Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2013
Sales and Use Tax Annotations
210.0000 DEMONSTRATION, DISPLAY AND USE OF PROPERTY HELD FOR RESALE—General—Regulation 1669
210.0095 Distribution of Partnership Share of Horse. A partnership was formed by two corporations for the purpose of purchasing a thoroughbred stallion for syndication and subsequent sale of 40 equal shares. The horse was acquired from an owner in Ireland and put to stud on a California farm. Each partner made an initial capital contribution of $1,000 and co-signed a purchase money note to the bank for $425,000.
The partnership agreement provided that any syndicated shares not sold by a specific date were to be divided equally between the two corporate partners. When the final twenty shares of the syndicate could not be sold, they were distributed equally between the two corporate partners.
When the partnership distributed the twenty shares to the corporate partners, a taxable use of that 50 percent interest in the horse took place since the horse had been purchased for resale. Consequently, the partnership is liable for use tax based on one half the cost of the horse. 9/02/92.