Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 295.0362


295.0362 Intercompany Transfer. Company C extended substantial credit to Individual B as well as company T and company R, both of which were owned by Individual B. Company A, which was an affiliated corporation of Company C, leased equipment to Companies T and R as part of an accommodation to its affiliate C.

Subsequently, Companies T and R defaulted under their lease agreements with A. Since the leases were entered into by A as an accommodation to its affiliate company C, C made an inter-company transfer of approximately $315,000 to A. This amount represented the balance of A's investment in the leases. A, in turn, assigned to C, on a nonrecourse basis, all of its interest in the leases.

The inter-company transfer of the $315,000 was not a bargained for exchange for the assignment of the lease and the underlying property, particularly in light of the leased equipment being abandoned. Rather, it represented a prior promise to pay off the lease if the lessees defaulted. However, C did receive title to the leased property. Accordingly, a portion of the payment was for the property. The amount attributed to the gross receipts from the sale is the salvage value of the property. 4/16/91.