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D. Reaves Livestock Liability for Additions to Tax for Fraud
1. Underpayment of Corporate Income Tax
Petitioners concede that Reaves Livestock underpaid its
income tax and that Mr. Reaves caused Reaves Livestock's receipts
that were not reported as income on the original corporate
returns to be diverted to the First Citizens accounts in 1984,
1985, 1986, and 1987.
2. Corporate Fraudulent Intent
We may impute the fraud of a shareholder or an officer of a
corporation to the corporation if the shareholder or officer
controls the corporation, the corporation was the agent's alter
ego, or the corporate agent's fraudulent acts benefited the
corporation. Loftin & Woodward Inc. v. United States, 577 F.2d
1206, 1244 (5th Cir. 1978); Ruidoso Racing Association, Inc. v.
Commissioner, 476 F.2d 502, 506 (10th Cir. 1973), affg. in part
and remanding in part T.C. Memo. 1971-194. These circumstances
are present here. Mr. Reaves was president and sole shareholder
of Reaves Livestock. He and Mrs. Reaves, vice president of
Reaves Livestock, controlled Reaves Livestock. Reaves Livestock
underreported its income by deducting as an expense the 282
checks to fictitious payees. Reaves Livestock also underreported
its income by diverting income to the First Citizens accounts and
by overstating deductions with payments to the First Citizens
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