NY TSB-A-00(3)C Corporation Tax 2000-02-29

Must a voluntarily dissolved corporation that merely holds record title to real property file Article 9-A franchise tax returns?

Short answer: No. A voluntarily dissolved corporation that is merely the record title holder of real property, and is otherwise inactive, is not doing business in New York under section 209.3, and is not subject to the Article 9-A franchise tax. It is not required to file franchise tax returns for the period after its dissolution while it only holds bare record title.

Disclaimer: This is an official New York State Department of Taxation and Finance Advisory Opinion (TSB-A), issued by the Office of Counsel at a taxpayer's request. It is limited to the facts set forth in it and binds the Department only with respect to the petitioner to whom it was issued, and only if that petitioner fully and accurately described all relevant facts; another taxpayer cannot rely on it. It reflects the law, regulations, and Department policy in effect when issued and may since have changed. Taxpayer-identifying details are redacted. New York State and local sales taxes are administered centrally by the Department. This summary is informational only and is not legal or tax advice. Consult a licensed New York tax professional about your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

Red Rose Farm, Inc. was a corporation whose owners (the Muller brothers) were advised to dissolve it. After dissolution, it remained the record title holder of real property until the title issue was addressed in 1997. It asked whether it had to file Article 9-A franchise tax returns for that period, given it merely held record title.

The Department held the dissolved corporation need not file:

Section 209.1 imposes the franchise tax for doing business, employing capital, owning/leasing property, or maintaining an office in New York.
Under section 209.3, a corporation that is not doing business (and not otherwise exercising a taxable privilege) is not subject to the Article 9-A tax.
A dissolved corporation that is merely a record title holder of real property located in New York, and is otherwise inactive, is not doing business -- so it is not subject to tax under Article 9-A and need not file returns for that period.

What this means for you

Bare record title is not "doing business"

A corporation that has been dissolved and does nothing but hold record title to real property is not carrying on business in New York. Section 209.3 keeps it outside the Article 9-A franchise tax, so no returns are required for that inactive period.

Dissolution plus inactivity is the key

The result depends on the corporation being dissolved and inactive -- holding bare legal title without operating, leasing for profit, or otherwise employing capital. An active property-holding corporation reaches a different result. (Compare TSB-A-00(11)C/Grapemount, where a corporation holding real property for investment was subject to 9-A.)

Part of a consistent "nominee" line

This sits with the Department's other dissolved-nominee opinions (e.g., TSB-A-00(12)C/Freund, and the later 02(15)C/Li'l Cricket) treating a dissolved corporation holding only record title as not doing business.

Common questions

Q: Does a dissolved corporation holding only record title owe Article 9-A tax?
A: No. It is not doing business under section 209.3 and is not subject to the franchise tax.

Q: Must it file franchise tax returns?
A: No, not for the period after dissolution while it merely holds bare record title and is inactive.

Q: What would change the answer?
A: Actually operating, leasing for profit, or otherwise employing capital in New York would make it subject to tax.

Citations and references

Statutes, regulations, and authorities:
- Tax Law section 209.1 (Article 9-A franchise tax; doing business)
- Tax Law section 209.3 (corporation not doing business not subject to tax)
- Red Rose Farm, Inc., TSB-A-00(3)C (Feb. 29, 2000)

Source

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-00(3)C
Corporation Tax
February 29, 2000

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. C991213C

On December 13, 1999, a Petition for Advisory Opinion was received on behalf of Red Rose
Farm, Inc., Quaker Hill Road, Pawling, New York 12564.
The issue raised by Petitioner, Red Rose Farm, Inc., is whether it is required to file franchise
tax returns under Article 9-A of the Tax Law, after it was voluntarily dissolved, because it was the
record title holder of real property .
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner is the record title holder of real property in Pawling, New York. The property
consists of approximately 300 acres of land with farm buildings thereon which was used by brothers,
Peter and Marten Muller, to run a dairy farm.
During 1988, the Muller brothers determined that they could no longer operate the farm as
a corporation. They were advised to dissolve the corporation. Accordingly, an accountant was
engaged to file the necessary documentation and returns to dissolve the corporation. All franchise
taxes were paid up to that point. The corporation was voluntarily dissolved effective November 30,
1988. Thereafter, the corporation did not conduct any business. The Muller brothers continued to
run the dairy farm as a partnership on a more limited basis, and thereafter, filed partnership returns.
Brothers, Peter and Marten Muller, are the only partners.
The partners did not understand that the real property should have been transferred out of the
corporate name into the names of the individual partners when the corporation was dissolved.
Accordingly, Petitioner remained the record title holder until 1997 when the Muller brothers realized
that it was incorrect to still have the property in the corporate name. On July 10, 1997, the brothers
executed a quit claim deed transferring title into the Red Rose Farm Partnership.
Petitioner’s representative states that the federal tax returns confirm that the real estate taxes
were treated as paid by the partnership and were taken as farm expenses of the partnership.
Petitioner’s representative also states that the 1989 New York State partnership return shows that
(1) the partnership has an interest in real property located in New York State, (2) that the partnership
carries on farm business at Quaker Hill Road, Pawling, New York, and (3) that the partnership
business started December 1, 1988. Subsequent tax returns also indicate the same information.
Discussion
Section 209.1 of the Tax Law imposes, annually, a franchise tax on every corporation for the
privilege of exercising its franchise, or of doing business, or of employing capital, or of owning or

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TSB-A-00(3)C
Corporation Tax
February 29, 2000

leasing property in New York State in a corporate or organized capacity, or of maintaining an office
in New York State for all or any part of each of its fiscal or calendar years.
Section 2-3.1 of the Business Corporation Franchise Tax Regulations provides that every
domestic corporation is required to pay a tax measured by entire net income (or other applicable
basis) up to the date on which it ceases to possess a franchise.
Section 209.3 of the Tax Law provides that a dissolved corporation which continues to
conduct business shall be subject to tax under Article 9-A of the Tax Law. Section 1-2.4(c) of the
Business Corporation Franchise Tax Regulations provides further that where the activities of a
dissolved corporation are limited to the liquidation of its business and affairs, the disposition of its
assets (other than in the regular course of business), and the distribution of the proceeds, the
dissolved corporation is not subject to tax under Article 9-A.
Therefore, a dissolved corporation that is merely a record title holder of real property located
in New York State as nominee for the benefit of others, and is otherwise inactive, is not conducting
business in New York State as contemplated by section 209.3 of the Tax Law. N.D.M. Autos, Inc.,
Adv Op Comm T & F, January 26, 1999, TSB-A-99(4)C; Rubin Brothers Holding Company, Adv
Op Comm T & F, December 4, 1997, TSB-A-97(27)C; W.R.H.R.E Corp., Adv Op Comm T & F,
March 3, 1995, TSB-A-95(4)C; Highmount Medical Building Inc., Adv Op Comm T & F, May 7,
1991, TSB-A-91(12)C; Harold S. Sommers, Adv Op Comm T & F, March 15, 1990, TSB-A-90(9)C;
Babson Bros. Co. of New York Inc., Adv Op Comm T & F, September 1, 1988, TSB-A-88(19)C.
Accordingly, pursuant to section 209.1 of the Tax Law, Petitioner, after its dissolution, is
merely holding property as nominee for the benefit of others and is not conducting business in New
York State pursuant to section 209.3 of the Tax Law. Therefore, Petitioner is not subject to tax
under Article 9-A of the Tax Law after it was dissolved effective November 30, 1988.

DATED: February 29, 2000

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Division

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.