Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2014
Sales and Use Tax Annotations
395.0000 OCCASIONAL SALES—SALE OF A BUSINESS—BUSINESS REORGANIZATION—Regulation 1595
(j) MERGERS AND REORGANIZATIONS
395.2158 Commencing Corporation—Assumption of Liabilities. A taxpayer performed a "spin-off" of one of its many divisions by transferring the real property, intangible rights, office equipment, computers, furniture, and other equipment to a wholly owned subsidiary corporation in exchange for the first issue of stock in the subsidiary. In addition, the subsidiary assumed the taxpayer's liabilities that were associated with that division. None of the liabilities assumed by the subsidiary was attributable to any tangible personal property transferred.
Even though the liabilities assumed by the commencing subsidiary corporation were not attributable to the tangible personal assets, the amount is consideration for all the assets transferred, including the tangible personal property assets located in California. The law, in the case of assumption of liabilities given in exchange for assets, does not limit the taxable consideration only to those liabilities which were directly attached to the specific tangible personal property asset(s). Therefore, it is proper to make an allocation of such consideration to assets subject to tax. 3/8/94.