Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2013
Sales and Use Tax Annotations
395.0000 OCCASIONAL SALES—SALE OF A BUSINESS—BUSINESS REORGANIZATION—Regulation 1595
(g) "SUBSTANTIALLY ALL THE PROPERTY"—TRANSFER OF
395.1525 Time Limitation for Transfer. Corporation A operated two divisions. At its March 1, 1985 meeting, the Board of Directors approved a plan for reorganization. Under the plan, two new corporations would be created and the assets and liabilities of each of the two divisions would be transferred to the new corporations, B and C, in exchange for their stock. The result would be that A would be a holding company for two wholly owned subsidiaries. By June 1985, the creation of the new subsidiary C, the transfer of the assets and shares of stock, and the required filings appear to have been completed. A bill of sale transferring the assets was dated June 14, 1985. The creation of the new B subsidiary, the transfer of the assets and the shares of stock, the first meeting of the new Board, and the required filings were not completed until November 1985. The stock transfer was accomplished at the October 7, 1985 meeting of B's Board. The requirement for a " . . . transfer of all or substantially all of the property . . . " must be tested immediately after the transfer in order to qualify for the section 6006.5(b) exemption. Applying that standard to the transfer from A to C leads us to conclude that the section 6006.5(b) exemption does not apply to it. This conclusion necessarily assumes that less than 80% of A's assets were transferred on June 14, 1985.
Regarding the transfer from A to B on November 1, 1985, the section 6006.5(b) exemption would apply since all the remaining property of A was transferred and there is no dispute that the real or ultimate ownership following the transfer was substantially the same as it was before the transfer. 4/14/89.