Richard D. Nelson - Page 10




                                               - 10 -                                                  
            respondent argues that petitioner did not have ownership in the                            
            bingo operation prior to the settlement of the lawsuit, neither                            
            party, prior to the submission of the briefs, contended that                               
            November should be disregarded as an entity.  Under these                                  
            circumstances, petitioner’s attempt, for the first time on brief,                          
            to disavow the existence of November would be most prejudicial to                          
            respondent and will not be permitted.  See, e.g., Estate of                                
            Horvath v. Commissioner, 59 T.C. 551, 556 (1973).                                          
                  Even if petitioner had been permitted to pursue his                                  
            contention that the corporate entity be disregarded, on the                                
            record here he would have failed.4  Petitioner created this                                
            corporate entity, caused it to file returns, and reported                                  
            passthrough losses from the entity on his individual return.  In                           
            addition, the existence and form of the S corporation had not                              
            been questioned by respondent.  Importantly, the existence of                              
            November is in no way dependent upon whether it or petitioner had                          
            an ownership interest in the bingo operation.  November was the                            
            financial conduit for petitioner’s involvement in the bingo                                
            business, whether or not he or November had an ownership interest                          
            in the bingo business.  Additionally, the deficiencies under                               



                  4 A party seeking to disavow the form of its own transaction                         
            may be required to present “strong proof” that the substance                               
            differs from the form.  Ullman v. Commissioner, 264 F.2d 305, 308                          
            (2d Cir. 1959), affg. 29 T.C. 129 (1957); Coleman v.                                       
            Commissioner, 87 T.C. 178, 202 (1986), affd. without published                             
            opinion 833 F.2d 303 (3d Cir. 1987).                                                       





Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011