Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2015
Sales and Use Tax Annotations
395.0000 OCCASIONAL SALES—SALE OF A BUSINESS—BUSINESS REORGANIZATION—Regulation 1595
(j) MERGERS AND REORGANIZATIONS
395.2160 Corporate Reorganizations. The sequence of the transactions is as follows:
(1) Corporation B is a wholly-owned subsidiary of Corporation A. Corporation A transfers all of its shares of B's stock back to B in exchange for B's assets and liabilities so as to come within the terms of section 334(b), of the Internal Revenue Code.
(2) Corporation C is another wholly-owned subsidiary of Corporation A. All of the assets and liabilities of C are transferred to Corporation A in liquidation so as to come within the terms of section 332, of the Internal Revenue Code.
(3) Corporation A transfers to Corporation C all of the assets and liabilities received from Corporation B in exchange for stock and an interest bearing note so as to come within the terms of section 351, of the Internal Revenue Code.
The transfer in (1) from Corporation B to Corporation A is not subject to tax, since the transaction is either an occasional sale or a sale for resale (since Corporation A made no use of these assets other than transferring them to Corporation C). The transfer in (2) is exempt from tax as an occasional sale. However, for the transfer in (3) to be an occasional sale, it must consist of "all or substantially all of the property" of the transferor, as required by Revenue and Taxation Code section 6006.5(b). The requirement is met if the tangible personal property formerly belonging to Corporation B, which was transferred to Corporation A and then to Corporation C, represents 80 percent or more of the total tangible personal property held by Corporation A. 7/29/59; 8/7/59. (Am. 2004–2).