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BTLG Table of Contents > Sales and Use Tax Court Decisions > B > Beatrice Co. v. State Board of Equalization … (1993)

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Beatrice Co. v. State Board of Equalization … (1993)

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Assumption of Liabilities Constitutes Consideration

Plaintiff corporation created a subsidiary and transferred to it all the assets of one of plaintiff's divisions. In exchange for those assets, the subsidiary issued 9,000 shares of the subsidiary's stock to plaintiff and assumed substantially all of the liabilities of the former division.

The Supreme Court held that even if the plaintiff remained primarily and jointly liable for debts and obligations assumed by its subsidiary, the assumption of liabilities by the subsidiary was consideration as between the transferor (the plaintiff) and the transferee (the subsidiary). Since the transfer was for consideration, it was a sale subject to sales tax. Beatrice Co. v. State Board of Equalization (1993) 6 Cal.4th 767.