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
(i) TRANSFERS AND CONTRIBUTIONS TO NEW CORPORATION OR PARTNERSHIP
395.2000 Step Transaction. A taxpayer owned a chain of restaurants. It transferred some of its businesses and assets, but not the liabilities, to a newly created corporation owned by the taxpayer. As consideration, the taxpayer received first issue stock in the new corporation. On the same day, the taxpayer transferred the stock to an existing subsidiary in exchange for the assumption of liabilities of the businesses previously transferred to the new corporation.
When a transaction is carried out in a series of steps, each dependent and conditional on the other, the essential nature of the transaction is viewed as a whole. In these circumstances, the transaction is viewed as a transfer of property to the existing subsidiary in exchange for the assumption of liabilities. The transfer of the assets is subject to tax. 11/19/74.