Muething v. Franchise Tax Board

Opinion

PARRILLI, J.

The question in this case is whether certain stock qualified as “small business stock” when sold. If it did, the transaction was not subject to California’s preference tax. The trial court concluded the stock at issue did qualify as “small business stock” and thus no part of the gain could be taxed as preference income. We disagree for the reasons set out below and reverse the judgment.

To resolve the issue we consider tax statutes that have been repealed, but still govern the disposition of considerable outstanding tax claims. Under the repealed law, capital gain from the…