In this tax case of first impression, the Commissioner of the Georgia Department of Revenue the “Commissioner” issued a $224,800 additional tax assessment against Trawick Construction Company, Inc. “Trawick” on January 13, 2004, as to the short-tax-year January 1, 1999 to October 1, 1999. On August 16, 2004, following Trawick’s appeal to the Office of State Administrative Hearings, an administrative law judge “ALJ” issued his Initial Decision finding that Trawick “demonstrated beyond a preponderance of the evidence that the Commissioner’s assessment of additional corporate Georgia income taxes on the proceeds of the Trawick stock transfer at issue was erroneous.” The Commissioner thereafter reversed the Initial Decision of the ALJ. Trawick petitioned for judicial review, and the superior court reversed, returning the case to the status quo ante, reinstating the ALJ’s decision. After we granted its application for discretionary review, the Department of Revenue the “Department” filed its appeal, contending that the superior court erred i in rejecting the Commissioner’s finding of fact that Trawick had elected tax treatment under 26 U.S.C. § 338 h 10 “Section 338 election”, such treatment relieving Trawick of federal tax liability as to the gain it realized upon the sale of its stock and characterizing the sale of its stock as a “deemed sale”1 of all its assets, ii in finding that Georgia’s statutes do not tax such gain because Trawick’s stock was sold pursuant to a Section 338 election made by Trawick’s shareholders, and iii in finding that the additional tax assessment was constitutionally barred. Finding that the gain realized by Trawick as a result of the deemed sale of its assets is taxable under Georgia law, we reverse. In broad terms, this case raises a question of law as to whether the Section 338 election at issue relieves Trawick of corporate tax liability under Georgia law as to the gain realized upon the proceeds from the deemed sale of its assets. “Erroneous applications of law to undisputed facts, as well as decisions based on erroneous theories of law, are subject to the de novo standard of review. Cit.” Trent Tube v. Hurston , 261 Ga. App. 525 583 SE2d 198 2003.
From its formation in 1960 through October 1, 1999, Trawick was a closely-held Florida corporation, and Trawick’s shareholders, directors, and officers were all members of the Trawick family. Trawick was in the telecommunications business and did business in Florida, Alabama, Arkansas, Louisiana, Mississippi, North Carolina, South Carolina, and Georgia.