Does a corporation that was dissolved decades ago and holds no assets owe New York franchise tax just for signing a deed to fix a title defect from its original 1967 liquidation?

Subject

Whether a corporation that has no assets and has been voluntarily dissolved since 1967 is liable for franchise taxes because it joined in a 1989 deed conveying real property solely to fill a gap in the chain of title.

Plain-English summary

New York ruled that a corporation dissolved 23 years earlier owed no franchise tax for signing a corrective deed. X Corporation had liquidated all its real estate to its two shareholders back in March 1967, immediately after dissolving — but that 1967 deed was never recorded, so the paper chain of title had a gap. In 1989, when a later owner sold the property and a title insurer needed clean title, it asked the (long-dissolved) X Corporation to join a new deed simply to paper over the missing 1967 recording. The title company then flagged a risk: could that 1989 signature revive X Corporation's franchise tax liability?

The Department said no. A dissolved corporation stays taxable under Article 9-A only if it keeps "conducting business" — and merely fixing a decades-old recording defect on property it no longer owned or benefited from isn't conducting business. Since X Corporation held no assets and did nothing else after 1967, it was never subject to tax during any of that time, and the Department released the lien for corporation franchise tax for 1968 through 1989.

What this means for you

Real estate and title professionals

When a title search turns up a defect traceable to an old dissolved corporation, having that corporation's authorized signatory join a corrective deed does not, by itself, create new tax exposure — as long as the corporation is truly inactive and the signature only cures a recording gap rather than reflecting any beneficial interest or transaction.

Owners of long-dissolved corporations

If your dissolved corporation's only lingering "activity" is helping clear an old title defect, this ruling supports treating that act as outside the scope of "doing business," so it shouldn't trigger franchise tax for the dissolution years or any year after.

Accountants and tax professionals

The key distinction is between liquidation-related paperwork (not taxable) and any activity that suggests the corporation continued operating or held a beneficial interest (taxable). Tax Law § 209.3 and 20 NYCRR § 1-2.2 draw that line: dissolved corporations limited to liquidating assets, disposing of them, and distributing proceeds are not subject to Article 9-A tax.

Common questions

Q: Does signing an old deed years after dissolution restart franchise tax liability?
A: Not if the corporation is only correcting a title/recording defect from its original liquidation and has no assets or ongoing activity. Here it did not.

Q: What if the dissolved corporation still held a beneficial interest in the property?
A: That would change the analysis. This ruling turned on X Corporation being merely a record titleholder with no beneficial interest — it had already conveyed away all its interest in 1967.

Q: Can I rely on this ruling for my own dissolved corporation?
A: No. This advisory opinion binds the Department only for the taxpayer and facts presented, and cannot be relied on by anyone else. It shows the Department's reasoning, but your facts may differ.

Citations and references

Statutes and regulations:

• Tax Law § 209.3 (a dissolved corporation that continues to conduct business remains subject to Article 9-A tax)
• 20 NYCRR § 1-2.2 (a dissolved corporation limited to liquidating its business, disposing of assets, and distributing proceeds is not subject to Article 9-A tax)
• 20 NYCRR § 2-3.1 (a domestic corporation pays tax up to the date it ceases to possess a franchise)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_1990.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a90_9c.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-90(9)C
Corporation Tax
March 15, 1990

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. C900109B

On January 9, 1990 a Petition for Advisory Opinion was received from Harold S. Sommers,
750 Third Avenue, Suite 2400, New York, New York 10017.
The issue raised by Petitioner, Harold S. Sommers, is whether a corporation which has no
assets and has been voluntarily dissolved since February, 1967, is liable for franchise taxes if its only
act, from the date of its voluntary dissolution, was to join in a conveyance of real property in
December, 1989, for the sole purpose of filling in the chain of title, since its deed of conveyance in
March, 1967 was not recorded.
In March, 1967, X corporation, a domestic corporation, conveyed by Bargain and Sale Deed
certain real property to Y and Z, the two individual stockholders of X corporation, in total liquidation
of X corporation. X corporation had been incorporated in the State of New York in 1955 and was
voluntarily dissolved in February, 1967. In 1969, Y and Z conveyed the real property to an
employees' profit sharing trust and in 1984, the trust conveyed the real property to Y, the sole
participant of said trust, in partial distribution of the trust. All of the deeds for the above
conveyances were recorded, except for X corporation's conveyance to Y and Z in March, 1967. In
December, 1989, Y conveyed the real property to M, a partnership. In connection with this
transaction, M partnership requested title insurance and in order to fill in the chain of title caused by
the failure to record the deed from X corporation to Y and Z in March, 1967, the title insurance
company had X corporation join in the conveyance to M partnership, since the original 1967 deed
could not be located. However, in its title report the title insurance company has made an exception
for possible unpaid franchise taxes against X corporation by virtue of its joining in this conveyance.
The title insurance company has agreed to remove this exception in its title report if an advisory
opinion is rendered by the Commissioner of Taxation and Finance stating that the joining in this
conveyance on the part of X corporation for the sole purpose of filling in the chain of title, will not
result in franchise tax liability.
Since its voluntary dissolution in February, 1967, and its actual conveyance of the real
property in March, 1967, in liquidation of the corporation, X corporation has held no assets and has
been totally inactive. The only reason it has joined Y in the conveyance to M partnership is to fill
in the chain of title caused by the failure to record the deed of conveyance in March, 1967 to Y and
Z, which original deed could not be located (only copies exist).
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.
TP-9 (9/88)

-2­
TSB-A-90(9)C
Corporation Tax
March 15, 1990

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 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.
Accordingly, after it was dissolved, X corporation was merely the record title holder of the
property and had no beneficial interest in it. Therefore it was not conducting business in New York
State pursuant to section 209.3 of the Tax Law and Section 1-2.2 of the Business Corporation
Franchise Tax Regulations. The mere execution of a deed to correct a defect in the chain of title did
not constitute conducting business in New York State. Thus, X corporation 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 1968 through 1989.

DATED: March 15, 1990

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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