Is transferring trucks from a dissolved partnership to a corporation owned by the former partners taxable, when no stock or payment changes hands?

Plain-English summary

Anacola Trucking Service, Inc., a refuse-collection corporation, is owned by two shareholders who previously ran a similar business as a partnership (1953–1981). When the partnership was discontinued in 1981, two trash removal trucks were transferred to the corporation. The company said no remuneration (monetary or otherwise) was paid, the corporation assumed no liability of the partners or partnership, and no additional stock was issued. It asked whether the transfer was taxable.

The Department held that, if the books document a genuine contribution to capital, the transfer is not a taxable retail sale.

• What a "sale" requires. Under 20 NYCRR 526.7, a "sale" means any transaction transferring title or possession of tangible personal property for a consideration. "Consideration" includes money, exchange, barter, the rendering of any service, or an agreement therefor — and monetary consideration includes the assumption of liabilities, fees, rentals, or royalties.
• The capital-contribution rule. Under 20 NYCRR 526.6, "the transfer of property to a corporation, as a contribution to capital, at a time other than its organization, without the issuance of stock or other consideration, is not a retail sale."
• This transfer fits. Because no money, stock, assumed liabilities, or other consideration changed hands, the trucks moved to the corporation without consideration.
• Result. If entries on the corporation's books document the acquisition as a legitimate contribution to capital, the transaction is not subject to tax under Tax Law 1105(a) — it is a transfer without consideration and therefore not a retail sale within 20 NYCRR 526.6 and 526.7.

What this means for you

A no-strings capital contribution isn't a taxable sale. Moving assets into a corporation you own — with no payment, no assumed debt, and no new stock issued — lacks the consideration that makes a transfer a "sale." Without consideration, there's no retail sale to tax.

Watch for hidden consideration. The exemption depends on there being truly nothing given in return. If the corporation issues stock, pays anything, or assumes the transferor's liabilities, that's consideration — and the transfer can become taxable. (Contrast a property-for-stock transfer, which the Department has treated as a taxable exchange.)

Timing and paperwork matter. This rule covers contributions made at a time other than the corporation's organization, and it hinges on the books documenting a legitimate capital contribution. Record it properly and consistently.

Common questions

Q: I moved equipment from my old partnership into my corporation and no one paid anything. Is that taxable?
A: Not if it's a genuine contribution to capital — no stock issued, no payment, no assumed liabilities. With no consideration, it's not a taxable retail sale. Just make sure the corporate books document it as a capital contribution.

Q: What counts as 'consideration' that could make it taxable?
A: Money, barter or exchange, services rendered, or the assumption of the transferor's liabilities — and the issuance of stock. Any of these means the transfer was for consideration and may be taxed.

Q: Does it matter that this happened years after the corporation was formed?
A: The rule specifically covers contributions at a time other than the corporation's organization, so a later contribution to capital still qualifies as a non-sale when there's no consideration.

Citations and references

Tax Law:

• 1105(a) — taxes receipts from every retail sale of tangible personal property

Regulations (20 NYCRR):

• 526.7(a), (b) — a "sale" is a transfer of title or possession for consideration; "consideration" includes money, exchange, barter, services, or assumed liabilities
• 526.6 — a transfer of property to a corporation as a contribution to capital, at a time other than its organization, without the issuance of stock or other consideration, is not a retail sale

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1985.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a85_27s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-85(27)S
Sales Tax
July 8, 1985

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S840404B

On April 4, 1984 a Petition for Advisory Opinion was received from Anacola Trucking
Service, Inc., 31 Kirkwood Avenue, Geneva, New York 14456.
The issue raised is whether the transfer of title to certain vehicles from a dissolved
partnership to a corporation, whose stock is owned entirely by the two former partners, is a taxable
transaction.
Petitioner is a corporation engaged in municipal refuse collection since 1969. The two sole
shareholders of the corporation were partners in a similar business from 1953 to 1981, when the
partnership was discontinued. At that time two trash removal trucks were transferred from the
partnership to the corporation.
Petitioner states that neither the partnership nor either of the individual partners received any
remuneration, monetary or otherwise, for the vehicles, nor did the corporation assume any liability
of the partners or the partnership. The corporation did not issue additional stock to its shareholders
in exchange for the property conveyed.
Section 526.7 of the New York State sales and use tax regulations defines "Sale, selling or
purchase, (a) . . .
(1) The words sale, selling or purchase mean any transaction in which there is a
transfer of title or possession, or both, of tangible personal property for a
consideration.
(b). . . The term consideration includes monetary consideration, exchange, barter, the
rendering of any service, or any agreement therefor. Monetary consideration includes
assumption of liabilities, fees, rentals, royalties or any other charge that a purchaser,
lessee or licensee is required to pay."
Regulations Section 526.6(8)(ii) states: "The transfer of property to a corporation, as
contribution to capital, at a time other than its organization, without the issuance of
stock or other consideration, is not a retail sale."

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-85(27)S
Sales Tax
July 8, 1985

Accordingly, if entries on the books of the corporation document the acquisition of the trucks
as a legitimate contribution to capital, such transaction is not subject to the tax imposed under
Section 1105(a) of the Tax Law because it is a transfer without consideration and therefore not a
retail sale within the meaning and intent of regulation sections 526.6 and 526.7.

DATED: June 12, 1985

s/FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth herein.