Beatrice Co. v. State Board of Equalization

Beatrice Company (Beatrice) asks this court to clarify whether an assumption of liabilities by a commencing subsidiary corporation in exchange for a transfer of tangible personal property by the parent corporation constitutes consideration for the transferred property which subjects the transaction to taxation under Revenue and Taxation Code sections 6051 and 6006, subdivision (a).

We granted Beatrice’s petition for review in order to resolve continuing uncertainty as to whether an assumption of liabilities constitutes consideration for a transfer of assets when the original obligor remains primarily liable. The uncertainty arises in part from an apparent conflict between the decisions in Macrodyne Industries, Inc. v. State Bd. of Equalization (1987) 192 Cal.App.3d 579 [ 237 Cal.Rptr. 537 ], and Cal-Metal Corp. v. State Bd. of Equalization (1984) 161 Cal.App.3d 759 [ 207 Cal.Rptr. 783 ].

We conclude that, although Beatrice remained primarily liable on debts and obligations assumed by its Standard Dry Wall Products, Inc., subsidiary (Standard Dry Wall), Standard Dry Wall’s assumption of liability for those debts and obligations was consideration. For that reason the…