Northern Indiana Public Service Company - Page 12

                                               - 12 -                                                 
            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                                





Page:  Previous  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  Next

Last modified: May 25, 2011