Did the family exemption apply when an unincorporated association transferred an aircraft to the mother of one association member?

Plain-English summary

An unincorporated association transferred an aircraft to the mother of one of its members. The requester argued that the transaction should qualify as a child-to-parent family transfer.

Counsel disagreed. Section 6005 included an association within the definition of a person, and section 6275(a) treated every person making a retail aircraft sale as a retailer. The association—not its member—was therefore the legal seller.

Because the association was a separate legal entity and had no parent-child relationship with the buyer, the section 6285 family exemption did not apply.

The letter supported separate-entity treatment with statutes allowing unincorporated associations to own and sell property and with California case law recognizing them as legal entities.

What this means for you

Members of clubs or ownership associations

The member's family relationship did not pass through the association. The exemption relationship had to exist between the actual legal seller and buyer.

Accountants and tax professionals

Identify the titled owner and transferor before applying a family exemption. Entity separateness can control even when ownership is closely held.

Common questions

Q: Who was treated as the aircraft seller?

A: The unincorporated association.

Q: Was an association a person for sales-tax purposes?

A: Yes, under section 6005.

Q: Why did the parent-child exemption fail?

A: The buyer was the mother of a member, not the parent of the association itself.

Q: Could the association own and sell property in its own name?

A: Yes. The letter cited California statutes and case law recognizing that capacity.

Citations and references

• California Revenue and Taxation Code §§ 6005, 6275(a), and 6285
• California Code of Civil Procedure § 388(a)
• Former California Corporations Code § 20001, as cited in the letter
• White v. Cox (1971) 17 Cal.App.3d 824

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 585.0025
• Original supporting opinion: 585.0025 PDF

Original ruling text

585.0025

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
916/445-3673

December 21, 1973
Dear ______:
Re:

______

Your letter of October 27, 1973 to the Occasional Sales Use Tax Unit, and the attached brief, has recently been referred to this office for review and response. After carefully considering the arguments and authorities cited therein, we conclude that the position expressed in our letter to you of September 26, 1973 is correct. That is, __, as an unincorporated association, is a taxable entity separate and apart from its member, _. Accordingly, the transfer of the aircraft from to mother, cannot qualify for the family exemption provided by Revenue and Taxation Code Section 6285 as a transfer from child to parent. Your attention is invited to subdivision (a) of Section 6275 of the Revenue and Taxation Code which specifically provides that every person making a retail sale of an aircraft is a retailer for the purposes of the Sales and Use Tax Law. The definition of person includes an association. (Rev. & Tax. Code Sec. 6005.) ___ is, therefore, a person for sales and use tax purposes and is a retailer in the contemplation of Section 6275 as a result of the transfer of title to the aircraft. The sales tax treatment of an unincorporated association as a separate entity is clearly supported by current California statutory and case law. Section 388 of the Code of Civil Procedure, subdivision (a), authorizes unincorporated associations to sue and be sued in their chosen name. More importantly the California Corporations Code provisions dealing with unincorporated associations give specific authority to such entities to purchase, own, hold, pledge, encumber or sell real estate and other property. (Corporations Code Sec. 20001.) Finally, the California courts have determined that unincorporated associations are entitled to general recognition as separate legal entities. See White v. Cox, (1971) 17 C.A. 3d 824, which traces the development of this principle in California law. Very truly yours,

Richard H. Ochener
Tax Counsel
RHO:ba