California partnership sale gain not deferred

August 2012


California's combined reporting intercompany transaction regulations are applicable to transactions between corporations that are members of the same combined reporting group. The sale of a partnership interest from a corporation to a disregarded LLC whose sole owner is a partnership does not qualify as a transaction between corporations.  Accordingly, any gain resulting from the partnership interest sale would not be deferred under the intercompany transaction regulations.  Rather, the sale should be currently recognized by the seller corporation. [California Franchise Tax Board Chief Counsel Ruling 2012-02 (7/26/12)]

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