Court Opinion

ID: 8050939
Source: CourtListenerOpinion
Date Created: 2022-09-09 04:11:49.949544+00
Date Added: 2024-06-11T16:37:41.950690
License: Public Domain

Horton, J.,
dissenting: Notwithstanding my reservations concerning the application of the RSA 78-B.-12 appeal provisions to this *601case, which I will not discuss, I would suggest that under the statutory scheme of RSA chapter 78-B, the conveyance of real estate from Lorden Lumber Company, Inc. to the individual plaintiffs Lorden was a transfer under RSA 78-B:l, as then in effect. The real estate did not pass by operation of law, as stated by the majority, but was identified as a corporate asset not necessary to satisfy corporate obligations; was selected as a corporate asset not to be converted to cash, and was distributed, in kind, to the shareholders. Although following the statutory dissolution mandates of RSA 293-A:88, II, this transaction requires a transfer from the corporation, and the property should not be characterized as passing by operation of law.
To reach the consideration issue, the majority “assumes” a transfer. I would hold that a transfer took place and find that the transfer was a taxable event under RSA 78-B:l. A taxable event having occurred, whether under the majority’s assumption or my analysis a tax is due. The amount of consideration must be determined in order to establish the amount of tax due. If there is no consideration (or less than $4,000), the appropriate tax is the minimum tax ($15).
I am convinced that the department of revenue administration correctly denied the refund. The individual Lordens held corporate stock which had value. When the real estate was transferred out of the corporation the value of that stock was reduced by some amount. Therefore, in the dissolution process there was less due to them from the corporation. All the “bargaining” that the majority feels was required was undertaken when the corporation was established. The parties incorporated under, and accepted the provisions of, the corporate law of this State. On incorporation, the shareholders agreed that upon dissolution of the corporation they would exchange the incidents of stock ownership for such real and personal property as may remain after the satisfaction of corporate obligations. See RSA 293-A:88, II. The dissolution procedure required a resolution of the board of directors recommending dissolution, and an agreement of the shareholders by action on the resolution. See RSA 293-A:85. When financial exchanges occur incident to the provisions of that law, there is consideration for the transfers. While establishing the amount of consideration is difficult, I find particularly appropriate in this case the department’s use of the value of the asset transferred to establish the presumptive value of the consideration.
It is easy to sympathize with honest citizens who, holding land in a closely held corporation, want to do away with the corporate form of holding and return to individual ownership. This might well be a form of transfer the legislature would choose to exempt from tax *602someday. However, this court should not undertake to establish the exemption. The impact of today’s decision reaches beyond the closely-held family real estate holding company. A major taxable transfer can be avoided, under today’s decision, by arranging for real estate to be the sole asset in a corporate or partnership name. This must be accomplished under favorable federal tax circumstances or with appropriate federal tax planning. The capital stock is then transferred or the partnership interest is assigned, to the buyer, who follows the Lorden liquidation and dissolution procedure.
I would affirm the department’s decision and dismiss the appeal.
Thayer, J., joins in the dissent.