Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2013
 

Sales and Use Tax Annotations


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395.0000 OCCASIONAL SALES—SALE OF A BUSINESS—BUSINESS REORGANIZATION—Regulation 1595

Annotation 395.0821

(d) PART OWNERSHIP, SALE OF

395.0821 Partnership—Sale of Interests. A and B, sole shareholders of a corporation, sold all of the corporation stock to C, a limited partnership of D, E and F. Each of these partners granted A the option to purchase their individual partnership interests for a price equal to the fair market value. In August 1983, A offered to purchase E's 26% in the partnership. In October 1983, D and F objected to the agreement, contending that they had a right of first refusal to purchase E's partnership interest, and filed complaints in court alleging various breaches. In June 1984, A, D, and F entered into a settlement agreement which, among other things, terminated the litigation, and allowed A to purchase D's 48% partnership interest and F's 26% partnership interest by November 15, 1984. A concluded the purchase of D and F's partnership interests on November 15, 1984, the same day A concluded the purchase of E's partnership interest. The issue involves whether there was a transfer from C to A or whether there were multiple transfers from the individual partners of their respective partnership interests to A.

The November 15, 1984 transaction constituted sales by the partners of their respective partnership interests and qualify as exempt occasional sales since the partners as individuals were not required to hold seller's permits. First of all, E's sale to A was not simultaneous with those of D and F. In fact, A and E had attempted to consummate their transaction but were thwarted by the litigation. When A and E finally did complete their transaction, it was on vastly different terms than were D and F's interests. The fact that E's sale was transacted on the same day as D and F's sales does not affect this conclusion. The sales were not simultaneous and were on different terms. The same day closings were a response to the litigation, not evidence of commonality of actions by the partners. 7/5/88.