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
(k) DISSOLUTION; LIQUIDATION; DISTRIBUTION OF ASSETS
395.2194 Dissolution and Transfer of Assets. A limited partnership consisting of Corporation A and Gift Trust B is in the business of leasing equipment and holds a seller's permit. Corporation A is owned by husband X and wife Y (81%), and their son Z (19%). Z also is the sole trustee of Gift Trust B.
The partnership plans to liquidate and distribute the assets to the partners in accordance with their respective interests. The assets distributed are subject to liabilities which will be assumed by the partners based on their respective interests.
After the liquidation, Corporation A will operate the business at the same site of the partnership.
Gift Trust B will transfer the assets it receives into a Limited Liability Company (LLC). The LLC will be the subject to the liabilities of the assets transferred. X and Y will contribute cash equivalent to 50% of the assets of the LLC and, thereafter, X and Y will hold a 5% interest in the LLC and Gift Trust B will hold a 95% interest.
Assuming the transactions were not undertaken solely for the purpose of avoiding or altering the sales and use tax liabilities of the parties, tax would apply to the series of transactions as follows:
(1) The transfer of partnership assets to Corporation A would be subject to tax to the extent of the liabilities assumed.
(2) Likewise, the transfer of partnership assets to Gift Trust B is subject to tax measured by the liabilities assumed.
(3) The transfer of assets by Gift Trust B to the LLC is an exempt occasional sale since it constitutes more than 80% of Gift Trust B's assets and Gift Trust B has more than an 80% interest in the LLC. 12/21/95.