How did California staff recommend registering a Massachusetts or business trust and determining trustee or beneficiary liability?

Plain-English summary

Richard Reger reported increasing permit applications by Unincorporated Business Organizations, also called Massachusetts or business trusts, and requested issuance guidelines. Tax Counsel Thomas Cooke quoted Ballantine & Sterling's description: an unincorporated business whose trustees hold and manage business assets for holders of transferable beneficial interests, using a common-law trust to conduct business.

The memorandum recommended requiring every applicant using this structure to provide the document establishing the trust. That instrument controlled the beneficiary-control inquiry and could contain clauses addressing trustee obligation liability.

The memorandum treated trusts and trustees as section 6005 persons and said a trustee and trust could be a group or combination acting as a unit. It recommended always considering trustees personally liable as section 6014 sellers with the trust, registering each trustee as a partner in the business in both individual and trustee capacities, obtaining personal asset information, advising each trustee of full business liability, and filing liens against the trust and trustees in both capacities.

Yet the same memorandum said a trust instrument could validly provide that a trustee was not personally liable for obligations incurred for the trust's benefit. It does not reconcile that private-obligation limitation with the categorical Board registration and collection recommendations, cite a tax-specific liability statute, or supply an applied court result.

Beneficiary treatment depended on control. The source cites Goldwater v. Ottman (1930) 210. Cal. 408; the reporter identifies Goldwater v. Oltman. As the memorandum describes the rule, creators or beneficial owners avoided direct creditor liability when trustees had complete business control, but were treated as partners when trustees were subject to their control. A power to elect trustees and fill board vacancies supplied such control. Staff recommended dual determinations against creators or beneficiaries only when the trust document showed control over the business or trustees.

The source does not show an applicant, instrument review, registration, asset disclosure, lien, dual determination, debt, collection or later outcome.

Source posture and citation issue

The live 415.0113 annotation, in the 2026 revision of the Business Taxes Law Guide, retains the common-law business-trust description, section 6005 categories, trust-document requirement, trustee asset information and full-liability warning. It omits the permit-growth request, beneficial-interest certificates, creator/beneficiary control, election and vacancy power, valid trustee-liability limitation clauses, section 6014, partner and seller treatment, precise registration and lien format, conditional dual determinations, printed case-name mismatch, missing records and absence of an applied outcome.

The reporter 210 Cal. 408 resolves to Goldwater v. Oltman, not the source's Goldwater v. Ottman. The original citation remains unchanged below.

CDTFA's Annotated Legal Opinions collection says statutory law controls over an inconsistent annotation. The official two-page PDF has a clean native text layer and no raster images, so no OCR was required. It prints group or combination action as a unit; that source form remains verbatim. Duplicate direct downloads and extractions matched, and the original-text tail remains byte-identical to the committed tail and fresh extraction after removing only terminal extractor whitespace.

What this means for you

Business trusts, trustees, and tax professionals

The trust instrument is central. Identify trustees, beneficial owners, control rights, election and vacancy powers, liability clauses and actual management before registration or collection. The memorandum's internally unresolved 1993 recommendations are not a substitute for current tax-specific trustee, beneficiary, lien and assessment authority.

Common questions

Q: What document did staff require from a business-trust applicant?

A: A copy of the document establishing the trust.

Q: How did staff recommend registering trustees?

A: With the trust and individually as trustees, treating each as a partner and seller, collecting personal asset information and warning of full business liability.

Q: Were beneficiaries automatically liable?

A: No. Staff recommended dual determinations only if the trust instrument showed that creators or beneficiaries controlled the business or trustees.

Q: Could the instrument limit trustee liability?

A: The memorandum says provisions limiting a trustee's personal liability for trust-benefit obligations can be valid, but it does not reconcile that statement with its categorical Board-liability recommendations.

Q: Did the source apply these recommendations to an actual trust?

A: No. It supplies no applicant, instrument, permit, lien, dual determination, litigation or outcome.

Citations and references

• California Revenue and Taxation Code sections 6005 and 6014
• Goldwater v. Ottman, printed at 210 Cal. 408 — reporter identifies Goldwater v. Oltman
• Ballantine & Sterling California Corporation Laws section 22.07[1]
• June 22 memorandum; applicants; trust instruments; trustee and beneficiary identities; control and asset records; permits; liabilities; notices; liens; dual determinations; litigation; and outcomes — absent

Verbatim support

From the official September 22, 1993 Legal Division memorandum:

It is our recommendation that each taxpayer seeking registration of a Massachusetts or business trust be required to furnish a copy of the document setting up the trust.

However, our research indicates that the trust instrument can contain a provision that the trustee will not be personally liable for obligations that he incurs for the benefit of the trust and these provisions are valid.

The Board should always consider trustees personally liable as "sellers" pursuant to Revenue and Taxation Code section 6014 along with the trust.

Issue dual determinations against beneficiaries or "creators" only if the beneficiaries or "creators" have control over the business or the trustees as stated in the trust document

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 415.0113
• Original supporting opinion: 415.0113 PDF

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Mr. Richard Reger
Compliance Planning &
Evaluation Section – MIC:44

From:

Thomas Cooke, Tax Counsel
Legal Division – MIC:82

Subject:

Massachusetts or Business Trusts

415.0113

Date:

September 22, 1993

Gordon Adelman has requested that I respond to your memorandum to him dated June 22, 1993 concerning the above subject. In your memorandum, you state that there are increasing numbers of taxpayers obtaining permits as Unincorporated Business Organizations, aka Massachusetts or Business Trusts. You ask for the opinion of the Legal Division as to guidelines for the issuance of these permits. In Ballantine & Sterling California Corporation Laws, § 22.07[1], it is stated: "The so-called Massachusetts or business trust is simply an unincorporated business in which the business assets are owned or held in the name of trustees and are operated or managed by them for the benefit of holders of certificates of beneficial interest in the trust. Thus, a business trust actually represents the use of a common law trust for the purpose of carrying on a business enterprise." In Goldwater v. Ottman (1930) 210. Cal. 408, the court stated that in a Massachusetts or business trust, the chief advantage is freedom from regulation and corporate taxation and its members enjoy the freedom from personal liability that is imposed upon partners. The court held that if the trust document establishing the trust provides that the trustees have complete control of the business, the creators of the trust (the beneficial owners) are exempt from direct personal liability to the creditors of the business; but if the trustees are subject to the control of the beneficial owners, the beneficial owners will be liable as partners. If the trust document permits the beneficial owners to elect trustees and fill any vacancies in the board, this gives the beneficial owners such control as they will be treated as partners. You state in your memorandum that the trustees are personally liable for the debts of the trust unless specifically exempted. However, our research indicates that the trust instrument can

contain a provision that the trustee will not be personally liable for obligations that he incurs for the benefit of the trust and these provisions are valid. The Board should always consider trustees personally liable as "sellers" pursuant to Revenue and Taxation Code section 6014 along with the trust. We believe that Revenue and Taxation Code section § 6005 permits a "trustee" and a "trust" to be a "group or combination action as a unit." It is our recommendation that each taxpayer seeking registration of a Massachusetts or business trust be required to furnish a copy of the document setting up the trust. Our other recommendations are –

1. That the trustees each be considered as partners in the business with the other trustees
   and the trust and be registered as “ Trust and A and B individually and as Trustees of said Trust”
2. Each trustee provide personal asset information and be advised that each trustee will
   be liable for the full business liability.
3. That the Board file liens as "X------------- Trust and A and B individually and as
   Trustees of said Trust."
4. Issue dual determinations against beneficiaries or "creators" only if the beneficiaries
   or "creators" have control over the business or the trustees as stated in the trust document TJC:plh cc:

Mr. Gary Jugum - MIC:82
Mr. Gordon Adelman - MIC:82
Ms. Sue Coty - MIC:46
Mr. Rick Slater - MIC:55
Mr. John Gibbs - Out of State District - OH