George Georgiou and Judith Georgiou A.K.A. Judy Georgiou, et al. - Page 23

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            separate legal entity from Georgiou.  "The fact is that * * *                                  
            [the taxpayer] did have a separate legal existence with                                        
            privileges and obligations entirely separate from those of its                                 
            stockholders.  The fact that it had only one stockholder seems of                              
            no legal significance."  Burnet v. Commonwealth Improvement Co.,                               
            287 U.S. 415, 419 (1932).                                                                      
                  The analysis in Moline Properties can also be applied to                                 
            distinguish Georgiou and JAI as separate legal entities.                                       
            Georgiou evaluated the purchase of Petite in his individual                                    
            capacity.  He decided to incorporate JAI based on several                                      
            business reasons, including Georgiou's desire to withhold                                      
            Kolonaki's financial information from lessors of Petite stores                                 
            and because Kolonaki had just divested itself of its retail                                    
            division creating GRS.  Georgiou's business reasons for forming                                
            JAI and its subsequent business activity establish JAI as a                                    
            separate legal entity from Georgiou.  See Moline Properties v.                                 
            Commissioner, supra at 438.                                                                    
                  The consequence of the separate legal status of Kolonaki,                                
            Georgiou, and JAI is that their overt acts must be analyzed                                    
            independently.  Kolonaki asserts that it was the beneficial owner                              
            of JAI stock even though it was not the record owner.  We agree                                
            that record ownership is not necessary to satisfy the "directly                                
            owned" requirement in section 1504(a).  The cases where courts                                 
            have permitted a division of legal and beneficial ownership,                                   

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