Robert Half Int'l, Inc. v. Franchise Tax Bd.

Robert Half International, Inc., appeals from a judgment entered after the trial court granted summary judgment to respondent Franchise Tax Board (FTB). Appellant contends the trial court erred when it ruled appellant was not entitled to deduct against its California corporate franchise tax a “nonbusiness” loss that it had incurred. We agree the court interpreted the applicable statue incorrectly and will reverse the judgment.

I. Factual and Procedural Background

At the time of the events giving rise to this case, appellant was known as Boothe Financial Corporation. Accordingly, for the remainder of this opinion, we will refer to appellant as Boothe.

In January 1980, Boothe acquired in a statutory merger the assets of an entity known as the IDS Realty Trust. Following the merger, Boothe’s principal business was real estate development, and the leasing and sale of computer and other equipment.

Pursuant to the terms of the merger, Boothe assumed the obligation to issue its own shares under a warrant that was held by a third party, Investors Diversified Services, Inc. As a result of the merger, the warrant became a right to purchase 480,000 shares of Boothe’s stock,…