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
(k) DISSOLUTION; LIQUIDATION; DISTRIBUTION OF ASSETS
395.2177 Cash Dividend, Substantial Change in Ownership—Not a Sale. Company A declared a stock dividend of 32 shares of common stock for each share of common stock held by its two shareholders. Prior to the stock dividend, Company B and Company C each held 25,000 shares. Each shareholder had the option to receive cash in lieu of the stock at a set price per share. Neither B nor C provided any consideration to A as part of the transfer of the stock or cash.
The distributions to Company B and Company C resulted in a change in the amount of stock owned by each party. The key to what occurred, however, is the fact that the ownership of Company A's tangible personal property did not change. Company B increased its percentage ownership of the stock of Company A, but did not ever obtain any ownership interest in the assets owned by Company A. The ownership of stock is different than the ownership of tangible personal property and the ownership of one does not equate to the ownership of the other. This means that Company B's increased ownership of Company A stock did not result in Company A selling any of its tangible personal property to Company B. Thus, the percentage change in stock ownership by the parties is not subject to tax. 10/21/97. (M99–1).