Ariz. Admin. Code § 15-5-2010

Current through Register Vol. 30, No. 24, June 14, 2024

Section R15-5-2010 - Transactions between Affiliated Persons

A. For purposes of this rule, the following definitions apply:

1. "Actual ownership" means direct ownership and control but does not include ownership by or through affiliated persons.

2. "Affiliated persons" means members of the individual's family or persons who have ownership or control of a business entity.

3. "Constructive purchase price" means the fair market value or, if the fair market value cannot be determined, the value established by expert appraisal that takes into consideration all factors relevant to the transaction.

4. "Control of a business entity" means direct or indirect ownership or control of more than 50% of the business entity. The following guidelines, as to indirect ownership, shall apply for purposes of determining control of a business entity.

a. A corporation, partnership, estate, or trust shall be considered as being owned proportionately by or for its shareholders, partners, or beneficiaries.

b. An individual shall be considered as owning directly or indirectly that portion which is owned by or for members of the individual's family.

c. The ownership of stock by a corporation, partnership, estate, or trust shall be considered actual ownership to its shareholders, partners, or beneficiaries for purposes of making another individual a constructive owner.

d. Ownership based on a family relationship shall not be treated as actual ownership by the related party for the purpose of making another individual a constructive owner.

5. "Fair market value" means the gross receipts that the transaction would have brought in the open market at a time and location similar to that of the affiliated party transaction and between a willing purchaser and a willing seller, who are not affiliated and have reasonable knowledge of the relevant facts.

6. "Members of the individual's family" means the relationship of spouse, brothers, and sisters, whether by whole or half blood and including adopted persons, ancestors, and lineal descendants.

B. The tax shall be computed upon the constructive purchase price when:

1. The transaction is between affiliated persons, and

2. The facts and circumstances indicate that the reported gross receipts from the transaction are not indicative of the fair market value of the transaction.

Ariz. Admin. Code § R15-5-2010

Renumbered from Section R15-5-1850 and amended effective October 14, 1993 (Supp. 93-4). Corrected typographical error to reflect what was filed with the Office of Secretary of State October 14, 1993; changed "owner" to "owned" in subsection (A)(4)(a) (Supp. 97-1).