In this case, the Texas based client sold Texas based radio and TV stations for a significant gain. Since the California operations were unitary with the Texas and other operations the client properly apportioned the extraordinary gain. This resulted in over $10 million in California Franchise tax.
Upon our review of the return we determined that the taxpayer had correctly filed the return under the applicable rules in California. However, based on our perspective we nonetheless advised the client to seek a refund, simply based on the fact that the tax was not fair. Ironically, the very rule in California (i.e. alternative apportionment §25137) to correct “unfair” situations operated in this case to tax the client unfairly. In the end, we secured a $2.8 million settlement with the Franchise Tax Board, “found money” based on a refund claim literally filed days before the statute of limitations for the refund would have otherwise expired.
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