Leo N. Levitt and Ruth G. Levitt - Page 55

                                       - 55 -                                         
               2.   Underpayment                                                      
               Petitioners contend that respondent did not establish by               
          clear and convincing evidence that petitioner underpaid tax.  We            
          disagree.                                                                   
               A controlling shareholder who causes a corporation, for no             
          business purpose of its own, to transfer earnings to another                
          entity which the shareholder controls may be taxed as receiving             
          income in the amount of the funds transferred.  Commissioner v.             
          Makransky, 321 F.2d 598, 602 (3d Cir. 1963), affg. 36 T.C. 446              
          (1961); Biltmore Homes, Inc. v. Commissioner, 288 F.2d 336 (4th             
          Cir. 1961), affg. T.C. Memo. 1960-53; Helvering v. Gordon, 87               
          F.2d 663 (8th Cir. 1937); Lonsdale v. Commissioner, 32 F.2d 537             
          (8th Cir. 1929), affg. 11 B.T.A. 659 (1928).  The control which             
          the taxpayer has over the amounts transferred may cause those               
          amounts to be taxable income to the taxpayer.  McSpadden v.                 
          Commissioner, 50 T.C. 478, 490 (1968) (false mortgage scheme).              
          Funds that petitioner diverted from Resyn to the Polymer and                
          Chemical Traders accounts were taxable income to him.  James v.             
          United States, 366 U.S. 213, 219 (1961) (embezzled funds over               
          which the taxpayer had complete dominion and control were taxable           
          income).                                                                    
               The Polymer and Chemical Traders accounts were nominee or              
          conduit bank accounts for petitioner during the years in issue.             
          Polymer and Chemical Traders had no business purpose.  Petitioner           
          completely controlled them.  Petitioner diverted Resyn funds to             




Page:  Previous  45  46  47  48  49  50  51  52  53  54  55  56  57  58  59  60  61  62  63  64  Next

Last modified: May 25, 2011