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corporation engages in business activity. As stated by the
Supreme Court:
The doctrine of corporate entity fills a useful
purpose in business life. Whether the purpose be to
gain an advantage under the law of the state of
incorporation or to avoid or to comply with the demands
of creditors or to serve the creator's personal or
undisclosed convenience, so long as that purpose is the
equivalent of business activity or is followed by the
carrying on of business by the corporation, the
corporation remains a separate taxable entity. * * *
[Moline Properties, Inc. v. Commissioner, 319 U.S. 436,
438-439 (1943); fn. refs. omitted.]
The alternative requirements of business purpose or business
activity have been restated many times. With respect to the
latter requirement, the quantum of business activity may be
rather minimal. Hospital Corp. of America v. Commissioner, 81
T.C. 520, 579 (1983). Even where a corporation is created with a
view to reducing taxes, if it in fact engages in substantive
business activity, it will not be disregarded for Federal tax
purposes. Bass v. Commissioner, 50 T.C. 595, 601 (1968). This
is true even if the primary reason for the corporation's
existence is to reduce taxes. As we stated in Nat Harrison
Associates, Inc. v. Commissioner, 42 T.C. 601, 618 (1964):
Whether the primary reason for its existence and
conduct of business was to avoid U.S. taxes or to
permit more economical performance of contracts through
use of native labor, or a combination of these and
other reasons, makes no difference in this regard. Any
one of these reasons would constitute a valid business
purpose for its existence and conduct of business as
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