California Legislature—2015–16 Regular Session

Assembly Bill No. 1438

Introduced by Assembly Member Perea

February 27, 2015

An act to amend Section 24943 of the Revenue and Taxation Code, relating to taxation.

LEGISLATIVE COUNSEL’S DIGEST

AB 1438, as introduced, Perea. Involuntary conversions.

The Corporation Tax Law generally provides that no gain is recognized on the involuntary conversion of property if specified conditions are met.

This bill would make nonsubstantive changes to this provision.

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 24943 of the Revenue and Taxation Code
is amended to read:

24943.  

begin delete If property (as end delete begin insert No gain shall be recognized if property,
as end insert a result of its destruction in whole or in part, theft, seizure, begin delete or
requisition or condemnation or end delete begin insert requisition, condemnation, end insert threat begin insert , end insert
or imminence begin delete thereof) end delete begin insert of threat, end insert is compulsorily or involuntarily
begin delete converted-- end delete begin insert converted into any of the following: end insert

(a)  begin delete Into property end delete begin insert Property end insert similar or related in service or use to
the property begin delete so converted, no gain shall be recognized end delete begin insert that was
converted end insert .

(b)  begin delete Into money, end delete begin insert Money, end insert and the disposition of the converted
property occurred before January 1, 1953, begin delete no gain shall be
recognized end delete if begin delete such end delete begin insert the end insert money is forthwith in good faith, under
regulations prescribed by the Franchise Tax Board, expended in
the acquisition of other property similar or related in service or
use to the property begin delete so end delete begin insert that was end insert converted, or in the acquisition of
control of a corporation owning such other property, or in the
establishment of a replacement fund. If any part of the money is
not so expended, the gain shall be recognized to the extent of the
money begin delete which end delete begin insert that end insert is not so begin delete expended (regardless end delete begin insert expended,
regardless end insert of whether begin delete such end delete begin insert the end insert money is received in one or more
taxable years and regardless of whether or not the money begin delete which end delete
begin insert that end insert is not so expended constitutes begin delete gain) end delete begin insert gain end insert . begin delete For end delete

begin insert (c) end insert begin insert   end insert begin insert For end insert purposes of this begin delete subsection end delete begin insert section end insert and Section 24944,
the begin delete term “disposition end delete begin insert following shall apply: end insert

begin insert (1) end insert begin insert   end insert begin insert “Disposition end insert of the converted property” means the
destruction, theft, seizure, requisition, or condemnation of the
converted property, or the sale or exchange of begin delete such end delete begin insert the end insert property
under threat or imminence of requisition or condemnation.

begin delete

For purposes of this section and Section 24944, the term
“control”

end delete

begin insert (2) end insert begin insert   end insert begin insert “Control” end insert means the ownership of stock possessing at least
80 percent of the total combined voting power of all classes of
stock entitled to vote and at least 80 percent of the total number
of shares of all other classes of stock of the corporation.