88-0741 - Corporation Franchise

 

BEFORE THE UTAH STATE TAX COMMISSION

_____________________________________

XXXXX

                                                                                    :           STIPULATION OF FACTS

            Petitioner,                                                         :

v.                                                                                 :

AUDITING DIVISION, UTAH STATE                      :           Appeal No. 88-0741

            TAX COMMISSION,                                     :

            Respondent.                                                     :

_____________________________________

            Petitioner and Respondent hereby stipulate as follows:

XXXXX/XXXXX

                        1.  Prior to XXXXX, XXXXX, XXXXX, and XXXXX (hereafter "the brothers~) cumulatively owned the majority of the stock of XXXXX operating corporations.

            2.  A stock holding and management corporation, XXXXX, (hereafter "XXXXX") was formed on XXXXX, to consolidate the corporations into a manageable structure.

            3.  At XXXXX, the stock of XXXXX was entirely owned by the brothers or members of their families, with any differences in the percentage of ownership due to pending settlement of divorces.

            4.  On XXXXX, XXXXX underwent a statutory merger with XXXXX and XXXXX changed its name to XXXXX (hereafter "XXXXX").

            5.  On XXXXX, shares of XXXXX stock were transferred between the brothers to give each brother and equal percentage of ownership after the settlement of divorces.

XXXXX

            6.  Prior to XXXXX, the stock of XXXXX (hereafter "XXXXX") was owned by the brothers with each owning 33 1/3% of the stock.

            7.  On XXXXX, XXXXX acquired 86.7% (21600 shares) of the stock of XXXXX in exchange for its own stock.  The remaining 13.3% (400 shares) was retained by XXXXX pending the settlement of a divorce.

            8.  For periods of time prior to the acquisition by XXXXX, XXXXX filed separate Utah corporate franchise tax returns.

            9.  In order to conform their tax year to the tax year of XXXXX, XXXXX filed a separate corporate franchise tax return for the short tax year XXXXX to XXXXX.  The return reported a current year's loss of $$$$$ and reported $$$$$ of prior years' losses as being available for carryover.

            10.  On XXXXX, the name of XXXXX was changed to XXXXX (hereafter "XXXXX").

            11.  On XXXXX, the divorce was settled and the remaining 400 shares of XXXXX were acquired by XXXXX.

            12.  On XXXXX, XXXXX was merged into XXXXX.

XXXXX

            13.  Prior to XXXXX, the XXXXX shares of stock of XXXXX (hereafter "XXXXX") were owned as follows:

                        XXXXX                                              XXXXX

                        XXXXX                                              XXXXX

                        XXXXX                                              XXXXX

                        XXXXX                                              XXXXX

            14.  On XXXXX, XXXXX acquired XXXXX's and XXXXX's stock in XXXXX in exchange for its own stock, giving XXXXX an 81% ownership in XXXXX.

            15.  XXXXX redeemed the shares owned by XXXXX and XXXXX during the following two years, leaving XXXXX with 100% ownership in XXXXX.

            16.  For periods of time prior to the XXXXX acquisition by XXXXX, XXXXX filed separate Utah corporate franchise tax returns.

            17.  In order to conform their tax year to the tax year of XXXXX, XXXXX filed a separate corporate franchise tax return for the short tax year XXXXX to XXXXX.  The return reported a current year's loss of $$$$$.

            18.  XXXXX's separate return loss was first carried back to prior XXXXX separate returns, where $$$$$ (as determined by Tax Commission adjustment) was applied to offset income, thus leaving $$$$$ of the loss available to be carried forward.

CONSOLIDATED RETURNS AND AUDIT

            19.  Starting with the fiscal year ending XXXXX, XXXXX, and later XXXXX, joined with its subsidiaries in filing Utah consolidated corporate franchise tax returns.

            20.  In XXXXX, XXXXX filed amended consolidated franchise tax returns for the years ending XXXXX, XXXXX, XXXXX, and XXXXX which followed amended federal income tax returns and reflected errors made on previously filed returns.

            21.  In its amended consolidated return for the fiscal year ending XXXXX, XXXXX carried over $$$$$ of XXXXX's separate return loss and applied it to offset consolidated income.

            22.  In its amended consolidated return for the fiscal year ending XXXXX, XXXXX carried over $$$$$ of XXXXX's separate return loss and applied it to offset consolidated income.

            23.  In XXXXX the Auditing Division began examining these amended returns and in a audit report dated XXXXX, disallowed the carryovers of the separate return losses on the consolidated returns.

            24.  XXXXX filed a Petition for Redetermination on XXXXX.

            25.  On XXXXX, the Auditing Division responded to XXXXX petition and reiterated its position.

            26.  On XXXXX, XXXXX filed a Request for Hearing before the Tax Commission in order to orally present arguments prior to the Tax Commission's rendering a final decision on their petition.

VERIFICATION

            STATE OF UTAH                                           :

            ) ss

COUNTY OF SALT LAKE                                        :

            I hereby certify that I have read the statements of fact that are contained in the foregoing Stipulation of Facts and verify that they are true and correct to the best of my knowledge.

            XXXXX

            Tax Manager

            XXXXX

            Subscribed and sworn to before me this XXXXX.

            Notary Public

My Commission expires:                                               Residing at:


XXXXX                                                                      DATED: XXXXX

Attorney for Petitioner

            DATED: XXXXX

XXXXX

Assistant Attorney General

Attorney for Respondent

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