Tax,
Family
Aug. 9, 2022
Seller beware – court rules that California can tax gain from the sale of goodwill
The trial court ruled, and the appellate court confirmed, that the FTB regulations for apportioning business income within the S corporation applied, rather than the personal income tax rules for sourcing income from the sale of intangibles at the shareholder level.
A California state appellate court recently upheld the trial court's decision in The 2009 Metropoulos Family Trust v. Franchise Tax Board (No. D078790 (Cal. Ct. App. May. 27, 2022), that nonresident shareholders of an S corporation source gain on the S corporation's sale of its intangible assets using the S corporation's apportionment factor and not based on the shareholders' state of residence. As a result, the nonresident shareholders were subject to Californ...
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