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reallocated income from the Earl Kiem escrow account to
petitioners under section 482. However, respondent did not
reallocate income to petitioners from Americana or the Earl Kiem
escrow account under section 482.
Respondent argues that petitioners are taxable on
Americana's income because petitioner husband improperly
converted Americana's assets to his control and intermingled his
financial affairs with those of Americana such that Americana
became his alter ego. We disagree. Respondent cited no
authority for us to apply the alter ego theory in these
circumstances. We do not apply an alter ego theory to reallocate
income from Americana to petitioners because Americana engaged in
bona fide business activities and was a separate taxable entity.
Jackson v. Commissioner, 233 F.2d 289, 291 (2d Cir. 1956), affg.
24 T.C. 1 (1955); Paymer v. Commissioner, 150 F.2d 334, 336-337
(2d Cir. 1945) (income from property taxed to stockholders,
rather than the corporation, only if the corporation is a dummy
or sham or is used for tax avoidance purposes). As discussed
below infra par. 9, petitioner husband did not fraudulently
divert corporate funds from Americana. Cf. Ruidoso Racing
Association, Inc. v. Commissioner, 476 F.2d 502, 506 (10th Cir.
1973), affg. in part and revg. and remanding in part T.C. Memo.
1971-194; Moore v. Commissioner, T.C. Memo. 1977-275, affd. 619
F.2d 619 (6th Cir. 1980) (corporation's dominant shareholder
fraudulently diverted corporate funds for personal use and so
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