If a New York corporation dissolves but keeps holding title to real property purely as a nominee for other people's benefit, does it still owe corporation franchise tax and stay subject to a franchise-tax lien?

Plain-English summary

In 1971 several individuals formed a joint venture to buy land in Onondaga County, New York, with title held in the name of Babson Bros. Co. of New York Inc. as nominee for the venture's members. Babson Bros. dissolved in 1978, adopting a formal board resolution and stockholder vote to wind up and distribute any beneficial interests it held for others -- but as a practical matter the venture members kept the land titled in the dissolved corporation's name (to avoid the hassle of deeding fractional shares to each of the many participants) and kept paying their pro-rata taxes and expenses through it. The company asked whether it owed corporation franchise tax and penalties for 1980-1988, and whether it could get the resulting tax lien released.

The Department said no tax was owed and the lien should be released. Under § 209.3, a dissolved corporation is only taxable if it continues to "conduct business" — and the regulations carve out dissolved corporations whose only remaining activity is winding up, disposing of assets, and distributing proceeds. Here, Babson Bros. held no beneficial interest in the land at all, before or after dissolution; it was purely a record-title convenience for other people's property. That's not conducting business, so the company qualified for release of the Article 9-A lien covering 1980 through 1988.

What this means for you

Dissolved corporations still holding title to property for others

Winding up and formally dissolving doesn't require you to immediately re-title every asset you hold as a nominee. If the corporation truly has no beneficial interest — it's just an administrative title-holder while the real owners work out logistics — the Department treats that as outside "conducting business," so no ongoing franchise tax accrues after dissolution.

Accountants and tax professionals

The key fact here is the corporation's total lack of beneficial interest, documented by board and shareholder resolutions specifically addressing nominee-held property at the time of dissolution. Compare this favorably to TSB-A-88(18)C (same batch of opinions, decided the same week) where a similar nominee arrangement was found taxable for the years BEFORE dissolution — the distinction is whether the corporation is still an active, undissolved entity holding property, versus a dissolved shell with no remaining business.

Common questions

Q: Does dissolving a corporation automatically end its franchise tax exposure?
A: Not automatically — a dissolved corporation that keeps "conducting business" (beyond mere liquidation, asset disposal, and distribution) stays taxable under § 209.3. Here, it was the total absence of any beneficial interest or activity — not the dissolution itself — that ended the tax exposure.

Q: Can I rely on this to stop filing franchise tax reports for my own dissolved nominee corporation?
A: No. This opinion binds the Department only for Babson Bros. on these specific facts. Whether your situation qualifies depends on your corporation having no beneficial interest and no activity beyond passively holding title — verify your own facts with a tax professional before relying on this outcome.

Citations and references

Statutes and regulations:

• Tax Law § 209.3 (dissolved corporation conducting business remains taxable)
• Business Corporation Franchise Tax Regulations § 2-3.1 (tax up to date franchise ceases)
• Business Corporation Franchise Tax Regulations § 1-2.2 (liquidation-only activity exception)
• Business Corporation Law § 1003 (certificate of dissolution)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_1988.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a88_19c.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-88 (19)C
Corporation Tax
September 1, 1988

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. C880620A

On June 20, 1988, a Petition for Advisory Opinion was received from Babson Bros. Co. of
New York Inc., 223 Brattle Road, Syracuse, New York 13203.
The issue raised is whether Petitioner, a dissolved corporation, is entitled to a release of lien
of New York State Corporation Franchise Tax and whether the corporation is required to file a
corporation franchise tax report and pay tax and penalties for taxable years 1980 through 1988,
where at the time of dissolution Petitioner held title to real property as nominee for various
individuals.
In 1971, Paul William Kelley, Jr. (hereinafter referred to as "Kelley") obtained through
cooperation of various Individuals, including Petitioner, an agreement to enter into a joint venture
agreement to purchase three contiguous parcels of land located in the Town of Cicero, County of
Onondaga, State of New York. Petitioner would take title to the real property and purchase it for and
on behalf of the Venture. The expenses of purchasing the property was determined on the basis of
a contract consisting of 20 shares of participation with each participant paying the sum of $3,100.00
upon the issuance of a share and to pay an additional $1,000.00 per year per share (the annual
payment would be applied to pay off existing mortgages and taxes or other expenses incurred). All
moneys would be paid to Petitioner. Each share represented an undivided one-twentieth share in the
total acreage involved. Petitioner would hold title in its name as the nominee for the members of the
Venture.
The members of the Venture had been friends and acquaintances for a number of years and
agreed orally that the original payment per share would be made, the property purchased and that a
joint venture agreement be drafted between Petitioner and Kelley who would thereafter co-issue
certificates of participation in the "joint venture agreement". The members of the Venture made their
payments to Petitioner based on the number of shares which were to be issued to that participant
after the agreement was drafted so that Petitioner would be able to purchase the real property
hereinbefore mentioned.
The board of directors of Petitioner held a meeting on November 1, 1978 and adopted a plan
of dissolution of Petitioner. A specific resolution was adopted with reference to property held in the
name of Petitioner which was not a corporate asset but held in the name of Petitioner for the
beneficial interest of any other person, firm or corporation. The resolution provided as follows:
"RESOLVED, that the said President and/or proper officer be and hereby are
authorized to assign and transfer any asset held in the name of the corporation for the
beneficial interest of any person, firm or corporation, such interest to that person,
firm or corporation as their interests appear by reason of any contracts executed by
this corporation or to George L. Babson, Jr. on behalf of those holding such
beneficial interests,"

-2­
TSB-A-88 (19)C
Corporation Tax
September 1, 1988

The board of directors further resolved that a certificate of dissolution be filed with
the Secretary of State of the State of New York.
A special meeting of the stockholders of Petitioner was held on November 2, 1978 for the
purpose of taking action on the dissolution of Petitioner in accordance with the resolution of
dissolution recommended by the board of directors. Ail stockholders were present and unanimously
resolved to adopt the plan of liquidation adopted by the board of directors and directed that the
proper officers be authorized and directed to file a certificate of dissolution pursuant to Section 1003
of the Business Corporation Law of the State of New York with the Secretary of State of the State
of New York.
A final corporation franchise tax report for the taxable period beginning December 1, 1978
and ending January 31, 1979 was filed with the New York State Department of Taxation and Finance
together with the certificate of dissolution.
All participants, both prior and subsequent to the dissolution of Petitioner, continued to make
annual payments, including their pro-rata share of taxes when assessed. Because of the number of
people involved, a determination was made to continue to hold the property in the name of Petitioner
rather than execute deeds to the individuals for fractional shares of the three properties involved. The
three properties are assessed by the County of Onondaga and the Town of Cicero as a single parcel
to Petitioner. The taxes and other expenses are paid by the participants on a pro-rata basis based upon
the number of shares owned by each participant to Babson who, in turn, pays taxes and other
expenses for participants. Most of the property was declared to be "Wetlands". Petitioner has not
engaged in any business activity since dissolution. No other asset, other than the real property herein
mentioned, is in the corporate name. Petitioner has no beneficial interest in the real property and has
had no beneficial interest in said real property since dissolution nor prior thereto since the acquisition
of the property.
Section 2-3.1 of the Business Corporation Franchise Tax Regulations (hereinafter
"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. Section 1-2.2 of the 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.

-3­
TSB-A-88 (19)C
Corporation Tax
September 1, 1988

Accordingly, after it was dissolved, Petitioner was merely holding property as nominee for
the benefit of others and was 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 after it was dissolved,
and is entitled to a release of lien of New York State Corporation Franchise tax for taxable years
1980 through 1988.

DATED: September 1, 1988

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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