Was use tax due when an individual retitled a truck, boat, and aircraft in a revocable trust while remaining solely liable for their loans?

Plain-English summary

An individual wanted to retitle a personally used truck, boat, and aircraft in his name as trustee of his revocable living trust. He was the sole trustor, trustee, and beneficiary. Loans remained outstanding, but he would stay individually liable and the trust would not become jointly liable.

California concluded that the transfer was not a taxable sale because the trust gave no consideration for the assets. The opinion's analysis depended on the absence of any shift or assumption of loan liability.

The source also carries a later-added bracketed reference to Revenue and Taxation Code section 6285(b). The original letter itself analyzed the transaction under the general definition of a sale and Regulation 1610.

Common questions

Did changing the registered title alone create a sale?

No on these facts. Without consideration, the retitling was not a sale.

Why did the outstanding loans matter?

Assuming debt can supply consideration, the opinion expressly assumed that the trust would not become jointly liable and that the owner remained the obligor.

Does this cover a transfer to a trust with other beneficiaries or a debt assumption?

No. The opinion was limited to the described sole-owner revocable trust and no shift of loan liability.

Citations and references

• California Revenue and Taxation Code section 6006(a)
• California Sales and Use Tax Regulation 1610(b)(1)
• California Revenue and Taxation Code section 6285(b), cited in a later bracketed source note

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/495-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/495-0730.pdf

Original ruling text

495.0730

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-6450

July 31, 1989

Ms. L--- L--F---, W--- & K--Attorneys at Law
--- - --- Floor --- Building
XXX --- Street
--- ---, CA XXXXX

Dear Ms. L---:
This is in reply to your June 13, 1989 letter regarding the application of use tax to a transfer of a plane, boat, or motor vehicle into the name of a trustee of a revocable trust. You noted the following facts: “We represent a client who has created and funded a revocable, living trust. Our client is sole trustor, trustee and beneficiary. The trust is solely for his benefit during his lifetime and is completely revocable at any time. He has a truck, a boat, and a plane for his personal use, titles to which currently stand in his name individually. He would like to re-register title to all of these assets in his name as Trustee of his revocable trust. There are loans outstanding on all of these assets. The loans will not be changed, and the client individually will remain as obligor.” Generally, use tax applies to the sale of a vehicle, vessel, or aircraft when the person making the sale is not a dealer of such property. The purchaser is responsible for payment of the tax. (Sales and Use Tax Reg. 1610, subd. (b)(1).) A “sale” is defined at Revenue and Taxation Code section 6006, subdivision (a), to generally mean and include transfer of title or possession, exchange or batter, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property for a consideration. You note that your client would remain liable for the outstanding loan on the truck, boat and aircraft. We assume that the trust would not become jointly liable with your client for

Ms. L--- L---

-2-

July 11, 1989
495.0730

payment of such loans. In such case, the transfer would not be subject to sales tax, because the transfer would not be for a consideration. [See now, Rev. & Tax Code § 6285(b)]. We hope this answers your questions; however, if you need further information, feel free to write again. Very truly yours,

Ronald L. Dick
Tax Counsel

RLD:sr