California Real Estate Practice Exam

When a business has been sold, and the State Board of Equalization has verified that all required taxes are paid, what document is issued to the buyer?

1. Clearance receipt

2. None of the above

3. Successor's liability receipt

4. Tax paid receipt

The correct answer is: Clearance receipt

When a business has been sold and the State Board of Equalization verifies that all required taxes have been paid, the document that is issued to the buyer is a clearance receipt. This receipt serves as proof that the seller has fulfilled their tax obligations, thereby protecting the buyer from any potential claims for unpaid taxes related to the business. A clearance receipt is particularly important because it reassures the buyer that they are not inheriting any tax liabilities associated with the business operations prior to the sale. This is a critical step in the transaction process, as it facilitates a smooth transition and reduces the risk of legal or financial complications for the buyer post-purchase. The other options may relate to tax situations but do not specifically denote the assurance provided to a buyer regarding the payment status of taxes in the context of a business sale. Hence, the clearance receipt is the appropriate documentation issued in this scenario.