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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
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