Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales And Use Tax Court Decisions

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Woo v. State Board of Equalization . . . (2000)

Fraudulent Transfer

The Board notified the spouse of a taxpayer who owed sales taxes that it would seek an earnings withholding order against her to pay her husband's tax debt. Thereafter, taxpayer and his spouse entered into an agreement transmuting their future earnings from community property to separate property. The spouse thereafter became employed by Wells Fargo for an annual salary of about $500,000. The Board filed an application for an earnings withholding order arguing that the agreement did not bar garnishment because it was fraudulent and unenforceable under Family Code section 851 and Civil Code section 3439.04. The spouse argued that the agreement was not a fraudulent transfer because she was not employed by Wells Fargo when the agreement was executed and that her future earnings were a mere expectancy that could not be transferred. The court held that the taxpayer had a present interest in the future earnings of his spouse at the time the agreement was executed, and the spouse's attempt to transmute that interest to avoid the tax debt constituted a fraudulent transfer. State Board of Equalization v. Woo (2000) 82 Cal.App.4th 481.