Personal Income Tax Appeal Decision Form - California State Board Of Equalization (Page 4 of 4) in pdf

Personal Income Tax Appeal Decision Form - California State Board Of Equalization Page 4

Appeal of BML Inc./Bayview Mortuary

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appellant cannot include the $166,667 it spent to reacquire its treasury stock in its calculation of

gain from the sale of its business assets. Next, IRC section 162(k) provides that no deduction

shall be allowed for any amount paid or incurred by a corporation in connection with the

reacquisition of its stock. IRC section 162(k)(2) then provides that the foregoing rule shall not

apply to:

1. Any deduction allowable under section 163 (relating to interest);

2. Any deduction for amounts which are properly allocable to indebtedness and

amortized over the term of such indebtedness; or

3. Any deduction for dividends paid (within the meaning of [IRC] section 561).

Here, appellant does not assert, and the record does not indicate, that any of the foregoing

exceptions apply to appellant’s repurchase of treasury stock from Mr. Miller’s estate. In

addition, appellant has not shown that its reacquired treasury stock could be, and was,

transformed into an asset at the time it sold its business assets, so that its basis could be used in

the calculation of gain from the sale of business assets. Appellant has thus not shown that

respondent’s removal of the amount appellant spent to repurchase treasury stock from its

calculation of gain on the sale of business assets, was in error.

Conclusion

Respondent’s action is accordingly sustained.

BML_ak

NOT TO BE CITED AS PRECEDENT

Personal Income Tax Appeal Decision Form - California State Board Of Equalization Page 4