Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2014
Sales and Use Tax Annotations
585.0000 VEHICLES, VESSELS, AND AIRCRAFT—Regulation 1610
585.0278 Transfer of Stock for Interest in Aircraft. A taxpayer owns 50% of the outstanding stock of a Subchapter S Corporation. The Corporation's sole asset is a Cessna aircraft. The Corporation is not in the business of selling aircraft. The taxpayer wishes to exchange his 50% stock ownership in the Corporation for a 50% direct interest in the aircraft. The aircraft would be registered showing the taxpayer as co-owner of the aircraft along with the Corporation. The reason the taxpayer desires the transfer is to facilitate the subsequent sale of his 50% interest in the aircraft to a third party, who has no interest in investing in the Corporation. The taxpayer will use the aircraft prior to selling his 50% interest to the third party. There is a sale of the 50% interest in the aircraft to the taxpayer by the Corporation. Fifty percent stock ownership in the Corporation is something of value at the time of the transfer and constitutes consideration. The taxable sales price is the value of that consideration and any other form of consideration (e.g., assumption of liabilities). Since the Corporation's sole asset is the aircraft, the value of the shares transferred would be equivalent to 50% of the value of the aircraft. Thus, use tax would be measured by 50% of the value of the aircraft.
The taxpayer's subsequent sale of the 50% interest in the aircraft to a third party will be subject to use tax, measured by the sales price. 10/21/96.