Laws, Regulations & Annotations

C

220.0000 CHANGE IN OWNERSHIP

Annotation 220.0091

220.0091 Corporate Reorganization. Parent Corporation is owned 51.06 percent by a revocable husband and wife trust. Subsidiary B owns real property in California. Under a proposed corporate reorganization pursuant to Internal Revenue Code sections 355 and 368(a)(1)(D), commonly referred to as a "non-pro rata split off," Parent Corporation would transfer all the stock of Subsidiary B to the revocable trust in exchange for a percentage of nonvoting stock of Parent. Following the proposed reorganization, the revocable trust would continue to own 51.06 percent of the outstanding voting stock of Parent, but the trust's share of nonvoting stock and total outstanding stock would be reduced to less than 50 percent. The trust would also own 100 percent of all the outstanding stock of Subsidiary B. Such a reorganization would not result in a change in ownership of the real property of Subsidiary B pursuant to Revenue and Taxation Code section 64, subdivision (a). Section 64, subdivision (b), does not apply because Subsidiary B would not be part of the "affiliated group" both before and after the transaction. Further, section 64, subdivision (c), does not apply because the revocable trust is not a separate legal entity that owned a controlling interest in Subsidiary B through the revocable trust and Parent Corporation prior to the reorganization. C 9/23/2004.