The California 3725 form is a crucial document used to report the transfer of assets from a parent corporation to its insurance company subsidiary. This form helps track these transactions and determine any applicable capital gains or losses. Completing this form accurately is essential for compliance with California tax regulations, so ensure you fill it out by clicking the button below.
The California Form 3725 serves a critical function in the realm of corporate taxation, specifically addressing the transfer of assets from a parent corporation to its insurance company subsidiary. This form is essential for tracking these asset transfers and determining any associated capital gains or losses. It applies to transactions initiated on or after June 23, 2004, and is particularly relevant when appreciated properties are involved. When a parent corporation transfers such properties, the California Revenue and Taxation Code (R&TC) Section 24465 allows for the deferral of gains, provided the assets are actively used in the insurer's trade or business. The form requires detailed information about the properties transferred, including their fair market value at the time of transfer and the cost basis. Additionally, it addresses the subsequent use or disposition of these assets by the insurance company, determining whether gains should be recognized as income. By completing this form accurately, corporations ensure compliance with tax regulations while effectively managing their financial reporting obligations.
TAXABLE YEAR
Assets Transferred from Parent Corporation
CALIFORNIA FORM
2012
3725
to Insurance Company Subsidiary
Attach to Form 100 or Form 100W.
Parent corporation name
California corporation number
FEIN
Part I Assets Transferred from Parent Corporation to Insurance Company Subsidiary
Section A – Information on Properties Transferred
Were appreciated properties transferred to an insurance company subsidiary? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes No If “Yes,” enter the company’s name, California corporation number, and/or FEIN (see instructions), then continue with line 2. If “No,” do not complete this form.
Insurance company name
2 Does the insurance company use the assets it received from its parent corporation in active conduct of a trade
Yes No
or business of the insurer?
If “Yes,” continue with Section B. If “No,” go to Part II.
Section B – Deferred Capital Gains. Use additional sheets if necessary.
(a)
(b)
(c)
(d)
(e)
(f)
(g)
Taxable year
Description of
Location of
Date transferred
Fair market value at
Cost or
Amount of gain
property
(mo., day, yr.)
date of transfer
other basis
deferred under R&TC
Section 24465
(e) less (f)
3
Part II Assets Transferred from Insurance Company to Other Companies
Section A – Information on Disposition of Properties
4
Does the insurance company still use the assets listed in Part l, Section B, in its active conduct of trade or business?
Yes
No
If “Yes,” corporation is not required to complete Part II, Section B or Section C. If “No,” go to line 5.
5
Did the insurance company dispose of any assets received from the parent corporation?
If “Yes,” go to line 6. If “No,” gain is taxable, go to Section B or Section C.
6
Did the insurance company sell the assets to another company within the combined reporting group?
If “Yes,” gain is non-taxable. If “No,” gain is taxable, go to Section B or Section C.
Section B – Short-Term Capital Gains and Losses-Assets Held One Year or Less. Use additional sheets if necessary.
Date of disposal
Fair market value
Gain (loss)
or gross sales price
(d) less (e)
7
8 Short-term capital gains (losses). Total amounts in column (f). Enter here and on Form 100 or Form 100W, Side 5, Schedule D, Part I, line 1, column (f) or Schedule D (100S), Section A or Section B, Part I, line 1, column (f).
See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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FTB 3725 2012 Side
Section C – Long-Term Capital Gains and Losses-Assets Held More Than One Year. Use additional sheets if necessary.
9
0 Long-term capital gains (losses). Total amounts in column (f). Enter here and on Form 100 or Form 100W, Side 5, Schedule D, Part II, line 5, column (f) or Schedule D (100S), Section A or Section B, Part II, line 4, column (f).
General Information
A Purpose
Use form FTB 3725, Assets Transferred from Parent Corporation to Insurance Company Subsidiary, to track the assets transferred from a parent corporation to an insurance company subsidiary. In addition, use this form to figure capital gains (losses) if the parent corporation transferred assets to an insurance company subsidiary beginning on or after June 23 2004.
California Revenue and Taxation Code (R&TC) Section 24465 provides that when a parent corporation transfers appreciated property to an insurance company subsidiary, the gain is deferred if the property transferred to the insurer is used in the active conduct of
a trade or business of the insurer. The gain must be recognized as income if any of the following apply:
•The transferred property is no longer owned by an insurer in the taxpayer’s commonly controlled group (or a member of the taxpayer’s combined reporting group).
•The property is no longer used in the active conduct of the insurer’s trade or business (or the trade or business of another member in the taxpayer’s combined reporting group).
•The holder of the property is no longer held by an insurer in the commonly controlled group of the transferor (or a member of the taxpayer’s combined reporting group).
R&TC Section 24465 applies to transactions entered into on or after June 23, 2004.
B Definitions
1.Appreciated property – Appreciated property means property whose fair market value (FMV), as of the date of the transfer, exceeds its adjusted basis as of that date.
2.Commonly controlled group – Commonly controlled group exists when stock possessing more than 50% of the voting power is owned, or constructively owned,
by a common parent corporation (or chains of corporations connected through the common parent) or by members of the same family, see R&TC Section 25105. Also, a commonly controlled group includes corporations that are stapled entities,
see R&TC Section 25105(b)(3). Special rules are provided in R&TC Section 25105 for partnerships, trusts, and transfers of voting power by proxy, voting trust, written shareholder agreement, etc.
Speciic Line Instructions
Part I – Assets Transferred from Parent Corporation to Insurance Company Subsidiary
Section A – Information on
Properties Transferred
Line – Enter the insurance company’s California corporation number or federal employer identification number (FEIN). If the insurance company does not have one of these numbers, enter “not applicable” and continue with line 2.
Section B – Deferred Capital Gains
Line 3, column (b) – Description of property. Describe the assets the parent corporation transferred to an insurance company subsidiary.
Line 3, column (e) – Fair market value at date of transfer. FMV is the price that the property would sell for in the open market.
Line 3, column (f) – Cost or other basis. In general, the cost or other basis is the cost of the property plus purchase commissions and improvements minus depreciation, amortization, and depletion. Enter the cost or adjusted basis of the asset for California purpose.
Part II – Assets Transferred from Insurance Company to Other Companies
Section B – Short-Term Capital Gains and Losses- Assets Held One Year or Less and
Section C – Long-Term Capital Gains and Losses-Assets Held More Than One Year
Report short-term or long-term capital gains (losses) based on the length of time the parent corporation held the assets.
Line 7 and Line 9, column (b) – Description of property. Describe the assets that the insurance company sells to another company; or the transferred assets that the insurance company does not use in its active trade or business.
Line 7 and Line 9, column (d) – Fair market value or gross sales price. Enter the FMV of the assets as of the date that the insurance company no longer uses the assets in its active trade or business. Or, enter the gross sales price of the assets if the insurance company sells the assets to another company.
Line 8 – Short-term capital gains (losses). Total amounts in column (f). Enter total short-term capital gains (losses) here and on Form 100 or Form 100W, Side 5, Schedule D, Part I, line 1, column (f) or Schedule D (100S), Section A or Section B, Part I, line 1, column (f). Write on Schedule D, under column (a) Description of property: “FTB 3725” and attach a copy of form FTB 3725 to the tax return.
Line 0 – Long-term capital gains (losses). Total amounts in column (f). Enter total long-term capital gains (losses) here and on Form 100 or Form 100W, Side 5, Schedule D, Part II, line 5, column (f) or Schedule D (100S), Section A or Section B, Part II, line 4, column (f). Write on Schedule D, under column (a) Description of property: “FTB 3725” and attach a copy of form FTB 3725 to the tax return.
Side 2 FTB 3725 2012
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