather than assuming that common ownership or one closing is enough.

Common questions

Q: How many corporations received the property?
A: Four, according to the source. They and the property are not identified.

Q: Who owned the transferee corporations?
A: The vendor corporation owned all their stock. No stock class, ownership date or corporate record is supplied.

Q: Did using four transferees make the transaction taxable?
A: No. Counsel concluded that the one transfer was exempt under section 6006.5(b) despite the property being held by four corporations afterward.

Q: Does the supporting letter say all assets moved simultaneously?

A: No. The live annotation says that; the letter itself identifies one transfer of property but supplies no asset scope or timing details.

Q: Did the letter call the transferees subsidiaries?

A: No. It says the vendor owned all of their stock. The live annotation describes wholly owned subsidiaries.

Q: What audit change followed?
A: Counsel said the audit would be revised to eliminate the transaction from the tax measure. The revised audit and final action are absent.

Q: What property and value were involved?

A: The source supplies neither the property nor any quantity, value, consideration, liability, tax measure or rate.

Citations and references

• California Revenue and Taxation Code § 6006.5(b)
• Consultation with an unidentified Assistant Attorney General and Deputy Attorney General — described but not included
• Parties; businesses; corporate and stock records; property and asset totals; transaction agreements and dates; consideration and liabilities; seller's permits and sales activity; tax period, measure and rate; audit; assessment; claim; appeal; and outcome — absent

Verbatim support

From the official December 3, 1956 scanned letter:

Upon reviewing the facts, the conclusion was reached that the transaction is exempt from sales tax under section 6006.5, paragraph (b) of the Sales and Use Tax Law.

Even though after the transfer the property transferred was owned by four corporations instead of one, there was but a single transfer from the vendor corporation which owned all of the stock of the transferee corporations.

We shall accordingly revise our audit to eliminate this transaction from the measure of the tax.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 395.2520
• Original supporting opinion: 395.2520 PDF

Original ruling text

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395 •2520 r

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December 3t 1956

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Dear

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I discussed this problem las t Fr iday with Assistant Attorney lieneral and Deputy 1.

Attorney General

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Upon r e vi1: J Wing
the fc:1.c·'-s , t he c ..mclusion was r Dn.ched that tne trans­ a ction i s exer:1pt f r om s ,tle s t a x under vecti on 6006.5 • p:ar agr.:i. ph ( b ) of t.he 3...:.lcs and lfoe 'l'ax Law.

£ven though afte r the tran sfer the property

t,rans.f'~rrBd was <J~m~d by fou r co r porati ons instead o.f one, there \ ·1:1s but c.1 s in::;le tra nsfer i r om t,i1e venaor corporu ­ tion -;;h::.c!1 o·.-.•rnd nl l of ·~he ::to c k 0£ ~he tr&nsfe r ee co r pon :.tions. ::e shall hCCorJ ln[~ly r e vis e our audit to elimin.~te this tra nsaction from ti1e measure o:f the t a x .

Very truly yours,

E. n. &tetson
l'ax Counsel

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