BEFORE THE UTAH STATE TAX
COMMISSION
_____________________________________
XXXXX
XXXXX
Petitioner : FINDINGS OF FACT,
: CONCLUSIONS
OF LAW,
v. : AND FINAL DECISION
:
AUDITING
DIVISION OF THE : Appeal No. 89-2305
UTAH STATE TAX COMMISSION :
: Account
No. XXXXX
Respondent :
_____________________________________
STATEMENT OF CASE
After
submitting briefs on the subject matter of this case, both Petitioner and
Respondent waived the right to a formal hearing. This decision is based on the entire contents of the file as
presently constituted on XXXXX.
The
parties stipulated to the following facts:
1.
Prior to XXXXX, XXXXX, "XXXXX", was an architectural firm licensed to
do business in Utah.
2.
Prior to XXXXX, XXXXX, XXXXX, "XXXXX", was an architectural firm
licensed to do business in Utah.
3.
On or about XXXXX, XXXXX exchanged ten shares of XXXXX stock for XXXXX shares
of XXXXX stock.
4.
On or about XXXXX, XXXXX of XXXXX with XXXXX were filed with the XXXXX.
5.
As a result of the merger, XXXXX and XXXXX combined to become XXXXX, XXXXX,
XXXXX and XXXXX "XXXXX".
6.
XXXXX had a net operating loss carry forward of approximately $$$$$ going into
the year ending XXXXX.
7.
XXXXX used XXXXX's net operating loss to offset income in the year ending
XXXXX.
8.
The Auditing Division disallowed XXXXX's use of XXXXX's loss.
CONCLUSIONS OF LAW
Utah
Code Ann. §59-7-108(14)(f) states that corporations acquiring the assets or
stock of another corporation may not deduct any net loss of the acquired
corporation incurred prior to the date of acquisition.
In
Savage Industries, Inc. v. Utah State Tax Commission, 811 P.2d 664, 670 (Utah
1991), the Utah Supreme Court addressed the above-referenced code section
directly when it decided that a corporation was not prohibited from using its
loss carryover deduction even though it had since been acquired by another
corporation.
Important
to the present case, the Court explained that the situation in Savage
"differs from instances where the acquired corporation is merged into the
acquiring corporation. There, the
surviving corporation is the "acquiring" corporation, and it appears
that the deduction would be prohibited."
Savage, supra, 811 P.2d at 670.
And
finally, Utah Admin. CodeR865-6F-14 states that loss carryovers and carrybacks
require different treatment under the state and federal statutes.
DECISION AND ORDER
In
the present case, the Tax Commission finds that XXXXX merged into the acquiring
corporation of XXXXX. Since XXXXX
remained as the surviving corporation after the merger, it may not utilize any
of XXXXX's deductions. XXXXX ceased to
exist.
The
situation in this case is unlike the circumstances of Savage wherein the
corporation still continued to operate "on its own" after the
acquiring corporation acquired it. In
the current case, XXXXX actually merged into XXXXX. XXXXX carries on the same business enterprise as XXXXX did in the
past, however, XXXXX is no longer continuing to function as a "separate
entity."
Petitioner
takes exception to the fine line distinction of the semantics involved. An acquisition, however, is not necessarily
a merger. The two are treated
differently and carry different tax liabilities.
Based
upon the foregoing the Tax Commission agrees with the Auditing Division and
finds that Petitioner is disallowed from using the loss carryover of XXXXX and
XXXXX.
DATED
this 12th day of May, 1992.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
ABSENT
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco S.
Blaine Willes
Commissioner Commissioner