Industrial Asphalt, Inc. v. State Board of Equalization

Opinion

STEPHENS, J.

*

Facts

The facts were stipulated, but a very brief summation establishes that Industrial and Huntmix were (and are) California corporations doing business in asphalt-related endeavors. They formed a joint venture partnership (referred to hereinafter as Venture) to do the same type of business.

Industrial contributed assets of $46,307,000 to Venture, which assumed liabilities of $10,342,000. Thus, a net value of the assets from Industrial was $35,965,000. Huntmix contributed assets of $21,328,000 to Venture which assumed liabilities of $3,806,000 for a net contribution of $17,522,000. The assets contributed constituted substantially all of the assets of each corporation.

Venture distributed to Industrial cash in the amount of $30,965,000 and to Huntmix $12,522,000, thus making each partner an equal member of Venture to the amount of $5 million.

The cash was obtained by Venture through a bank loan. Both corporations remained jointly and severally liable for the state liabilities to which Venture was also liable. The debts were, after the effective establishment of Venture, guaranteed by the corporations, though Venture was primarily liable.

The Tax Board considered the transaction as one of sale and taxed the corporations. They paid the taxes and sought reimbursement on the theory of no sale. The trial court agreed and ordered a refund. The board appeals.

The question is: were the transfers of assets by the corporations to Venture “sales”? The answer is yes.

We conceive no distinction between the case before us and

Cal-Metal Corp.

v.

State Bd. of Equalization

(1984) 161 Cal.App.3d 759 [207 Cal.Rptr.

[1240]

783], There, as here, we deal with a “commencing partnership.” There, as here, there was an assumption of liabilities. Assumption of liabilities is a “consideration”