Facts

In 1992, plaintiffs W. Rocke and Glenda Garcia owned a condemned office building in the San Jose. Defendant Franchise Tax Board levied $357,000 in income taxes after a jury awarded plaintiffs $3.2 million in compensation. The interest and penalties from plaintiffs' failure to pay increased the assessment to $1,181,186. The plaintiffs sued defendants to recover the income tax paid.

PLAINTIFFS' CONTENTIONS:
The plaintiffs contended they owed no income taxes on the award, having invested the sale proceeds into property with a similar use. They argued this investment in the Golf Course at Boulder Ridge deferred tax liability pursuant to Internal Revenue Code Section 1033.

DEFENDANT'S CONTENTIONS:
The defendant contended the golf course was not a legitimate transaction between a closely held corporation and its owners, and did not occur within the time required by Section 1033. Consequently, it was not protected against liability under Section 1033.

Damages

The plaintiffs sought $1,181,186 in income taxes paid to the state.

Result

Judge Paul Alvarado awarded plaintiffs $1,181,186 for the full amount of defendant's assessment.