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Smith (OTA Case No. 20036033). The matter concerns whether appellant is liable for tax on a distributive share of gain from the sale of a partnership interest because it constitutes California source income for the 2012 tax year. Appellant waived an oral hearing; the decision is based on the written record. The dispute involves additional proposed tax of $176,936 plus applicable interest from the Franchise Tax Board.",{"@graph":63,"@context":118},[64,80,101],{"@type":65,"itemListElement":66},"BreadcrumbList",[67,71,74,77],{"item":68,"name":69,"@type":70,"position":9},"https://docshare.wps.com","Home","ListItem",{"item":72,"name":10,"@type":70,"position":73},"https://docshare.wps.com/template/",2,{"item":75,"name":41,"@type":70,"position":76},"https://docshare.wps.com/template/letters/",3,{"item":78,"name":59,"@type":70,"position":79},"https://docshare.wps.com/template/office-of-tax-appeals-state-of-california-opinion-ota-case-no-20036033/304359/",4,{"url":78,"name":59,"@type":81,"image":82,"author":87,"headline":59,"publisher":90,"fileFormat":93,"inLanguage":57,"description":61,"dateModified":94,"datePublished":95,"encodingFormat":93,"isAccessibleForFree":96,"interactionStatistic":97},"DigitalDocument",{"url":83,"@type":84,"width":85,"height":86},"https://docshare.wps.com/thumbnails/office-of-tax-appeals-state-of-california-opinion-ota-case-no-20036033/304359.png","ImageObject",442,249,{"name":88,"@type":89},"Kurz","Person",{"url":68,"name":91,"@type":92},"DocShare","Organization","application/pdf","2026-10-01","2026-09-19",true,{"@type":98,"interactionType":99,"userInteractionCount":79},"InteractionCounter",{"@type":100},"ViewAction",{"@type":102,"mainEntity":103},"FAQPage",[104,110,114],{"name":105,"@type":106,"acceptedAnswer":107},"What question did the Office of Tax Appeals decide in OTA Case No. 20036033?","Question",{"text":108,"@type":109},"It decided whether L. Smith is liable for tax on a distributive share of gain from the sale of a partnership interest because it constitutes California source income.","Answer",{"name":111,"@type":106,"acceptedAnswer":112},"What tax year and amount were at issue?",{"text":113,"@type":109},"The appeal concerns the 2012 tax year. The Franchise Tax Board proposed additional tax of $176,936 plus applicable interest.",{"name":115,"@type":106,"acceptedAnswer":116},"Why did the Office of Tax Appeals decide the case based on the written record?",{"text":117,"@type":109},"L. Smith waived the right to an oral hearing, so OTA determined the matter based on the written record.","https://schema.org",{"og:url":78,"og:type":120,"og:title":59,"og:site_name":91,"og:description":61},"article",{"robots":122,"canonical":78},"index,follow",{"doc_id":124,"site_id":56},304359,1790191102,{"code":4,"msg":5,"data":127},{"doc_id":124,"user_id":128,"nickname":88,"user_avatar":129,"doc_module":9,"category_id":40,"category_name":41,"doc_title":59,"doc_description":61,"doc_content":130,"file_id":131,"file_url":132,"file_type":133,"file_size":134,"view_count":79,"is_deleted":4,"is_public":9,"is_downloadable":9,"audit_status":9,"page_count":135,"language":136,"language_code":57,"site_id":56,"html_lang":57,"table_of_contents":137,"faqs":138,"seo_title":139,"seo_description":61,"update_tm":140,"read_time":141},2336478945635,"https://ap-avatar.wpscdn.com/davatar_6f874abed73319feea01a86fa6f0fab8","OFFICE OF TAX APPEALS STATE OF CALIFORNIA  \nIn the Matter of the Appeal of:  \nL. SMITH  \n) OTA Case No. 20036033)  \n))  \n)  \n   )  \nOPINION  \nRepresenting the Parties:  \nFor Appellant: L. Smith  \nFor Respondent: Matt Cappel, Tax Counsel  \nChris Casselman, Tax Counsel IV  \nFor Office of Tax Appeals: William J. Stafford, Tax Counsel III  \nK. GAST, Administrative Law Judge: Pursuant to Revenue and Taxation Code (R&TC) section 19045, L. Smith (appellant) appeals an action by respondent Franchise Tax Board (FTB) proposing additional tax of $176,936, plus applicable interest, for the 2012 tax year.  \nAppellant waived the right to an oral hearing; therefore, Office of Tax Appeals (OTA) decides the matter based on the written record.  \nISSUE  \nWhether appellant is liable for tax on a distributive share of gain from the sale of a partnership interest because it constitutes California source income.1  \n1 Throughout this Opinion,“partnership interest” and “membership interest” are used interchangeably because the limited liability companies at issue are classified as partnerships for federal and California income tax purposes.  \nFACTUAL FINDINGS2  \nGeneral Factual Background  \n1. Appellant, an individual, was a California nonresident.  \n2. Appellant owned an indirect membership interest in a limited liability company (LLC) called SOSV, LLC (Holdco), which was classified as a partnership for federal and California income tax purposes. Holdco was directly owned by three members: Skokie Boulevard Investors, LLC held a 50 percent membership interest; HLS Tyme II Share, LP held a 35 percent membership interest; and the S. Ginsburg 2001 Irrevocable Trust held a 15 percent membership interest.3  \n3. Holdco had its principal office in Illinois, where its sole manager, S. Ginsburg (Ginsburg), an individual, was located. Holdco was a holding company, and on its final 2012 California LLC tax return (Form 568), it reported no tangible (real or personal) property at either the beginning or ending of the year, no payroll or other operating expenses, and no sales.  \n4. Holdco’s sole function was to hold its 50.50 percent (direct) membership interest in an entity called Shell Vacations, LLC (Shell), which was based in Arizona and classified asa partnership for federal and California income tax purposes. The remaining  \n49.50 percent membership interest in Shell was owned by York Special Opportunities Fund, LP (York), which is unrelated to Holdco or its direct and indirect members.  \n5. Shell, through its subsidiaries and affiliates, was in the business of acquiring, developing, and selling timeshare/vacation ownership interests and vacation club memberships. Shell conducted business within and without California.  \nHoldco  \n6. On its 2012 Form 568, Holdco indicated it began doing business in California in 1997 and its principal business activity was timeshare developer.  \n7. Holdco’s Third Amendment To Operating Agreement (the Holdco Agreement), effective in 2002, indicates Ginsburg was once a direct member of Holdco but he assigned his  \n2 Unless otherwise specified, all facts are applicable to the 2012 tax year at issue.  \n3 The record does not specify in which of Holdco’s direct members appellant held an interest (direct or indirect) . However, neither party asserts that affects the outcome of this appeal.  \nmembership interests in Holdco to his trust, the S. Ginsburg 2001 Irrevocable Trust. The Holdco Agreement states Ginsburg was appointed Holdco’s sole manager at least as of 2002, and he was authorized to exercise all powers of Holdco. It further states that in 2002, Holdco owned 90 percent of the membership interests in Shell, and Holdco was Shell’s manager. The Holdco Agreement is signed by the trustee of the S. Ginsburg 2001 Irrevocable Trust and Ginsburg himself, and both do so in their capacity as general partners, members, and/or managers of Holdco’s direct members at the time.  \n8. At some point in time, Ginsburg held a 50 percent direct me","cbCaimnn7TLM8qn9","https://ap.wps.com/l/cbCaimnn7TLM8qn9","pdf",383750,23,"English","# Issue\n## California source income and distributive share of gain\n# Factual Findings\n## General factual background\n## Holdco and Shell structure\n## Board management and operating agreements","[{\"question\":\"What question did the Office of Tax Appeals decide in OTA Case No. 20036033?\",\"answer\":\"It decided whether L. Smith is liable for tax on a distributive share of gain from the sale of a partnership interest because it constitutes California source income.\"},{\"question\":\"What tax year and amount were at issue?\",\"answer\":\"The appeal concerns the 2012 tax year. The Franchise Tax Board proposed additional tax of $176,936 plus applicable interest.\"},{\"question\":\"Why did the Office of Tax Appeals decide the case based on the written record?\",\"answer\":\"L. Smith waived the right to an oral hearing, so OTA determined the matter based on the written record.\"}]","OFFICE OF TAX APPEALS STATE OF CALIFORNIA - Opinion - OTA Case No. 20036033 | PDF",1789812212,8]