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Contact Information:
Edward S. Kisscorni, CPA
290 Suncrest Court, SW
Grandville, MI 49418

Office: 616/233-0667
Cell: 616/443-6730
Fax: 616/233-0667

Blog: www.EdKisscorni.com/Blog1
Email: Ed@EdKisscorni.com
 



 



 

 Blog 
Thursday, May 01 2014

Asset Disposition Was Casual Transaction

In South Lyon Apartment, LLC v. Department of Treasury, Michigan Court of Appeals, No. 313943, March 13, 2014, a Michigan taxpayer’s asset disposition was properly determined to be a casual transaction under the Single Business Tax (SBT).  The Court of Appeals ruled that it was properly excluded from the tax base.  

The taxpayer’s sole asset was a 50% interest in a limited partnership that operated an apartment complex.  The SBT law defined "casual transaction" to be a transaction made in other than the ordinary course of repeated and successive transactions of a like character, except that a transaction made or engaged in by a person that is incidental to that person’s regular business activity is a business activity.  "Incidental" means something minor and of little importance.

In this case, the Court of Appeals determined the sale of the taxpayer’s sole asset as a major event, a significant act in the financial sense that ended the taxpayer’s business interest in the partnership.  A one-time transaction, the asset disposition was not incidental.  Thus, the taxpayer’s sale of its only asset qualified as a casual transaction and was not subject to the SBT.

Sale Under Asset Purchase Agreement Was Casual Transaction

In Sovereign Sales, LLC, v. Department of Treasury, Michigan Court of Appeals, No. 313982, March 18, 2014, a Michigan taxpayer’s sale under an asset purchase agreement was determined to be a casual transaction under the Single Business Tax (SBT).  Therefore it was properly excluded from the tax base.

Under the APA, the taxpayer agreed to sell to a competitor all of its business assets including the accounts, purchase orders, licenses, permits, copyrights, trademarks, good will, equipment, and inventory, and entered into a covenant not to compete. The SBT law defined "casual transaction" to be a transaction made in other than the ordinary course of repeated and successive transactions of a like character, except that a transaction made or engaged in by a person that is incidental to that person’s regular business activity is a business activity. "Incidental" means something minor and of little importance.

The Court of Appeals rejected the department’s argument that the sale of the taxpayer’s entire inventory to the competitor was of like character with its ongoing business of selling its inventory to retailers.  In this case, the asset purchase was not of like character with the taxpayer’s previous repeated and successive transactions.  The sale of substantially all of its assets was not incidental.  Thus, the taxpayer’s sale of essentially the entire business qualified as a casual transaction and was not subject to the Single Business Tax.

Posted by: Ed Kisscorni AT 01:37 pm   |  Permalink   |  0 Comments  |  Email
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