When "Gross" is Really Not "Gross" And Other Anomalies

In General Motors Corp. v. Franchise Tax Board, Case No. B165665 (June 30, 2004), the California Court of Appeals held that the Franchise Tax Board ("FTB") properly excluded returns of principal from certain sales of securities.

General Motors ("GM"), a Delaware corporation, maintains a "Treasury Department" in New York City. The Treasury Department manages the excess cash of GM and its various related corporate entities and subsidiaries in the United States. During the years at issue, GM’s net corporate income totaled over $7 billion, of which the Treasury Department generated over a half billion dollars in income. Specifically, the Treasury Department used its excess cash to purchase various marketable securities such as U.S. Treasury bonds, notes and bills, as well as bank certificates of deposit (CDs), etc. The investments were categorized as follows: (1) direct sales¹, (2) maturities, and (3) repurchase agreements². Approximately 90% of the Treasury Department’s proceeds from