Legal Ruling 1958-12
California Franchise Tax Board
Legal Ruling No. 012
June 26, 1958
Liquidating Activities: Doing Business
As a matter of factual determination the liquidating activities of the subject corporation did not constitute doing business.
Taxpayer, a Nevada corporation qualified to do business in California, withdrew in January, 1949, however, it was not dissolved. In 1947 and 1948 the operating assets had been sold and the only assets remaining as of January 1, 1949 were bank deposits and Federal tax refunds receivable. After withdrawal taxpayer maintained an office in Los Angeles with X Corporation. There were no activities nor office in Nevada. Taxpayer had no income subsequent to January 1, 1949, although salaries and certain other expenditures were made during the year. Advice is requested as to whether taxpayer was "doing business" after its withdrawal.
"Doing business" is defined as actively engaged in any transaction for financial or pecuniary gain or profit. A corporation remaining in existence solely for the purpose of collecting its accounts receivable, discharging its accounts payable, and pursuing a claim for refund of Federal taxes has been held not to be doing business within the meaning of the law. Such transactions were not aimed at the production of income. (Appeal of Johnson Foundry & Machine Co., State Board of Equalization, November 17, 1949). The instant case presents a similar situation. The records show that taxpayer had no receipts and no income in 1949. There is no evidence shown of any transaction entered into for profit, it appearing that the office staff was maintained merely to prosecute Federal tax claims and accomplish winding up of the affairs of the corporation, all operating assets having been disposed of. Although a corporation may withdraw and yet continue activities which constitute "doing business", the activities of taxpayer were not of such a nature and taxpayer was not doing business after its withdrawal.